Credit Suisse warns of substantial 2023 loss after cash exodus
CREDIT Suisse Group warned it expects a substantial loss this year after clients pulled a record amount of funds in the final three months of 2022, capping the bank’s worst annual performance since the financial crisis.
The worse-than-expected net loss of 1.39 billion Swiss francs (S$2 billion) in the three months through December was driven by losses at both the key wealth division and investment bank, Credit Suisse said on Thursday (Feb 9).
Credit Suisse is still struggling to recover from outflows after a social media storm questioning the bank’s future led to depositor panic in the first few weeks of October, with outflows for the quarter totalling 110.5 billion francs.
While chairman Axel Lehmann has sought to stem the exodus, the loss of assets will see the key wealth management unit continue to bleed into the first quarter. In an attempt to regain its footing, Credit Suisse is carving out parts of its investment bank and refocusing on its core wealth management business, revamping its strategy after years of scandals and losses shattered confidence in the brand.
“We have taken comprehensive measures to further increase our client engagement and regain deposits as well as assets under management,” the bank said.
Credit Suisse shares were indicated down 4 per cent in at Julius Baer in pre-market trading on Thursday.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Chief financial officer Dixit Joshi said on Thursday that the wealth management unit had seen inflows in January, particularly in Asia-Pacific, in a sign that the bank is winning back some client confidence.
The bank pulled off a US$4 billion capital raise late last year, with Saudi National Bank taking a stake of about 10 per cent, and is shedding as many as 9,000 jobs with the aim of regaining profitability by 2024. As a result of the losses and cost-cutting drive, the bank has cut the pool for variable compensation for 2022 by about 50 per cent. The bank said it estimates restructuring charges for 2023 of about 1.6 billion francs.
Fixed income trading revenues in the quarter were down 84 per cent year on year, while equities trading revenues fell 96 per cent – a significantly worse performance in both areas than European or Wall Street peers. Meanwhile, capital markets and advisory revenues were also down 59 per cent, as a result of a slump in dealmaking and an uncertain market environment.
In wealth management, the bank posted a before-tax loss of 199 million francs, worse than estimates. Recurring fees and net interest income were both down by 17 per cent, while transaction revenues slumped 20 per cent, driven by mark-to-market losses for Asia-Pacific financing of 31 million francs.
On Thursday, the lender announced the purchase of M Klein operations for US$175 million, as part of the establishment of the new Credit Suisse First Boston brand to house investment banking functions.
The bank said it had received a commitment for a US$500 million injection in the business, and is engaging with other interested parties to provide balance sheet or equity for the carve-out.
The continued losses underscore the urgency for Lehmann and chief executive officer Ulrich Koerner to put Credit Suisse on sustainable footing, with investors and analysts showing limited patience for execution of the revamp.
“With heavy losses to continue in 2023, we expect to see another wave of downgrades and see no reason to own the shares,” analysts at Keefe, Bruyette and Woods wrote in a note on Thursday. BLOOMBERG
Share with us your feedback on BT's products and services
