Scandal-ridden Credit Suisse warns profits will be hit – Expat Guide to Switzerland

Credit Suisse warned on Tuesday that the litigation will hit fourth-quarter profits as its investment bank faces a loss, in the latest blow to the scandal-ridden financial giant.

The announcement comes just a week after Credit Suisse Chairman Antonio Horta-Osorio resigned for breaking Covid quarantine rules in Switzerland.

Horta-Osorio, who had been in the job for just under nine months, had pledged to improve risk management at Credit Suisse after the bank was rocked by implosions at financial firms Greensill and Archegos last year.

In the latest setback, the bank said on Tuesday that its fourth-quarter profits would “be negatively impacted” as it set aside 500 million Swiss francs ($545 million, 482 million euros) for litigation.

“These litigation provisions have been made in connection with a number of cases where the Group has more proactively sought settlements and primarily relate to litigation inherited from our investment banking business,” Credit Suisse said. .

The provisions will be partly offset by real estate sales of 225 million Swiss francs.

The bank, which will report full-year and four-quarter results on Feb. 10, said it expects pretax profit to break even in the last three months of 2021.

Credit Suisse said it saw a reduction in transaction-based revenue in its investment banking and wealth management businesses.

“This reflects the usual seasonal slowdown but, in addition, business activity reflects the return to more normal business conditions after the exceptional environment that has prevailed for most of 2020 and 2021,” he said.

“Combined with the reduction in our overall risk appetite, including our decision to substantially exit our prime services business, this resulted in a loss for the fourth quarter of 2021 in the Investment Bank division.”

The bank reported a “significant slowdown” in transactions in its international and Asia-Pacific wealth management divisions, with the latter impacted by client deleveraging due to “adverse market conditions” in the region.

Credit Suisse’s loss in the fourth quarter “is twice what we had estimated,” said Vontobel market analyst Andreas Venditti, who put the figure at around 1.6 billion Swiss francs.

– Billions lost –

Credit Suisse announced in November a three-year reorganization plan that significantly reduces its investment banking activities and refocuses on wealth management.

The bank then declared that it would place the limitation and management of risks at the heart of its corporate culture.

The collapse of US hedge fund Archegos last year cost Credit Suisse some $5.5 billion.

An independent external investigation into the Archegos fiasco has revealed a failure in effective risk management at Credit Suisse.

The bank has also refunded billions of dollars to investors who put money into funds linked to the collapse of British financial firm Greensill.

Additionally, Credit Suisse was slapped last year with nearly half a billion dollars in fines for its role in Mozambique’s giant financial crisis.

Credit Suisse has appointed Axel Lehmann, who joined the bank just three months ago to chair the board’s risk committee, to succeed Horta-Osorio.

The Portuguese banker quit after learning he had traveled in breach of Switzerland’s self-isolation rules late last year.


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