Credit Suisse ends a torrid year with 2b Swiss francs quarterly loss

[ZURICH] Credit Suisse on Thursday (Feb 10) posted a fourth-quarter net loss of 2 billion Swiss francs (S$2.9 billion), hurt by provisions to settle its investment bank's legal costs and a slowdown in business for its trading and wealth management divisions.

The scandal-ridden lender, which had flagged a loss in January, was also cautious about its near-term prospects calling 2022 a year of transition and flagging a decline in adjusted pretax income for the first quarter.

For the full year, net income attributable to shareholders tumbled to a 1.6 billion franc loss. That compared to a 2.7 billion franc profit for 2020.

It was a horrendous 2021 for Switzerland's second-biggest bank, marked by the collapse of US$10 billion in supply chain finance funds linked to insolvent British finance firm Greensill and a US$5.5 billion trading loss from the implosion of investment fund Archegos.

Credit Suisse chief executive Thomas Gottstein said the bank was actively working on resolving its legacy issues and also noted an goodwill impairment charge relating to its acquisition of US investment bank Donaldson, Lufkin & Jenrette (DLJ) in 2000.

"During the last 3 quarters of the year, we ran the bank with a constrained risk appetite across all divisions as we took decisive actions to strengthen our overall risk and controls foundation and continued our remediation efforts, including on the Supply Chain Finance Funds matter, where our priority is to return cash to investors," he said in a statement.

Last year's scandals, preceded by an executive spying scandal in 2019, have only been followed by more. It began 2022 with the abrupt departure last month of its chairman brought in just 9 months earlier and has become the first major Swiss bank to be tried in a criminal court, charged with allowing an alleged Bulgarian cocaine trafficking gang to launder millions of euros.

Credit Suisse has denied wrongdoing in the Bulgarian money laundering case.

Shares in the bank, which have lost nearly a third of their value since the start of 2020, were indicated 2.6 per cent lower in pre-market trade.

Tasked with reforming the bank's freewheeling corporate culture, Credit Suisse chairman Axel Lehmann has said he wants to stick with his predecessor's strategy of focusing on wealth management, noting customer business remained excellent at the time of his appointment in January.

During the final quarter of 2021, Credit Suisse's investment banking division posted a 2.1 billion-franc pretax loss. The goodwill impairment for DLJ came to US$1.7 billion.

Fixed income and sales and trading revenue tumbled 38 per cent year on year while equity sales and trading revenues slid 26 per cent as a result of the bank's exit from prime services announced in November.

Capital markets revenue plunged 48 per cent, while advisory revenue surged 51 per cent.

Credit Suisse's flagship international wealth management business saw revenue fall 26 per cent. It noted it had seen new net asset outflows of US$3.2 billion in the Asia Pacific region that it said were related to wealthy clients deleveraging as well as "de-risking measures" it had taken.

Across the bank, assets under management rose 7 per cent to 1.6 trillion Swiss francs, helped by a pickup in inflows for its asset management business.

The results mark a sharp contrast to cross-town rival UBS, which this month reported its best annual profit since the global financial crisis, emboldening it to hike share buybacks and set more ambitious profit goals. REUTERS