Credit Suisse Group AG yesterday said that it would post a net loss in the fourth quarter on the back of an impairment of 1.6 billion Swiss francs (US$1.75 billion) tied to restructuring, as other charges and legal fees accompany its efforts to reboot strategy in the wake of a string of scandals.
Net income in the third quarter dropped 21 percent, hit by SF564 million of litigation costs from a variety of issues, including a fundraising scandal in Mozambique and the implosion of Greensill Capital Ltd.
A move to shrink the investment bank by 25 percent would cause the SF1.6 billion impairment this quarter, as the firm leans further into wealth management.
Credit Suisse CEO Thomas Gottstein has been looking to prove that major blunders in the trading and asset management divisions have not eroded the strength of the firm’s other profit drivers.
The bank yesterday provided a strategic update that boosts the profitable wealth unit and dials back risk from the investment bank.
“Wealth Management businesses returned to robust net new assets and higher transaction revenues sequentially, while recurring commissions and fees, and client business volumes demonstrated strong year on year momentum,” Gottstein said in the earnings release.
The bank’s strategy came after a six-month review by new chairman Antonio Horta-Osorio following a series of costly errors, including losing US$5.5 billion in the blowup of family office Archegos Capital Management LLC and having to unwind client funds that were managed with collapsed lender Greensill Capital.
Revenue rose in the third quarter, helped by deal-making fees that almost tripled from a year earlier amid a merger boom. The lender’s wealth business recorded net new assets of SF6.5 billion, led by the Asia-Pacific region.
A further impairment of SF113 million was recorded for the third quarter in the asset management unit related to its investment in York Capital Management LP.
The Swiss bank took a 30 percent stake in the US investment firm in 2000, and already booked a US$450 million impairment last year, as it wound down most of its hedge-fund strategies.
The international wealth division posted SF1.4 billion in net inflows, while the Asia and Swiss wealth units delivered SF3.2 billion and SF1.9 billion in net inflows.
The three wealth businesses will now be combined in a single unit following the strategy review.
At the investment bank, Credit Suisse assuaged with earnings from capital markets and advisory fees keeping pace with the biggest Wall Street peers.
Advisory revenues were up 182 percent from last year’s third quarter, posting the best quarterly performance since 2018, driven by strong merger-and-acquisition fees.
Fixed-income trading revenues dropped 13 percent in line with US and European competitors. Equities trading revenues were down 9 percent, as the bank exits the prime brokerage business following the Archegos blowup.
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