What Credit Suisse has billed as a transition year looks to be turning into another «annus horribilis» as it posts a massive second-quarter loss. The bank is pinning its fortunes on a new CEO to turn things around.
Credit Suisse posted a 1.6 billion Swiss franc ($1.62 billion) loss attributable to shareholders in the second quarter, closing out the troubled reign of CEO Thomas Gottstein who will be succeeded by Ulrich Koerner, the bank said in its second-quarter results announcement. It also warned of a further loss in the third quarter.
The results disappointed, particularly in the investment bank which posted an 860 million franc loss in the second quarter. While a loss was expected for the unit, the magnitude was a surprise, as litigation costs hit the unit.
«Our results for the second quarter of 2022 are disappointing, especially in the investment bank, and were also impacted by higher litigation provisions and other adjusting items. The bank’s performance was significantly affected by a number of external factors, including geopolitical, macroeconomic, and market headwinds. These challenging circumstances led to results which overshadow the strength of our leading client franchises in all four divisions of the bank,» said the outgoing CEO Gottstein.
Net New Money Reversal
After attracting 7.9 billion Swiss francs of new money in the first quarter, Credit Suisse saw most of that leave the bank in the second quarter, as it recorded 7.7 billion in outflows. Assets under management fell to 1.5 trillion francs in the second quarter, down from 1.6 trillion francs at the end of the first quarter.
These are primarily due to net outflows in the EMEA and Switzerland, offset by net new assets in the Asia Pacific and Americas regions, according to Credit Suisse.
Future Loss
Adverse market conditions will likely negatively impact client activity in the coming months, leading to a further loss in the investment bank in the third quarter, the bank said. However, the Swiss bank and wealth management unit will continue to benefit from higher interest rates on the Swiss franc and US dollar exposure, respectively, while asset management is set to improve in the second half of the year, it added. Furthermore, the bank is increasing its effort to reduce costs as well as intensifying its digital transformation program to bring its absolute cost base to less than 15.5 billion Swiss francs over the medium term.
In addition, Credit Suisse said it will be initiating a comprehensive strategic review and will provide details and specific performance goals with the bank's third-quarter results.
