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Credit Suisse Expects A $1.6 Billion Loss In Q4, Set To Speed Up Its Strategy Overhaul

Credit Suisse Expects A $1.6 Billion Loss In Q4, Set To Speed Up Its Strategy Overhaul
Credit Suisse forecast a 1.5 billion Swiss franc ($1.6 billion) fourth-quarter loss on Wednesday as it embarks on a massive strategic overhaul.
Last month, the beleaguered lender announced a slew of measures aimed at addressing persistent underperformance in its investment bank as well as a string of risk and compliance failures that have resulted in consistently high litigation costs.
“These decisive measures are expected to result in a radical restructuring of the Investment Bank, an accelerated cost transformation, and strengthened and reallocated capital, each of which are progressing at pace,” the bank said in a market update on Wednesday.
Credit Suisse disclosed that net asset outflows had kept going, totaling about 6% of assets under management at the end of the third quarter. The Zurich-based bank warned last month that this trend would continue in the first two weeks of October, following reports casting doubt on its liquidity position and a spike in credit default swaps. Credit default swaps are a type of financial derivative that protects the buyer from default.
“In wealth management, these outflows have reduced substantially from the elevated levels of the first two weeks of October 2022 although have not yet reversed,” Credit Suisse said Wednesday.
The group expects to incur a 75 million Swiss franc loss as a result of the selling of its stake in the British wealth tech platform Allfunds group, while reduced deposits and assets under management are anticipated to result in a drop in net interest income, recurring commissions and fees, leading to a loss for the bank's wealth management division in the fourth quarter.
“Together with the adverse revenue impact from the previously disclosed exit from the non-core businesses and exposures, and as previously announced on October 27, 2022, Credit Suisse would expect the Investment Bank and the Group to report a substantial loss before taxes in the fourth quarter 2022, of up to CHF ~1.5 billion for the Group,” the bank said.
“The Group’s actual results will depend on a number of factors including the Investment Bank’s performance for the remainder of the quarter, the continued exit of non-core positions, any goodwill impairments, and the outcome of certain other actions, including potential real estate sales.”
Credit Suisse affirmed that it has started work toward a 15%, or 2.5 billion Swiss franc, reduction in its cost base by 2025, with a 1.2 billion Swiss franc reduction in 2023. 5% of the bank's workforce is being laid off, along with cuts to "other non-compensation related costs."
Last week, the company stated that it would speed up its investment bank restructure by selling a substantial chunk of its securitized products group (SPG) to Apollo Global Management, lowering SPG assets from $75 billion to around $20 billion by the middle of 2023.
“These actions and other deleveraging measures including, but not limited to, in the non-core businesses, are expected to strengthen liquidity ratios and reduce the funding requirements of the Group,” it said Wednesday.

Christopher J. Mitchell

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