Credit Suisse warns of $1.6bn fourth-quarter loss and outflow of funds

Zurich-based lender is overhauling operations at its investment bank and placing greater focus on private banking after years of management missteps

Credit Suisse's profit warning on Wednesday is a blow. Reuters
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Credit Suisse said it will book a loss of up to 1.5 billion Swiss francs ($1.6bn) for the fourth quarter, and reported further outflows of wealth management funds as client confidence slumps.

The Zurich-based bank said in a statement on Wednesday that it expects losses in its wealth management and investment banking divisions because of subdued activity, market conditions, continued outflows of customer assets and the sale of non-core businesses.

The lender said that as of November 11, net asset outflows were about 6 per cent of the assets under management at the end of the third quarter. That is equivalent to approximately 84 billion Swiss francs in outflows across wealth and asset management.

Credit Suisse is undergoing an overhaul that will carve up its investment bank and place greater focus on private banking after years of scandals and management missteps. It will seek approval from shareholders on Wednesday for a capital raise of about 4 billion francs and intends to reduce staff by about 9,000 by 2025.

“The massive net outflows in Wealth Management, CS’s core business alongside the Swiss Bank, are deeply concerning — even more so as they have not yet reversed,” said Andreas Venditti, banking analyst at Bank Vontobel in Zurich.

“Credit Suisse needs to restore trust as fast as possible, but that is easier said than done.”

The results will depend on “a number of factors”, including remaining performance for the rest of the year, the continued exit of non-core positions, any goodwill impairments, and outcomes of other asset sales, the bank said.

The bank said last month that a loss for the fourth quarter was to be expected, with chief executive Ulrich Koerner saying that the bank will “definitely” be profitable from 2024.

Lower deposits and reduced managed assets are expected to hit the bank’s net interest income and recurring fees for the wealth unit, it said.

Its outflows in wealth management “have reduced substantially from the elevated levels of the first two weeks of October 2022, although have not yet reversed and were approximately 10 per cent of assets under management at the end of the third quarter of 2022”, it said.

It also expects to incur restructuring charges and software and real estate impairments of 250 million Swiss francs in the fourth quarter.

Updated: November 23, 2022, 9:23 AM
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