Credit Suisse Group closed out a scandal-tainted year by warning of a deeper quarterly loss as charges mount and business slows at its two biggest units.
The lender said in a surprise statement Tuesday that it will post a loss in its investment bank as it exits the business with hedge funds and trading conditions normalize. Clients in the key wealth unit pulled money in the fourth quarter as they reduce risk, particularly in Asia. Credit Suisse will also set aside an additional 500 million francs ($546 million) for litigation, pushing it deeper into the red.
The performance issues and additional charges cap the bank’s worst year since the financial crises after it was shaken by the collapse of Archegos Capital Management and Greensill Capital. Chief Executive Officer Thomas Gottstein has struggled to revive confidence among employees and investors after an exodus of talent. A reboot under star banker Antonio Horta-Osorio has been thrown into doubt after he was ousted as chairman nine months into his role.
“We expect these results will again bring into question management leadership,” analysts at Citigroup, including Andrew Coombs, wrote in a note. “Near-term momentum remains very poor, and ambitions to grow the top-line still seem a distant prospect.”
Credit Suisse already warned in November that it will post a net loss on the back of a 1.6 billion-franc impairment tied to its restructuring. The new charges will further weigh on results. The bank said it expects to have near-zero pretax income in the fourth quarter before the big restructuring charge.
Shares of Credit Suisse fell 1.4% at 10:06 a.m. in Zurich trading. The stock has lost almost a third of its value over the past year, the worst performer among the large European banks, which have rallied on the prospect of higher interest rates.
The new provisions, which will be partly offset by gains from real estate sales, come from a “number of cases where the Group has more proactively pursued settlements and primarily relate to legacy litigation matters from our investment banking business,” Credit Suisse said. It didn’t provide details on what litigation is covered by the charge.
