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Credit Suisse issues profit warning for second quarter

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An indication above the doorway to the Credit Suisse Group AG headquarters in Zurich, Switzerland, on Monday, Nov. 1, 2021.

Thi My Lien Nguyen | Bloomberg | Getty Images

Credit Suisse said on Wednesday that it’s prone to post a loss for the second quarter because the war in Ukraine and monetary policy tightening squeeze its investment bank.

In a trading update early Wednesday morning, the embattled lender said the geopolitical situation, significant monetary tightening from major central banks in response to soaring inflation, and the unwinding of Covid-19 era stimulus measures had caused “continued heightened market volatility, weak customer flows and ongoing client deleveraging, notably within the APAC region.”

Credit Suisse said despite the trading revenues benefiting from the spike in volatility, the impact of those conditions, combined with “continued low levels of capital markets issuance” and widening credit spreads, have “depressed the financial performance” of the investment bank in April and May.

That is “prone to result in a loss for this division in addition to a loss for the Group within the second quarter of 2022,” the trading update said.

The bank’s shares fell greater than 5% shortly after markets opened on Wednesday.

Credit Suisse has endured a string of scandals and mishaps lately, leading some shareholders to call for a change in leadership. Chairman Axel Lehmann told CNBC in May, nevertheless, that CEO Thomas Gottstein has his full backing to proceed with the “rebuilding” of the corporate.

Gottstein took the reins in 2020 following the resignation of predecessor Tidjane Thiam over a protracted spying scandal.

The bank reported a net loss for the primary quarter of 2022 and announced a management reshuffle because it continues to grapple with litigation costs referring to the Archegos hedge fund collapse.

“We’d note that our reported earnings will even be affected by continued volatility available in the market value of our 8.6% investment in Allfunds Group,” the bank added.

Spanish wealthtech platform Allfunds Group, which launched on the Euronext Amsterdam in April 2021, has seen its share price plunge 52% year-to-date.

Credit Suisse said 2022 will remain a 12 months of “transition” for the bank, vowing to speed up cost-cutting across the group, and can provide further details at its Investor “Deep Dive” on June 28.

The bank goals to operate a bunch common equity tier one capital ratio, a measure of bank solvency, of 13.5% within the near-term, in keeping with its goal of 14% by 2024.

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