Even if everything goes according to plan for CEO Ulrich Koerner, Credit Suisse faces fateful moments next year. finews.asia charts the bank's course through the challenging months ahead.
1. Highnoon on February 9
Credit Suisse will present its annual results for 2022 at the beginning of February. With regard to the fourth quarter, the bank already warned of losses of up to 1.5 billion Swiss francs ($1.6 billion).
So the balance sheet of the number two in Swiss banking ends very much in the red. For shareholders, the question is whether it comes to an end. They will be particularly interested in whether Credit Suisse could stop the outflow of client funds in its core asset management business. Analysts estimate the outflows in the fourth quarter at 100 billion francs, a mark that must not be exceeded under any circumstances. If it does, it raises the question arises whether CEO Ulrich Koerner's strategy has failed after four months.
2. Wailing About the Bonus
Credit Suisse reported losses every quarter this year which should have a corresponding impact on performance pay. American investment banks halved 2022 bonuses. At beleaguered Credit Suisse, which is being restructured over the next three years, high compensation is even less likely. «We have to be honest," Credit Suisse Switzerland CEO André Helfenstein recently told the «NZZ» (in German, behind paywall). «We have a bad year as a group...then we get paid less, and that's okay.»
Whether his staff thinks that's okay, will become apparent when bonus season begins after annual results are presented. It will be interesting to see what management pulls out of the hat this time to prevent a talent exodus.
(Image: PD)
3. The Revenge of the Lescaudron victims - Served Cold
Since 2015, victims of former Credit Suisse private banker Patrice Lescaudron have been in litigation. In the coming months, their global stranglehold on the bank is likely to tighten. A verdict in Singapore is expected before the end of the first quarter. One of the big bank's fiduciary companies, sued by Georgian billionaire Bidzina Ivanishvili (pictured above), admitted to the Commercial Court it had failed to inform the wealthy client about unauthorized transfers. Still, the Credit Suisse subsidiary did not want this to be understood as an admission of guilt. The damages claimed by Ivanishvili in Singapore amount to $1.27 billion.
In the first half of the year, the written verdict of the Court of Appeal in Bermuda is expected to be handed down. The court will decide whether a subsidiary of the bank must pay the $600 million in damages that the subsidiary was ordered to pay in March. Criminal charges against Credit Suisse in Switzerland were filed at the end of 2021. Since then, various bankers have been questioned by the Geneva prosecutor's office. Following that, things remained quiet. But that could change in 2023.
4. On April 4, The Saudis Will Have Their Say
The ordinary general meeting of Credit Suisse is scheduled for April 4. As with recent ordinary and extraordinary shareholder meetings, it is likely to be tumultuous once again, and the background noise is likely to be interesting. Will the new major shareholders from Saudi Arabia, including the Saudi National Bank and the controversial Crown Prince Mohammed bin Salman (picture below) make their first demands on the management? Or will they, like the Qataris before them, be content with the role of spectators?
Given the operational misery, managerial salaries at the bank should reach a new low. We will see.
(Image: Keystone)
5. Then There is Archegos and Greensill
The forced closure of Credit Suisse's Greensill funds and the billion-dollar loss from New York financial firm Archegos happened in the spring of 2021. The double debacle will continue to impact the bank in the spring of 2023 and beyond. The Swiss Financial Market Supervisory Authority (Finma) opened enforcement proceedings on both cases which are still pending. By the end of November, the bank had managed to return some $6.78 billion of just over $10 billion in blocked assets to Greensill fund investors. Recent progress has been marginal, with the bank still trying to recover additional funds from debtors and third parties through legal action.
But fund customers who have already lost patience are threatening to go to court. In connection with Archegos and Greensill, investors in the US filed several class-action lawsuits against Credit Suisse and are likely to enter a livelier phase in the coming months. The bank settled the first such lawsuit last September, although that did not come without costs.
6. The Continued DOJ Threat
In January, finews.com pointed out the potential danger of the case. Whistleblowers formerly employed by the bank provided American authorities with information about alleged tax fraud practices at Credit Suisse. According to media reports, the US Department of Justice (DOJ) is investigating whether the bank helped US account holders conceal hundreds of millions of dollars from the Internal Revenue Service.
This is highly sensitive for the Swiss bank, which settled a DOJ tax fraud charge in 2014 for a record $2.6 billion. If it emerges the institution helped US clients hide assets from the IRS even after the settlement, Credit Suisse faces the threat of being classified as a repeat offender. Credit Suisse denies any inappropriate behavior and, according to its statements, is cooperating with the authorities.
7. Tuna is on the Menu
Because of the scandal over bonds for the African country of Mozambique going bust, Credit Suisse paid $475 million to various authorities in the fall of 2021. In July, the Swiss bank transferred $22.6 million to investors who lost money with its so-called tuna bonds.
But that was not the end of the line for the bank. A civil suit is set for September of next year, filed in London in 2020 by investors who bought more than $600 million of the bonds. In the same year, the Office of the Attorney General of Switzerland in Bern had opened criminal proceedings on suspicion of money laundering, shedding more light on the Mozambique scandal.
(Image: Shutterstock)
8. Maturing Bond Headaches
According to its projections, Credit Suisse will either have to repay or roll over a volume of outstanding bonds in 2023 greater than any in five years, rising from an estimated $17 billion in 2022 to an expected $22 billion, as the bank detailed in a December presentation. What has become apparent in recent months, is the bank now has to offer high coupons to find buyers of its bonds. These expenses add to the billions in costs for restructuring the bank, making the loss of earnings in the operating business even more painful.
9. When will the wild card be played?
Even if everything goes according to plan for Koerner and his management, the share price is unlikely to recover overnight, making the bank vulnerable to raiders and strategic investors. Currently, the bank still has a market capitalization of over 11 billion francs among a fragmented shareholder base. So for just over 1 billion francs, someone could become the institution's largest shareholder.
Given the bank's condition, no one has done so yet. But with each new low that the share price tests, the chances that someone might play this wild card increase.
