Following yet another setback in the first quarter of 2022, Credit Suisse’s options for moving forward appear to be dwindling.

«This bank should be liquidated!» exclaimed a finews.asia reader on social media after Credit Suisse announced another quarterly loss on Wednesday. Bad news seems to be coming out with a numbing regularity at Switzerland’s second-largest bank. 

Such news isn’t rendered any less dire even as CEO Thomas Gottstein said back in February that 2022 would be a «transition year» and the bank would nevertheless make a profit. That seems like a long time ago. A closer look quickly reveals that the problems are now much deeper, and several things are striking.

Crisis Management Top Discipline

That Credit Suisse is suffering a quarterly loss simply because of increased provisions suggests that business activities have declined massively. For a financial institution undergoing what is supposed to be a turnaround of epochal proportions, the optics are rather bad.

Also striking is that the bank is facing problems on virtually all fronts. For once, the latest provisions, regrettably not disclosed in detail, do not stem from investment banking, which is riskier per se, but from asset management. In other words, from the bank's supreme discipline.

Ongoing Contradictions

The provisions announced Wednesday are said to be related to «many small cases», some dating back ten years, and the embezzlement scandal surrounding the former, now deceased, client advisor Patrice Lescaudron. In this matter alone, Credit Suisse is still facing a fine of around $500 million, as finews.asia also reported. 

This leads to the conclusion that in the past ten years alone, Credit Suisse engaged in dubious, or even criminally relevant, practices in all of its divisions, the possible exception being its Swiss business. This stands in stark contrast to numerous assurances given by myriad Credit Suisse CEOs and presidents, who have repeatedly asserted the scandals that have come to light are merely isolated incidents, as CEO Gottstein also asserted last year in connection with the debacles surrounding Greensill and Archegos.

Not a Good Time For Mergers

If speculation about the fate of Credit Suisse is now taking place, there are not as many options open as it might seem. After all, the numerous planning needed for a merger with another European bank is likely to have evaporated this year due to the war in Ukraine, spiking inflation, and the end of easy money from central banks to the financial markets. The imponderables are too numerous for two major institutions to embark on such an adventure.

At the top, a management team remains that, although it has undergone some personnel changes, still has two key players in CEO Gottstein and general counsel Romeo Cerutti who, each in his way, played a significant role in the recent debacle. Under these premises, any new start appears to be less than credible.

Imminent Personnel Changes

The fact there have been rumblings in Zurich financial circles for some weeks that Cerutti could leave his post is hardly surprising, given the many legal cases with which CS is now confronted. Should it come to that, the logical consequence would be that Gottstein would also vacate his post. 

Louis Brandeis, a former U.S. Supreme Court Associate Justice, wrote a collection of essays called «Other People's Money and How the Bankers Use It» in which he observed, «sunlight is said to be the best of disinfectants.» A new chief operating officer at Credit Suisse might do well to heed such advice and open the windows and let the sunshine in.