Credit Suisse sees Q4 pre-tax loss of $1.6B

ZURICH, Switzerland: Credit Suisse stocks tumbled again on Wednesday after announcing it expects a surprise fourth-quarter pre-tax loss of up to $1.6 billion as it launches into a radical overhaul of its operations.

Shaken by repeated scandals, Switzerland’s second-largest bank unveiled a rejig in late October, but accepted that its accounts would take a hit of up to 1.5 billion Swiss francs ($1.6 billion) in the final three months of the year.

At an extraordinary general meeting, shareholders approved capital increases worth about 4 billion Swiss francs.

“The approved increase in share capital is expected to increase Credit Suisse’s CET1 ratio and support its strategic transformation,” the bank said in a statement, referring to the ratio that compares a bank’s capital to its risk-weighted assets.

“The increase is to be carried out through two capital increases with expected aggregate gross proceeds of approximately 4 billion Swiss francs,” it added.

The scale of fourth-quarter losses “will depend on a number of factors including the investment bank’s performance for the remainder of the quarter, the continued exit of noncore positions, any goodwill impairments and the outcome of certain other actions, including potential real-estate sales,” the Zurich-based bank said in a statement.

Credit Suisse said in October it expected to incur restructuring charges, software and property impairments of about 250 million Swiss francs in the fourth quarter as part of its overhaul.

Question of trust

The bank’s reorganization is aimed at dramatically reducing the scale of its investment bank.

However, the restructuring takes place in an unfavorable context for the banking sector.

Its investment bank suffered the backlash of the “substantial industry-wide slowdown” in capital markets and reduced activity in the sales and trading markets, it said.

“The bank expects these market conditions to continue in the coming months,” it added.

Credit Suisse launched its new strategy following huge thirdquarter losses in a bid to repair the damage following a series of scandals.

In addition to revamping its investment banking unit, the announced measures include slashing 9,000 jobs and a capital injection from the Saudi National Bank.

Andreas Venditti, an analyst at Swiss investment managers Vontobel, said the “massive net outflows” in wealth management — the bank’s core business, alongside its Swiss domestic banking — are deeply concerning, even more so as they are yet to be reversed.

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