Credit Suisse forecasts $1.6 billion loss in fourth quarter

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

Fabrice Cofrini | AFP | Getty Images

Swiss credit on Wednesday forecast a loss of 1.5 billion Swiss francs ($1.6 billion) in the fourth quarter as it undertook a massive strategic overhaul.

The troubled lender last month announced a series of measures to address the continued underperformance of its investment bank and a series of risk and compliance lapses that have plagued it with persistently high litigation costs.

“These decisive steps should result in a radical restructuring of the Investment Bank, accelerated cost transformation and strengthened and reallocated capital, each progressing at its own pace,” the bank said in a market update on Wednesday.

Credit Suisse revealed that it continued to experience net outflows of assets and said those flows represented around 6% of assets under management at the end of the third quarter. The Zurich-based bank reported last month that this trend continued in the first two weeks of October after reports cast doubt on its liquidity position and credit default swaps rose. Credit default swaps are a type of financial derivative that provides the buyer with protection against default.

“In wealth management, these outflows have declined significantly from the high levels of the first two weeks of October 2022, although they have not yet reversed,” Credit Suisse said on Wednesday.

The group expects to record a loss of 75 million Swiss francs from the sale of its stake in UK technology platform Allfunds, while lower deposits and reduced assets under management are expected to lead to lower net income from interest, recurring commissions and fees. , which the bank said will likely lead to a loss for its wealth management division in the fourth quarter.

“In addition to the previously announced negative revenue impact from exiting non-core businesses and exposures, and as previously announced on October 27, 2022, Credit Suisse would expect Investment Banking and Group report a substantial pre-tax loss in the fourth quarter of 2022, up to ~CHF 1.5 billion for the Group,” the bank said.

“The actual results of the group will depend on a number of factors, including the performance of the Investment Bank for the remainder of the quarter, the continued exit of non-core positions, any impairment of goodwill and the outcome of certain other actions, including potential real estate sales.

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

The bank announced last week that it would accelerate the restructuring of its investment bank by selling a significant portion of its Securitized Products Group (SPG) to Apollo Global Management, reducing SPG’s assets from $75 billion to around $20 billion by mid-2023.

“These actions and other deleveraging measures, including but not limited to non-strategic businesses, should strengthen liquidity ratios and reduce the group’s funding needs,” he said on Wednesday. .

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