Credit Suisse flags $1.6-bn loss in Q4, to cut 9,000 jobs

Credit Suisse Group AG warned it will book a loss of up to 1.5 billion Swiss francs ($1.6 billion) for the fourth quarter, and reported further outflows of wealth management funds amid a slump in client confidence.

The Zurich-based bank said in a statement Wednesday it expects losses in both the wealth management division and its investment banking unit due to 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’s equivalent to approximately 84 billion Swiss francs in outflows across wealth and asset management.

Credit Suisse is undergoing a sweeping overhaul that will see its investment bank carved up and greater focus placed on private banking after years of scandals and management missteps. It will seek approval from shareholders later Wednesday for a capital raise of about 4 billion francs and intends to reduce headcount 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 AG in Zurich. “Credit Suisse needs to restore trust as fast as possible — but that is easier said than done.”

The actual 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 warned last month that a loss for the fourth quarter was to be expected, with Chief Executive Officer Ulrich Koerner saying that the bank will “definitely” be profitable from 2024.

Lower deposits and reduced managed assets are expected to negatively impact 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. All this adds up to a very bad year for Credit Suisse, incredibly it will likely be even worse than the last one.