Fabrice Coffrini | AFP | Getty Images Credit Suisse on Thursday posted a quarterly loss that was significantly worse than analysts’ estimates as it announced a massive strategic overhaul. The troubled lender posted a net loss of 4.034 billion Swiss francs ($4.09 billion) for the third quarter, compared with analysts’ expectations for a loss of 567.93 million Swiss francs. The figure was also well below the 434 million Swiss francs profit recorded for the same quarter last year. The bank noted that the loss reflected an impairment of 3.655 billion Swiss francs related to the “revaluation of deferred tax assets as a result of the overall strategic review.” Under pressure from investors, the bank unveiled a major overhaul of its operations in a bid to tackle the underperformance of its investment bank and after a raft of legal costs have hit profits. In its widely anticipated strategic shift, Credit Suisse has promised to “fundamentally restructure” its investment bank to significantly reduce its exposure to asset-weighted assets, which are used to determine a bank’s capital requirements. It also aims to reduce its cost base by 15%, or 2.5 billion Swiss francs, by 2025. Credit Suisse expects to incur restructuring charges of 2.9 billion Swiss francs by the end of 2024. The transformation plan will see Credit Suisse spin off its investment bank into an independent business called CS First Boston, raise 4 billion Swiss francs in capital through a new share issue and rights offering and create a capital release unit to close lower. return, non-strategic businesses. The aim is to reduce weighted assets and leverage exposure by 40% each during the restructuring, while the bank also planned to allocate “nearly 80% of capital to Wealth Management, Swiss Bank, Asset Management and Markets by 2025.” “Our new integrated model, with our Wealth Management franchise, strong Swiss bank and asset management capabilities at its core, is designed to enable us to deliver a unique and compelling proposition for clients and colleagues, while targeting the organic growth and the creation of capital for shareholders. “, new CEO Ulrich Koerner said in a statement. “The new Executive Board is focused on restoring trust through relentless and responsible delivery of our new strategy, where risk management remains at the core of everything we do.” Koerner took the helm in July after predecessor Thomas Gottstein resigned after the bank posted a net loss of 1.593 billion Swiss francs for the second quarter, well below consensus expectations among analysts. Credit Suisse has been plagued in the past year by sluggish investment banking revenue, losses from exiting its Russian business and legal costs related to a host of compliance and risk management failures, most notably the Archegos hedge fund scandal. Here are some other financials for the third quarter:
Group revenue reached 3.804 billion Swiss francs, up from 5.437 billion Swiss francs in the same period last year. The CET1 capital ratio, a measure of banks’ solvency, was 12.6%, compared with 14.4% in the same period last year and 13.5% in the previous quarter. Return on tangible equity was -38.3%, down from -15% in the second quarter and 4.5% in the third quarter of 2021.
This is a developing news story and will be updated soon.
