Credit Suisse has reported its biggest annual loss since the 2008 financial crisis, laying bare the scale of the challenge the bank faces in restoring its fortunes.
The lender on Thursday reported a SFr1.4bn ($1.5bn) loss for the fourth quarter, as investment banking revenues slumped and clients pulled money from the group’s wealth management business. The bruising quarter took the bank’s annual loss to SFr7.3bn.
Customers withdrew SFr111bn from the group in the final three months of the year, with two-thirds of the outflows coming in October, when the bank was hit by rumours on social media about its financial health.
The wealth management business accounted for SFr92.7bn of the outflows in the quarter, the bank said, surpassing the SFr61.9bn expected by analysts.
Credit Suisse’s shares dropped 10 per cent on Thursday morning to SFr2.90, having fallen more than 60 per cent over the past year and hit an all-time low of SFr2.70 in December.
Credit Suisse is embarking on a radical restructuring in an attempt to draw a line under a series of crises and return to profit. Under the plan, the group is axing 9,000 of its 52,000-strong workforce, spinning off its investment bank in a move that will also revive the First Boston name and beefing up its wealth management business.
“Credit Suisse management is undergoing a very difficult and complex process of restructuring,” said JPMorgan analyst Kian Abouhossein. “The franchise is deteriorating so far faster than expected and seems to be ongoing.”
The bank warned on Thursday that it expected to make another “substantial loss” in 2023 as it absorbed restructuring costs.
“This is a year when it bears a large brunt of the restructuring expenses out of our strategic plan,” Credit Suisse chief financial officer Dixit Joshi said, adding that SFr1.6bn of costs would come in 2023, with a further SFr1bn planned for 2024.
Alongside its quarterly results, the bank announced it had completed the acquisition of M Klein & Company, the advisory boutique owned by Michael Klein, the former director who will run Credit Suisse’s spun-off investment bank.
Credit Suisse paid $175mn for the business in the form of a $100mn convertible note and $75mn in cash. The deal is expected to eventually cost Credit Suisse $210mn, including interest costs and annual payments on the note.
Klein has been named chief executive of banking at Credit Suisse and head of the Americas. He has joined the executive board and will report to group chief Ulrich Körner.
Korner said the acquisition marked “another milestone in the carve-out of CS First Boston as a leading independent capital markets and advisory business”, adding: “The transaction should further strengthen CS First Boston’s advisory and capital markets capabilities.”
Credit Suisse also announced that the first stage of the deal to sell its securitised products business to Apollo was complete, with the new venture to be called Atlas SP Partners.
The bank said it expected to book a pre-tax gain of $800mn from the sale and that the deal was due to be completed in the first half of this year.
In the final quarter of 2022, Credit Suisse reported a 33 per cent fall in revenues, largely down to a 74 per cent decline in investment banking fees, while wealth management revenues fell 17 per cent and asset management income dropped 28 per cent.
The bank said its group-wise bonus pool for 2023 would be cut in half and confirmed a Financial Times report that senior managers would not receive a bonus. Korner also confirmed plans to motivate senior managers to hit cost-cutting and profitability targets by offering a special SFr350mn bonus.
While the results revealed outflows during a bruising quarter, the bank said customers were beginning to return, especially in Switzerland and in the Asia-Pacific region.
Credit Suisse said parts of the business had experienced inflows in January, but did not say whether the group as a whole was seeing outflows reverse.
Korner said the bank had had personal conversations with 10,000 wealth management clients and 50,000 customers in the domestic business since the end of October and so far just 2 per cent of clients had closed their accounts with the group.
Fellow Swiss wealth managers UBS and Julius Baer both reported an influx of wealth management assets at the tail-end of last year, as clients switched funds from their Credit Suisse accounts.
Thomas Hallett, an analyst at Keefe, Bruyette & Woods, described the outflows as “huge”. “This is deeply concerning, in our view,” he said. “At best, some return but at what cost? We expect this to be viewed negatively.”