December 2, 2022

Credit Suisse warns of $1.6 billion loss as rich clients leave

3 min read

Credit Suisse expects a pre-tax loss of up to 1.5 billion Swiss francs ($1.58 billion) in its fourth quarter as it bleeds cash, the Swiss bank said on Wednesday, some approval from shareholders. A long time ago 4 billion dollar capital increase.

The bank said a “challenging” economic and market environment hurt client activity, while cash outflows increased across the business at the start of its fourth quarter.

It’s the latest shock to the profit warning. A distressed creditor It had previously forecast a net loss for the last three months of the year but did not disclose figures.

The bank also gave a sobering assessment of the scale of its problems, which have been exacerbated by withdrawal of clients’ savings and investments.

At the end of the third quarter, outflows equaled 6% of the group’s assets under management, the bank said. It said the trend in the wealth management division, which caters to wealthy clients, has since improved, but remains unchanged.

As a result, the bank was forced to dip into liquidity buffers, which slipped below some minimum regulatory requirements even though it said its basic liquidity and funding requirements were met.

Credit Suisse

E held an extraordinary general meeting on Wednesday, approving a capital increase to help it recover from the biggest crisis in its 166-year history.

The bank has been hit by a series of scandals and losses, including a $5.5 billion loss exposed by American investment firm Arcegos. It also had to freeze $10 billion worth of supply chain finance funds linked to insolvent British financier Greencell.

“The investment bank has been affected by a significant industry-wide slowdown in the capital markets and reduced activity in the sales and trading business, general seasonality and the relatively underperformance of the group,” Switzerland’s second-largest bank said.

“Credit Suisse expects the investment bank and group to report a substantial loss before tax in the fourth quarter of 2022, amounting to … 1.5 billion. [Swiss francs] for the group.”

That follows a third-quarter pre-tax loss of 342 million francs and a loss of 1.94 billion francs so far this year.

The bank said client activity in its wealth management and Swiss bank divisions remained low, a trend expected to continue in the coming months.

Analysts expressed concern about the outflow, which Bank Vintobel estimated at about 84 billion Swiss francs ($88.2 billion).

“The massive net outflows in wealth management, the Swiss bank’s core business as well as CS’s, are of deep concern – all the more so because they have not yet turned around,” said Vontobel analyst Andreas Venditti. “CS needs to rebuild trust as soon as possible – but that’s easier said than done.”

Credit Suisse said that in wealth management, outflows had slowed “significantly” from the highs of the first two weeks of October and were around 10 percent of assets under management at the end of the third quarter of 2022.

The cost of insuring Credit Suisse’s debt against default rose and its bonds came under pressure after the announcement, which knocked 6 percent off its share price, down nearly 60 percent so far this year. have been

Credit Suisse also highlighted its efforts to improve its balance sheet and reduce risk, including a bond sale that raised $5 billion and the sale of part of its securitized products group.

In late October, Credit Suisse unveiled plans to cut thousands of jobs and shift its focus away from investment banking and toward less turbulent wealth management.

It said it was also making progress toward its goal of cutting costs by 15 percent by 2025, including cutting costs by about 1.2 billion francs by the end of 2023.

“The group continues to implement the strategic initiatives detailed on October 27, 2022, to create a simpler, more focused and more stable bank,” it said.

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