Financial Results
Credit Suisse Names New CEO As Gottstein Resigns; Bank Logs Q2 Loss
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A heavy loss in the second quarter, sustained as the bank has battled through a series of mishaps, has prompted Switzerland's second-largest lender to announce a review of its business lines. The changes include turning the investment bank into a "capital-light" operation.
Credit Suisse,
which today reported that it slid into a loss for the second
quarter of 2022, also announced that its chief executive, Thomas
Gottstein, has resigned and will be succeeded by one of its
senior figures, Ulrich Körner, from 1 August.
The Zurich-listed bank also said it is conducting a
“comprehensive strategic review” of business lines, including the
idea of transforming its loss-hit investment bank into a
“capital-light, advisory-led banking business,” and
strengthening its wealth management arm.
Shares in the bank were up 1.28 per cent around 10 am Swiss time,
at SFr5.22 per share.
A run of damaging losses, such as those sustained by exposures to
US-based hedge fund/family office Archegos, and supply-chain
finance business Greensill over the past few years, came as
Gottstein battled to restore the fortunes and image of the bank.
Gottstein had been appointed in 2020 to take over from CEO
Tidjane Thiam, who had left in the wake of a
damaging spying scandal.
The change also highlights the ferocious competition in current
banking and how investment banking, once a prized business line,
carries significant capital risks. Swiss banks have had to cope
with negative official interest rates; there has also been
speculation – never confirmed – that rival UBS might buy Credit
Suisse.
In its Q2 2022 results, Credit Suisse reported a net
loss, attributable to shareholders, of SFr1.593 billion
($1.65 billion), contrasting with net income of SFr253 million a
year earlier. At the investment banking arm in particular, Credit
Suisse said that on an adjusted basis, this division posted a
“significant” pre-tax loss of $860 million, against pre-tax
income of $663 million in 2Q21, “reflecting extremely challenging
market conditions, particularly in capital markets.” (The IB
figures were given in US dollars rather than Swiss
francs.)
On a reported basis, the pre-tax loss at the investment bank was
$1.2 billion. Total reported operating costs rose 12 per cent and
included $200 million of major litigation provisions, mainly in
connection with a previously-disclosed matter concerning
compliance with records preservation requirements relating to
business communications sent over unapproved electronic messaging
channels, as well as restructuring costs of $63 million. (Other
banks such as Morgan Stanley and JP Morgan have also been
punished over the similar the use of channels such as
WhatsApp.)
Across the whole Credit Suisse group, it sustained a net outflow
of assets of SFr7.7 billion, against -SFr4.7 billion in the
second quarter of 2021. Assets under management fell to SFr1.454
trillion from SFr1.632 trillion.
Net revenues fell to SFr3.645 billion in Q2 2022 from
SFr5.103 billion. Total operating costs rose 4 per cent
year-on-year to SFr4.754 billion. The bank’s Common Equity Tier 1
ratio was 13.5 per cent at the end of June, narrowing from 13.7
per cent a year before.
Wealth management results
Credit Suisse said that on an adjusted basis, its wealth
management pre-tax income fell to SFr114 million, falling from
SFr432 million, a slide of 74 per cent on a year ago due to
reduced client activity, lower volumes impacting revenues and
higher costs.
Adjusted pre-tax income was hit by certain asset impairments and
non-operational charges, including SFr17 million relating to
certain third-party assets, mark-to-market losses in Asia-Pacific
financing of SFr21 million, SFr24 million relating to the supply
chain finance fund fee waiver programme, and other costs. WM net
revenues fell 34 per cent to SFr1.3 billion.
The WM business sustained net asset outflows of SFr1.4 billion in
Q2, mainly driven by outflows from EMEA and Switzerland,
including client deleveraging, partially offset by inflows from
Asia-Pacific and Americas. Total assets under management stood at
SFr662 billion, down from SFr769 billion, mainly caused by
falling markets.
Review of businesses
Switzerland’s second-largest bank said its business review will
consider how to strengthen its “world-class global wealth
management franchise, leading universal bank in Switzerland and
multi-specialist asset management business." The review will also
consider how to transform the investment bank into a
capital-light, advisory-led banking business with more focused
markets which complement the growth of the wealth
management and Swiss bank franchises. It will look at
options for the securitised products business, which may include
attracting third-party capital into its platform to capture
untapped growth opportunities and free up capital for growth. The
firm also wants to cut costs below SFr15.5 billion in the medium
term, in part through a company-wide “digital
transformation.”
In wealth management, Credit Suisse said it aims to “extend its
leadership positions” across Switzerland, EMEA, parts of the
Americas and APAC, leveraging its strengths in the ultra-high net
worth sector while accelerating “Core” HNW growth to drive
recurring revenues, supported by a unified global
platform.
New chief
Welcoming Körner to the CEO slot, chairman Axel Lehmann, said: ”I
am delighted to welcome Ueli as our new group CEO, to oversee
this comprehensive strategic review at a pivotal moment for
Credit Suisse. With his profound industry knowledge and
impressive track record, Ueli will drive our strategic and
operational transformation, building on existing strengths and
accelerating growth in key business areas.”
“Since becoming chairman and reviewing the bank’s portfolio with
our newly refreshed board of directors, I have come to appreciate
the world-class quality of our businesses. But we need to be more
flexible to ensure they have the necessary resources to compete.
Our goal must be to become a stronger, simpler and a more
efficient group with more sustainable returns,” he said.
Gottstein said: “Despite the challenges of the past two years, I
am immensely proud of our achievements since joining the
executive board seven years ago and more recently in
strengthening the bank, recruiting a top-calibre executive board,
reducing risk and fundamentally improving our risk culture. In
recent weeks, for personal and health-related considerations, and
after discussions with Axel and my family, I concluded that now
would be the right time to step aside and clear the way for new
leadership to fully embrace the important initiatives announced
this morning, which I wholeheartedly support.”
Körner joined Credit Suisse on 1 April as CEO of asset
management, having previously worked at UBS where he served as a
member of the group executive board for 11 years, of which six
years were leading the asset management division. Prior to this
role he served as chief operating officer.
From 2011 Körner additionally headed Europe, Middle East and
Africa for UBS. Before joining UBS, he was an executive at Credit
Suisse serving in a variety of roles, including chief
financial officer and chief operating officer of Credit Suisse
Financial Services and CEO Switzerland.