Credit Suisse announces loss of up to $1.58 billion in fourth quarter

  • Bank gives details of latest earnings warning
  • Analyst highlights asset outflows
  • Seeks shareholder approval for $4 billion capital raise
  • Stocks open lower after update

ZURICH, Nov 23 (Reuters) – Credit Suisse (CSGN.S) expects to post a pre-tax loss of up to 1.5 billion Swiss francs ($1.58 billion) in the fourth quarter as the Swiss bank preparing to seek shareholder approval for a $4 billion fundraiser.

The bank said on Wednesday that the “difficult” economic and market environment had a negative effect on customer activity, while cash outflows across the business increased at the start of its fourth quarter. .

The profit warning is the latest setback for the embattled lender which previously said it expected to make a net loss in the last three months of the year but did not give a figure.

Credit Suisse is due to hold an extraordinary general meeting on Wednesday where it will seek approval for a capital increase to fund a recovery from the biggest crisis in its 166-year history.

The bank has been battered by a series of scandals and losses, including a $5.5 billion loss following the collapse of US investment firm Archegos. He also had to freeze $10 billion in supply chain finance funds linked to insolvent British financier Greensill.

“Investment Bank was impacted by the substantial slowdown in industry-wide capital markets and reduced activity in sales and trading activities, compounding normal seasonal declines, and the group’s relative underperformance. β€œ, said the second Swiss bank.

“Credit Suisse expects the Investment Bank and Group to post a substantial pre-tax loss in the fourth quarter of 2022, of up to CHF 1.5 billion for the Group.”

This follows a pre-tax loss of 342 million francs in the third quarter and 1.94 billion francs since the start of the year.

Client activity remained subdued in the Wealth Management and Swiss Bank divisions, a situation that is expected to continue in the coming months, the bank said.

At the group level, as of November 11, net asset outflows represented approximately 6% of assets under management at the end of the third quarter, a level higher than that of the third quarter.

In Wealth Management, outflows had reduced “substantially” from the high levels of the first two weeks of October, but they have not yet reversed, and amounted to around 10% of assets under management at the end of the third quarter of 2022.

Analysts have expressed concern about the outflows, which Bank Vontobel has estimated at around 84 billion Swiss francs of group assets under management.

“Massive net outflows in wealth management, CS’s core business alongside the Swiss bank, are deeply concerning – especially as they have not yet reversed,” said Andreas Venditti, an analyst at Vontobel.

“CS need to rebuild trust as quickly as possible – but that’s easier said than done.”

Shares of the bank, which have lost 59% in value this year, opened 2.7% lower.

Credit Suisse also highlighted its efforts to improve its balance sheet and reduce risk, including bond sales that raised $5 billion and the sale of part of its securitized product group.

In late October, Credit Suisse unveiled a plan to cut thousands of jobs and shift away from investment banking toward less turbulent wealth management.

He said he was also making progress towards his goal of cutting costs by 15% by 2025, including cutting spending by about 1.2 billion francs by the end of 2023.

β€œThe Group continues to execute the decisive strategic actions detailed on October 27, 2022, to create a simpler, more focused and more stable bank,” he said.

($1 = 0.9507 Swiss francs)

Reporting by John Revill; Editing by Paul Carrel and Maria Sheahan; Editing by Ana Nicolaci da Costa and Jane Merriman

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