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Credit Suisse projects $1.6 billion fourth-quarter loss

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Switzerland’s second largest bank Credit Suisse is seen here next to a Swiss flag in downtown Geneva.

Fabrice Coffrini | AFP | Getty Images

Credit Suisse on Wednesday projected a 1.5 billion Swiss franc ($1.6 billion) fourth-quarter loss because it undertakes an enormous strategic overhaul.

The embattled lender last month announced a raft of measures to handle persistent underperformance in its investment bank and a series of risk and compliance failures which have saddled it with consistently high litigation costs.

“These decisive measures are expected to end in a radical restructuring of the Investment Bank, an accelerated cost transformation, and strengthened and reallocated capital, each of that are progressing at pace,” the bank said in a market update on Wednesday.

Credit Suisse revealed that it had continued to experience net asset outflows, and said these flows were roughly 6% of assets under management at the tip of the third quarter. The Zurich-based bank flagged last month that this trend continued in the primary two weeks of October, after reports forged doubt over its liquidity position and credit default swaps spiked. Credit default swaps are a kind of financial derivative that provide the client with protection against default. 

“In wealth management, these outflows have reduced substantially from the elevated levels of the primary two weeks of October 2022 although haven’t yet reversed,” Credit Suisse said Wednesday.

The group expects to record a 75 million Swiss franc loss related to the sale of its shareholding in British wealth tech platform Allfunds group, while lower deposits and reduced assets under management are expected to steer to a fall in net interest income, recurring commissions and costs, which the bank said is prone to result in a loss for its wealth management division within the fourth quarter.

“Along with the opposed revenue impact from the previously disclosed exit from the non-core businesses and exposures, and as previously announced on October 27, 2022, Credit Suisse would expect the Investment Bank and the Group to report a considerable loss before taxes within the fourth quarter 2022, of as much as CHF ~1.5 billion for the Group,” the bank said.

“The Group’s actual results will rely upon a lot of aspects including the Investment Bank’s performance for the rest of the quarter, the continued exit of non-core positions, any goodwill impairments, and the end result of certain other actions, including potential real estate sales.”

Credit Suisse confirmed that it has begun working toward the targeted 15%, or 2.5 billion Swiss francs, reduction of its cost base by 2025 with a targeted reduction of 1.2 billion Swiss francs in 2023. Layoffs of 5% of the bank’s workforce are underway alongside reductions to “other non-compensation related costs.”

The bank announced last week that it will speed up the restructure of its investment bank by selling a good portion of its securitized products group (SPG) to Apollo Global Management, reducing SPG assets from $75 billion to roughly $20 billion by the center of 2023.

“These actions and other deleveraging measures including, but not limited to, within the non-core businesses, are expected to strengthen liquidity ratios and reduce the funding requirements of the Group,” it said Wednesday.

Credit Suisse holds a rare general meeting on Wednesday, at which shareholders will vote on the group’s capital raising proposals.

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