Credit Suisse falls back into the red

For the first time, shareholders were also presented with something like a preliminary total for the latest series of scandals: the loan provisions from the Archegos scandal, provisions for older legal cases and write-downs in the investment bank due to a change in strategy totaled CHF 7.6 billion in 2021 alone .

Bank boss Thomas Gottstein said: “Despite a very supportive market environment, 2021 was a very difficult year for Credit Suisse.” At the beginning of the year, the chief supervisor António Horta-Osório, who was committed as a reformer, stumbled over his own personal misconduct.

It is now becoming increasingly clear that the series of negative news is having an impact on the core business. In the fourth quarter, the bank had to cope with billions in outflows of funds in both its Swiss business and its Asian business. In China in particular, risky credit transactions have been withdrawn and the debt ratio of customers reduced.

In wealth management, the bank’s most important business area, only a minimal profit of CHF 25 million remained in the fourth quarter of 2021. At the same time, costs rose, so that the division had to spend 97 centimes for every franc earned.

Investment bank makes significant loss

The investment bank, a profit driver for many of its competitors, posted an adjusted pre-tax loss of more than CHF 230 million in the fourth quarter. The bank cited “challenging trading conditions” in the corporate bond business, typically a strength of Credit Suisse, as one of the reasons.

In addition, stock trading fell significantly because the bank largely withdrew from the so-called prime services business after the Archegos debacle, in which the trading business with hedge funds is bundled.

Overall, the investment bank’s loss in the fourth quarter totaled around two billion francs. The reason was a write-down on the value of an investment bank acquired in 2000, which was particularly strong in the business with high-yield bonds and private equity. Because Credit Suisse wants to reduce risks after the series of scandals, it is increasingly having to withdraw from these areas.

At the same time, the bank was unable to reduce costs to the same extent as the decline in profits last year. Credit Suisse has reduced variable remuneration for employees by CHF 900 million to CHF 2 billion.

At the same time, however, it handed out almost 800 million francs in cash bonuses paid in advance, which employees have to pay back if they leave the bank early – a measure to retain employees that, however, had caused internal unrest.

Another almost 500 million francs in bonuses are to be given to high-ranking employees if the bank has successfully changed its strategy to a less risky business model by 2024. In addition, the bank announced in November last year that it would recruit hundreds of client advisors for asset management.

Trouble with the shareholders

The bank is not only fighting for customers and employees – it also has to placate its shareholders. As reported by the “Financial Times”, some major shareholders want to refuse to support the deputy chairman of the board, Severin Schwan. Schwan, head of the pharmaceutical giant Roche in the main office, has been in office since 2014 as the top independent supervisor. During this time, the bank slid into a series of scandals.

Credit Suisse boss Gottstein also had more bad news for angry investors and customers: the processing of the Greensill scandal has been completed for the board of directors and the financial regulator Finma.

For the time being, however, the public will not learn anything about how the bank had to liquidate funds with a total volume of ten billion dollars. “We have no intention of releasing the report while we are still securing assets,” Gottstein said.

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