Credit Suisse warns on profits for third time this year

Credit Suisse issued its sixth profit warning in seven quarters - its third this year alone - on Wednesday morning, as its clients scaled back on risk in tough market conditions.

The Swiss bank was down more than 7% in Zurich trading, after it said market conditions so far in the second quarter had remained “challenging”.

It said the combination of the current geopolitical situation following Russia’s invasion of Ukraine, “significant” monetary tightening by major central banks in response to inflation, and the unwinding of Covid-related stimulus measures had resulted in “continued heightened market volatility”, weak customer flows and ongoing client deleveraging, notably in the Asia-Pacific region.

“Within the Investment Bank, while our advisory revenues have been resilient and GTS revenues, compared to last year, have benefited from the higher volatility, albeit with an uneven performance, the impact of these conditions, together with continued low levels of capital markets issuance and the widening in credit spreads, have depressed the financial performance of this division in April and May and are likely to lead to a loss for this division as well as a loss for the group in the second quarter of 2022,” Credit Suisse said in its statement.

“We would note that our reported earnings will also be affected by continued volatility in the market value of our 8.6% investment in Allfunds Group.”

Looking to the second half, Credit Suisse said 2022 would remain a year “of transition”.

“Given the economic and market environment, we are accelerating our cost initiatives across the group with the aim of maximising savings from 2023 onwards,” it said, adding that it would provide further details at its ‘Investor Deep Dive’ on 28 June.

“We remain focussed on the disciplined execution of our strategy, delivering on our regulatory remediation programs and placing risk management at the core of the bank.

“In doing so, we are focused on delivering best-in-class service and support to our clients, especially in this challenging market environment.”

Credit Suisse also said it intended to operate with a group CET1 ratio of around 13.5% in the near-term, in line with its 2024 objective of reaching a CET1 ratio of more than 14% before the planned Basel III reforms.

At 1010 CEST (0910 BST), shares in Credit Suisse were down 7.3% in Zurich at CHF 6.22 (508p).

Reporting by Josh White at Sharecast.com.