Feb 9, 2023
Credit Suisse Clients Pull $120 Billion Amid Fifth Straight Loss
(Bloomberg) -- Credit Suisse Group AG posted a bigger-than-expected loss for the fourth quarter and unprecedented client outflows, exacerbating the difficulty for Chief Executive Officer Ulrich Koerner in returning to profitability by next year.
Shares in the Swiss bank slid as much as 12% on Thursday after it posted a fifth-straight quarterly loss of 1.39 billion Swiss francs ($1.5 billion). While outflows were concentrated in a hectic two-week period in October, the full scale of the exodus — 110.5 billion francs — still surprised analysts.
Koerner’s pledge to stem the decline hinges on a massive client outreach program to woo nervous clients and their cash back to the bank, while carving out the volatile investment bank and slashing costs. On Thursday, Credit Suisse reported progress in the steps needed to execute the plan, including the purchase of dealmaker Michael Klein’s boutique advisory firm, but only tentative signs that customer confidence is returning.
By “2024 I think we should be profitable,” Koerner said in an interview with Bloomberg Television’s Francine Lacqua. “2023 will be a transformative year, and then we get better and better,” he said.
Koerner detailed the bank’s efforts to win funds back, reaching out to tens of thousands of clients following the October surge, with management “hopeful that we bring a fair part of the outflow back in 2023 and the rest will come later.”
Shares pared losses later Thursday, trading down 7.5% as of 3:06 p.m. in Zurich.
Credit Suisse’s total assets under management stood at 1.3 trillion Swiss francs at the end of 2022, a decline of almost 20% from a year earlier. Chief Financial Officer Dixit Joshi said Thursday that the wealth management unit had seen inflows in January, particularly in Asia Pacific.
The bank is executing on its restructuring plan “at pace,” according to the CEO. Since the end of October, Credit Suisse has raised $4 billion in fresh capital and closed the sale of its securitized products group to Apollo Global Management Inc., expecting to book a gain of $800 million in the first quarter.
Investment banking carve-out Credit Suisse First Boston is taking shape, with the absorption of Klein’s boutique firm in a deal valued at $210 million and an intention to publicly list or spin off the unit by the end of 2024. And on costs, Credit Suisse has managed to cut 4% of staff, inching towards the 17% or 9,000 total job cuts they plan by 2025.
The structural cuts in the investment bank coupled with an uncertain macroeconomic environment partly drove results that trailed European and US peers by a long way. Fixed income trading revenues in the quarter were down 84% year on year, while equities trading revenues collapsed 96%. Meanwhile capital markets and advisory revenues were also down 59%, as a result of a slump in dealmaking and an uncertain market environment, though that result was more in line with the competition.
In wealth management, the bank posted a before-tax-loss of 199 million francs, worse than estimates. Recurring fees and net interest income were both down by 17%, while transactions revenues slumped 20% driven by marked-to-market losses for APAC financing of 31 million francs.
The continued losses underscore the urgency for Chairman Axel Lehmann and Koerner to put Credit Suisse on sustainable footing, with investors and analysts showing limited patience for execution of the revamp.
“With heavy losses to continue in 2023, we expect to see another wave of downgrades and see no reason to own the shares,” analysts at Keefe, Bruyette and Woods wrote in a note Thursday.
(Updates with shares. A previous version was corrected to add decimal point in table, currency conversion)
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