Credit Suisse slides on warning of £1.3bn loss

Shares in Credit Suisse were sliding on Wednesday morning, after the banking giant warned of a loss of CHF 1.5bn (£1.32bn) as a result of wealth management outflows.

The company said it was now expecting a fourth quarter loss of CHF 1.5bn as a fall in assets under management and deposits meant fees and commissions were down.

It said deposit and net asset outflows started in the first two weeks of October, at levels that “substantially exceeded” the rates incurred in the third quarter.

At group level, as at 11 November net asset outflows were about 6% of assets under management at the end of the third quarter.

In wealth management, the company said the outflows had reduced “substantially” from the elevated levels of the first two weeks of October, although had not yet reversed and were around 10% of assets under management at the end of the third quarter.

It said that in the Swiss bank, client balances had stabilised and were around 1% of assets under management at the end of the third quarter.

“Credit Suisse is executing on its strategic commitments to strengthen its balance sheet and reduce risk, engaging clients proactively and accessing the public and private markets, including the recent issuance of approximately $5bn through two bond sales, which saw strong investor demand,” the bank said in its statement.

“The bank is also making strides in reducing the group’s cost base by 15%, or CHF 2.5bn, in 2025, including through a targeted reduction of CHF 1.2bn for 2023.”

Actions to reduce its headcount by 5% had been taken, with reductions to other non-compensation related costs a;sp underway.

As it announced on 27 October, the bank expected to incur restructuring charges, software and real estate impairments of CHF 250m as part of the cost of the strategic transformation in the fourth quarter.

“Strategic actions taken to significantly reduce the group’s risk profile are expected to be reflected in near-term financial results.

“Consistent with its announced divestment strategy, the bank disposed of its shareholding in Allfunds Group, and expects to record a CHF 75m loss related to the sale.

“Lower deposits and assets under management are expected to lead to reduced net interest income and recurring commissions and fees - this is likely to lead to a loss for wealth management in the fourth quarter of 2022.”

Together with the adverse revenue impact from the previously-disclosed exit from the non-core businesses and exposures, and as it announced on 27 October, Credit Suisse was expecting the investment bank and the group to report a “substantial loss” before taxes in the fourth quarter of up to CHF 1.5bn at group level.

“The group’s actual results will depend on a number of factors including the investment bank’s performance for the remainder of the quarter, the continued exit of non-core positions, any goodwill impairments, and the outcome of certain other actions, including potential real estate sales.

“The group confirms the capital ratio guidance communicated on 27 October.

“The group is targeting a 2025 pre-Basel III reform CET1 ratio of more than 13.5%, while expecting to maintain a pre-Basel III reform CET1 ratio of at least 13% throughout the transformation period in 2023 through 2025.

“The group continues to execute on the decisive strategic actions detailed on 27 October to create a simpler, more focused and more stable bank - a new Credit Suisse.”

At 1156 CET (1056 GMT), shares in Credit Suisse Group were down 4.59% in Zurich at CHF 3.679.

Reporting by Josh White for Sharecast.com.