After alarmed clients fled in large numbers, Credit Suisse Group announced its worst annual loss since the global financial crisis of 2008 and issued a warning that this year would see another "substantial" loss.
Having been hit by scandal after scandal, the bank experienced a sharp increase in withdrawals in the fourth quarter, with more than 110 billion Swiss francs ($120 billion) leaving the institution, despite claims that the situation has been improving.
According to the statement made on Thursday, the investment banking division and wealth management division will likely both experience losses in the first quarter of 2023.
Shares of the bank fell 5% in morning trading.
According to Thomas Hallett of Keefe, Bruyette & Woods, Credit Suisse's "operational performance was even worse than feared and the level of outflows quite staggering."
"With heavy losses to continue in 2023, we expect to see another wave of downgrades and see no reason to own the shares."
The second-largest bank in Switzerland reported a net loss of 1.39 billion francs for the fourth quarter. It now had a 7.29 billion franc net loss for the entire year of 2022, which was its second consecutive year of losses.
Among numerous scandals in recent years, a $5.5 billion loss on American investment firm Archegos in 2021 and the freezing of $10 billion in supply chain finance funds connected to bankrupt British financier Greensill have particularly hurt Credit Suisse.
Other scandals that rocked the bank included a first-ever domestic prosecution involving money laundering for an organized crime group. After that, late last year, the group's confidence was shaken by a flurry of unfounded rumors about its financial situation. Around that time, the outflows were largely observed.
Credit Suisse's flagship wealth management division reported outflows of 92.7 billion francs, far exceeding the 61.9 billion analysts had predicted, bringing the division's assets under management to a new total of 540.5 billion.
It violated some liquidity requirements due to a fund hemorrhage last year, but its finance chief said on Thursday that the issue has since been resolved.
A Vontobel analyst named Andreas Venditti warned that the past year was "clearly one of the worst years in Credit Suisse's 167-year history" and that there was little hope for improvement in the near future.
The bank stated on Thursday that "significant deposit and net asset outflows at the beginning of the quarter" as well as general economic conditions had negatively impacted the last three months of the previous year.
The bank's rating was downgraded by Standard & Poor's in November, moving it just one level above junk.
However, the bank reported that its liquidity levels had increased after completing a 4 billion Swiss franc fundraising round in December. Credit Suisse is "seeing money now coming back in different parts of the firm," according to Chief Executive Ulrich Koerner, who made the statement last month.
"We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation," Koerner said on Thursday.
The bank also announced that it had acquired Michael Klein's advisory boutique for $175 million, making progress in its plans to spin off its investment banking division.
It did not provide information on potential additional investors for the unit. In October, Koerner stated, without naming the investor, that the bank already had a $500 million commitment from them.
At the end of December, the bank's CET1 capital ratio increased to 14.1% from 12.6% at the end of September. A rise to 13.8% was what analysts anticipated.
(Source:www.theglobeandmail.com)
Having been hit by scandal after scandal, the bank experienced a sharp increase in withdrawals in the fourth quarter, with more than 110 billion Swiss francs ($120 billion) leaving the institution, despite claims that the situation has been improving.
According to the statement made on Thursday, the investment banking division and wealth management division will likely both experience losses in the first quarter of 2023.
Shares of the bank fell 5% in morning trading.
According to Thomas Hallett of Keefe, Bruyette & Woods, Credit Suisse's "operational performance was even worse than feared and the level of outflows quite staggering."
"With heavy losses to continue in 2023, we expect to see another wave of downgrades and see no reason to own the shares."
The second-largest bank in Switzerland reported a net loss of 1.39 billion francs for the fourth quarter. It now had a 7.29 billion franc net loss for the entire year of 2022, which was its second consecutive year of losses.
Among numerous scandals in recent years, a $5.5 billion loss on American investment firm Archegos in 2021 and the freezing of $10 billion in supply chain finance funds connected to bankrupt British financier Greensill have particularly hurt Credit Suisse.
Other scandals that rocked the bank included a first-ever domestic prosecution involving money laundering for an organized crime group. After that, late last year, the group's confidence was shaken by a flurry of unfounded rumors about its financial situation. Around that time, the outflows were largely observed.
Credit Suisse's flagship wealth management division reported outflows of 92.7 billion francs, far exceeding the 61.9 billion analysts had predicted, bringing the division's assets under management to a new total of 540.5 billion.
It violated some liquidity requirements due to a fund hemorrhage last year, but its finance chief said on Thursday that the issue has since been resolved.
A Vontobel analyst named Andreas Venditti warned that the past year was "clearly one of the worst years in Credit Suisse's 167-year history" and that there was little hope for improvement in the near future.
The bank stated on Thursday that "significant deposit and net asset outflows at the beginning of the quarter" as well as general economic conditions had negatively impacted the last three months of the previous year.
The bank's rating was downgraded by Standard & Poor's in November, moving it just one level above junk.
However, the bank reported that its liquidity levels had increased after completing a 4 billion Swiss franc fundraising round in December. Credit Suisse is "seeing money now coming back in different parts of the firm," according to Chief Executive Ulrich Koerner, who made the statement last month.
"We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation," Koerner said on Thursday.
The bank also announced that it had acquired Michael Klein's advisory boutique for $175 million, making progress in its plans to spin off its investment banking division.
It did not provide information on potential additional investors for the unit. In October, Koerner stated, without naming the investor, that the bank already had a $500 million commitment from them.
At the end of December, the bank's CET1 capital ratio increased to 14.1% from 12.6% at the end of September. A rise to 13.8% was what analysts anticipated.
(Source:www.theglobeandmail.com)
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