Credit Suisse extends losing streak with expected quarterly loss

CREDIT Suisse Group expects a loss at the groupwide level and investment bank in the second quarter, adding to the Swiss lender’s woes after a string of profit warnings and hits. 

Market conditions have remained challenging after the invasion of Ukraine and monetary tightening across the world, leading to weak customer flows and ongoing client deleveraging, the bank said in a statement on Wednesday (Jun 8). While advisory revenues at the investment bank were resilient, low levels of capital markets issuance and widening credit spreads hit the unit’s financial performance in April and May, the bank said.

The latest profit warning adds to pressure on chief executive officer Thomas Gottstein, whose 2 years in charge have seen a US$5.5 billion hit from Archegos, the collapse of partner Greensill Capital and numerous setbacks that eroded investor confidence, weakened key businesses and prompted an exodus of talent. The lender has said that 2022 will be a year of transition as it reduces risk at the investment bank while shifting more resources to wealth management.

“Given the economic and market environment, we are accelerating our cost initiatives across the group with the aim of maximising savings from 2023 onwards,” the bank said, without providing more details. Gottstein is set to present at the Goldman Sachs European Financials Conference on Thursday and is giving an investor “deep dive” on Jun 28 where it said it will give an update on its cost saving plans.

Since the Archegos blow, which led to the departure of investment bank head Brian Chin and risk chief Lara Warner, the bad news has continued apace. The bank ousted reform-minded chairman Antonio Horta-Osorio after he broke covid rules and recent surprise charges include 703 million francs (S$991.4 million) of legal expenses in the first quarter, with the bank flagging that more legal costs may still be to come. Steadily, the ranks of the management board that Gottstein inherited have been replaced, leaving the Swiss banker as the last one standing since he took over. 

Gottstein said in a recent TV interview from Davos that he has a “clear mandate” to steer the bank past one of the most tumultuous periods of its recent history, after Bloomberg reported that members of the board of directors had held early stage talks on potentially replacing the executive. Chairman Axel Lehmann reiterated his support for Gottstein in a CNBC interview at Davos, telling the news organisation that he fully backed the executive “because he’s good”. BLOOMBERG