Credit Suisse Group AG is at risk of posting a third consecutive annual loss after predicting it will take a 2.3 billion Swiss franc (US$2.33 billion) hit from a US tax overhaul signed into law by US President Donald Trump.
Unless the Zurich, Switzerland-based bank made significantly more than SF1 billion in the final quarter of this year, the writedown could trigger yet another yearly deficit for the lender, which had a net income position of SF1.14 billion after nine months.
The new tax bill means both “Credit Suisse and UBS will have to book a loss,” Mirabaud analyst Andreas Brun said by telephone.
Credit Suisse spokeswoman Amy Rajendran declined to comment on whether the charge would result in a fourth-quarter loss.
She said the bank will report results in February.
“It won’t affect Credit Suisse’s share price, since they’ve guided for it and the writedown doesn’t affect the regulatory capital,” Brun said.
“However, it doesn’t look nice for Credit Suisse to post another full-year loss because of a one-off regardless of all the progress they’ve made,” Brun added.
Credit Suisse has sought to reassure investors by saying that the policy for returning capital to shareholders remains unchanged and that the one-time accounting adjustment will have a “minimal” effect on the capital position.
Credit Suisse chief executive Tidjane Thiam at an investors’ day in London on Nov. 30 announced a return on tangible equity target of as much as 12 percent by 2020, the first profitability target under his tenure.
The new tax on services and interest payments to affiliates outside the US is “likely to have a negative impact” on tax liabilities next year, Credit Suisse said.
The bank is to provide a more detailed account on the US tax reform’s effects with the release of its full-year results scheduled for Feb. 14.
The lowering of the corporate tax rate from 35 to 21 percent would benefit most companies, but it also requires them to recalculate deferred tax assets that have accumulated on their balance sheets.
Bank of America Corp is also to take a US$3 billion charge and biotechnology company Amgen Inc announced a writedown of US$6 billion to US$6.5 billion.
“Credit Suisse anticipates that the reform will have a positive impact on the US economy and our activity levels in the US,” particularly in investment banking activities in advisory and underwriting, the bank said in a statement on Friday.
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