Shown here, Credit Suisse’s second largest bank in Switzerland, next to the Swiss flag in downtown Geneva.
Fabrice Coverini Agence France-Presse | Getty Images
Credit Suisse On Wednesday, it expected the company to post a loss of 1.5 billion Swiss francs ($1.6 billion) in the fourth quarter as it makes massive strategic overhauls.
The beleaguered lender last month announced a set of measures to address persistent poor performance at its investment bank and a series of risks and compliance failures that have caused it to shoulder ever-high litigation costs.
“These critical actions are expected to result in a radical restructuring of the investment bank, a rapid cost shift, and capital strengthening and reallocation, each of which is proceeding at a rapid pace,” the bank said in a market update on Wednesday.
Credit Suisse revealed that it continued to experience net asset outflows, and said that these inflows amounted to about 6% of assets under management at the end of the third quarter. The Zurich-based bank noted last month that this trend continued in the first two weeks of October, after reports cast doubt on its liquidity position and CDS rose. A credit default swap is a type of financial derivative that provides the buyer with protection against default.
“In wealth management, these outflows have fallen significantly from the high levels in the first two weeks of October 2022 although they have not yet abated,” Credit Suisse said on Wednesday.
The group expects to post a loss of CHF 75 million related to the sale of its stake in the British wealth platform Allfunds Group, while lower deposits and lower assets under management are expected to result in lower net interest income, commissions and recurring fees, which the bank said is likely to result in To the wealth management division loss in the fourth quarter.
Along with the negative impact on revenue from previously announced exits from non-core business and exposures, and as previously announced on October 27, 2022, Credit Suisse expects the investment bank and group to report a significant pre-tax loss in the fourth quarter of 2022 of up to 1.5 billion Swiss francs for the group.”
The Group’s actual results will depend on a number of factors including the investment bank’s performance for the remainder of the quarter, continued exits from non-core positions, any impairment of goodwill, and the results of certain other actions, including potential real estate sales.
Credit Suisse has confirmed that it has begun working towards reducing the cost base by 15% or CHF 2.5 billion targeted by 2025 with a target reduction of CHF 1.2 billion in 2023. Layoffs of 5% of the bank’s workforce are under way along with cuts to ” 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 about $20 billion by mid-2023.
“These and other deleveraging measures including, but not limited to, in non-core businesses are expected to enhance liquidity ratios and reduce the financing requirements of the group,” it said on Wednesday.
Credit Suisse is holding an extraordinary meeting on Wednesday, where shareholders will vote on plans to restructure the group and proposals to increase capital.
Credit Suisse shares fell more than 5% in early trade.