ZURICH, Feb 9 (Reuters) – Credit Suisse Group (CSGN.S) reported its biggest annual loss since the 2008 global financial crisis after shaken customers withdrew billions from the bank, and it warned that another “substantial” loss would occur this year.
Battered by one scandal after another, the bank saw a sharp acceleration in withdrawals in the fourth quarter, with outflows of more than 110 billion Swiss francs ($120 billion), although it said the situation s was improving.
The results, described as “catastrophic” by Ethos, which represents some Credit Suisse shareholders, sent the bank’s shares down as much as 10%.
Switzerland’s second-largest bank has embarked on a major overhaul of its business by cutting costs and jobs to revive its fortunes, including creating a separate business for its investment bank under the CS First Boston brand. The bank successfully completed a fundraising round of 4 billion Swiss francs in December.
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Managing Director Ulrich Koerner said: “We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation.”
“We did careful and hopefully a little careful planning,” he told reporters.
But analysts were alarmed by the scale of the losses and outflows.
“Credit Suisse’s operating performance was even worse than expected and the level of outflows quite staggering,” Keefe, Bruyette & Woods analyst Thomas Hallett said in a note.
“With heavy losses continuing into 2023, we expect to see another wave of downgrades and see no reason to hold the stock.”
For the fourth quarter, the bank recorded a net loss of 1.39 billion francs. This brought its total net loss in 2022 to 7.29 billion francs, marking its second consecutive year in the red.
The bank also signaled that the wealth management division and the investment bank will likely also post losses in the first quarter of 2023.
The wealth management division recorded outflows of 92.7 billion francs in the fourth quarter, well above the 61.9 billion expected by analysts, and bringing the division’s new total assets under management to 540 .5 billion.
Bleeding funds last year led it to breach some liquidity requirements, but its chief financial officer said on Thursday the problem had since been resolved.
The large outflows of deposits and net assets from the bank have worsened a generally bleak picture.
Andreas Venditti, an analyst at Vontobel, described last year as “clearly one of the worst years in Credit Suisse’s 167-year history”, and said the future offered little immediate relief.
Among a series of scandals, Credit Suisse was hit hard by the collapse of US investment firm Archegos in 2021 as well as the freezing of billions in supply chain finance funds linked to insolvent UK financier Greensill .
Other scandals rocking the bank include a lawsuit in Switzerland involving money laundering for a criminal gang.
Investment bank Credit Suisse posted a loss of 3.8 billion francs in 2022, roughly the same amount it paid to staff in the division.
The bank said it racked up heavy losses as trading revenue plummeted, but it also pointed to the impact of ‘accelerated deleveraging’ triggered by ‘large deposit outflows’ in the last three months of last year. .
On the proposed spin-off from the investment bank, Credit Suisse said it bought former board member Michael Klein’s consultancy boutique for $175 million.
The projects have already raised concerns among some investors about possible conflicts of interest.
On Thursday, the Ethos Foundation, which represents some Credit Suisse shareholders, said it was raising “governance issues” and little information had been revealed about the deal.
Ethos chief executive Vincent Kaufmann told Reuters he was surprised at the amount that had been paid “given the little information we have today about this company founded and led by Mr. Klein, Member of the Board of Directors of Credit Suisse until October 2022 and CEO Designate of the Buyer (CSFB)”.
Credit Suisse did not provide details of other investors that may back the investment bank. Koerner said last year he had a $500 million commitment from an unnamed investor.
Last November, ratings agency Standard & Poor’s downgraded the bank’s rating to just one level above junk bank.
($1 = 0.9195 Swiss francs)
Additional reporting by Stefania Spezzati in London; edited by John O’Donnell, Edwina Gibbs and Jane Merriman
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