By Noele Illien and Oliver Hirt
ZURICH (RockedBuzz via Reuters) – Credit Suisse Group on Thursday posted its biggest annual loss since the 2008 global financial crisis after angry customers withdrew billions from the bank, and warned it would suffer another loss this year” substantial”.
Beaten by one scandal after another, the bank saw a sharp acceleration in withdrawals in the fourth quarter, with outflows of more than 110 billion Swiss francs ($120 billion), though it said the picture had improved.
In a statement, Swiss regulator Finma said that while Credit Suisse’s cash buffers have had a stabilizing effect on the bank and are in the process of rebuilding, the regulator “monitors banks very closely during such situations.” “.
The results, described as “catastrophic” by Ethos, which represents some Credit Suisse shareholders, sent shares of the bank 14.7% down on Thursday to 2.77 francs, valuing the lender at 11.1 billion francs.
Switzerland’s second-largest bank has embarked on a major overhaul of its business, cutting costs and jobs to revive its fortunes, including creating a separate business for its investment bank under the CS First Boston brand . The bank raised 4 billion Swiss francs from investors in December.
Chief Executive Officer Ulrich Koerner said: “We have a clear plan to create a new Credit Suisse and intend to continue delivering on our three-year strategic transformation.”
“We’ve done some prudent and hopefully a little careful planning,” he told reporters.
But analysts were alarmed by the scale of the losses and outflows.
“Credit Suisse’s operating performance has been even worse than feared and the level of outflows is quite staggering,” Thomas Hallett, an analyst at Keefe, Bruyette & Woods, said in a statement.
“With heavy losses continuing into 2023, we expect to see another wave of downgrades and see no reason to own the stock.”
In the fourth quarter, the bank recorded a net loss of 1.39 billion francs. This brought its total net loss in 2022 to CHF7.29 billion, marking its second consecutive year in the red.
The bank also signaled that its wealth management division and investment bank are also likely to post losses in the first quarter of 2023.
The Wealth Management division reported outflows of CHF92.7 billion in the fourth quarter, well above the CHF61.9 billion forecast by analysts, bringing the division’s new total assets under management to CHF540.5 billion.
The haemorrhage of funds last year led her to breach some liquidity requirements, but her finance boss said on Thursday that the problem had been resolved.
Significant outflows of deposits and the bank’s net assets added to a generally bleak picture.
Vontobel analyst Andreas Venditti described last year as “clearly one of the worst years in Credit Suisse’s 167-year history,” and said the future offered no immediate respite.
Amid a series of scandals, Credit Suisse has been hit hard by the collapse of US investment firm Archegos in 2021, as well as the freezing of billions in supply chain finance funds linked to insolvent British financier Greensill.
Other scandals that rocked the bank included a money laundering prosecution in Switzerland for a criminal gang.
GRAPH: Credit Suisse Goes Off Track – https://www.ceiving.com/graphics/CREDITSUISSEGP-OUTLOOK/klvygdbrgvg/chart.png
Credit Suisse’s investment bank reported a loss of CHF3.8 billion in 2022, roughly the same amount it paid to division staff.
The bank said it piled up the heavy loss as trading revenues plummeted, but it also stressed the impact of “accelerated deleveraging” triggered by “significant deposit outflows” in the last three months of last year.
In its plans to spin off the investment bank, Credit Suisse said it bought former board member Michael Klein’s advisory boutique for $175 million.
The plans have already sparked concerns from some investors about potential conflicts of interest.
The Ethos Foundation, which represents some Credit Suisse shareholders, said on Thursday it had raised “governance concerns” and little information about the deal had been revealed.
Ethos chief executive Vincent Kaufmann told RockedBuzz via Reuters he was surprised at how much had been paid “given the little information we have today about this company founded and run by Mr. Klein, a member of the Credit Suisse board until October 2022 and CEO-designate of the acquirer (CSFB).”
Credit Suisse did not provide details of other investors who could back the investment bank. Koerner last year said he had a pledge of $500 million from an investor, without naming it.
Last November, ratings agency Standard & Poor’s downgraded the bank to just one notch above junk.
($1 = 0.9195 Swiss francs)
(Additional reporting by Stefania Spezzati in London; Editing by John O’Donnell, Edwina Gibbs, Jane Merriman and Jan Harvey)