Q3 2022 earnings and revision

Credit Suisse, Switzerland’s second largest bank, is seen here in Geneva city centre, next to a Swiss flag.

Fabric Coffin | AFP | Getty Pictures

Credit Suisse On Thursday, it reported a quarterly loss that was significantly worse than analyst forecasts as it announced a major strategic overhaul.

The embattled lender posted a third-quarter net loss of CHF 4,034 billion ($4.09 billion), compared to analysts’ loss expectations of CHF 567.93 million. The figure was also well below the 434 million Swiss franc profit announced for the same quarter last year.

The bank noted that the loss reflected an impairment of CHF 3.655 billion related to the “reassessment of deferred tax assets as a result of extensive strategic review”.

Under pressure from investors, the bank has announced a major overhaul of its business to address poor performance at the investment bank and a series of litigation costs that have fueled earnings. New CEO Ulrich Koerner told CNBC on Thursday that this represents the beginning of “a new transformation into Credit Suisse.”

In its widely anticipated strategic shift, the bank pledged to “radically restructure” an investment bank to significantly reduce a bank’s exposure to risk-weighted assets used to determine capital requirements. It also aims to reduce its cost base by 15%, or CHF 2.5 billion, by 2025.

The bank expects to pay a restructuring fee of CHF 2.9 billion by the end of 2024.

The transformation plan will see Credit Suisse split the investment bank into an independent business called CS First Boston, raise CHF 4 billion through the issuance of new shares and an offering of rights, and create a capital release unit for the lower decline. return, non-strategic work.

The aim is to reduce risk-weighted assets and leverage risk by 40% throughout the restructuring, and to “allocate almost 80% of its capital to Asset Management, Swiss Bank, Wealth Management and Markets” by 2025. “

Speaking to CNBC, Koerner told CNBC that the bank “will be much more stable, sustainably profitable, much simpler to set up, and one of the most important things for us is how we got to this solution. We started with the client’s needs, and we actually designed everything around the client’s needs and we got what we propose today.”

Koerner took over after the bank posted a net loss of CHF 1.593 billion in July, well below analysts’ collective expectations, following the resignation of the previous term Thomas Gottstein. He said Thursday’s strategic overhaul represented “a very determined program of action”.

“First, a radical restructuring of the investment bank; second, a significant reduction in costs, and third, further strengthening of our capital base, and I think with that, we have all the necessary materials … where we want to go,” he added.

Last year, Credit Suisse suffered from stagnant investment banking revenues, losses from the withdrawal of its business in Russia, and litigation costs related to a number of past compliance and risk management failures, notably the Archegos hedge fund scandal.

Here are some other financial highlights for the third quarter:

• Group revenue fell from CHF 5.437 billion to CHF 3.804 billion compared to the same period last year.
• The CET1 capital ratio, a measure of bank solvency, was 12.6%, compared to 14.4% in the same period last year and 13.5% in the previous quarter.
• Return on tangible equity fell to 38.3% from -15% in the second quarter and 4.5% in the third quarter of 2021.

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