GENEVA: Credit Suisse on Thursday posted its biggest annual loss since the 2008 financial crisis and the scandal-plagued Swiss banking giant expects to stay in the red in 2023, sending its shares plummeting.
Switzerland's second-biggest bank, which unveiled a dramatic restructuring plan in October aimed at stopping the rot, reported a net loss of 7.3 billion Swiss francs ($7.9 billion) for 2022.
The Zurich-based lender had waved goodbye to more than eight billion Swiss francs during the global financial crisis 15 years ago.
Citing the impact from restructuring charges and its exit from non-core businesses, Credit Suisse said in a statement that it "would also expect the group to report a substantial loss before taxes in 2023".
The bank's restructuring focuses on drastically reducing the scale of its investment banking unit, which was at the heart of a string of scandals that included the collapse of US fund Archegos.
Those restructuring costs are estimated at around 1.6 billion Swiss francs this year and around one billion francs in 2024.
Chief executive Ulrich Korner said the bank had "a clear plan to create a new Credit Suisse".
But its share price plunged on the Swiss stock exchange's main SMI index, down 7.7 percent at exactly three Swiss francs just after 1200 GMT, having at one point dipped as low as 2.88 francs a share. The SMI was up 0.3 percent.
Since March 2021, the bank's stock has lost more than 75 percent of its value.
In the last quarter, its net loss attributable to shareholders amounted to nearly 1.4 billion Swiss francs -- slightly better than expected.
"A weak fourth quarter concludes a terrible 2022, clearly one of the worst years in Credit Suisse's 167-year history," said Andreas Venditti, an analyst at Swiss investment managers Vontobel, noting that the bank reported losses in seven out of the last nine quarters.
"2024 might bring a turnaround, albeit with likely still minor profits. The transformation to 'new Credit Suisse' will take time."
CLIENTS WITHDRAW FUNDS
In November, the bank issued a profit warning on restructuring charges, lower activity in the capital markets and large client withdrawals, saying it expected a loss of up to 1.5 billion Swiss francs.
Credit Suisse recorded net asset outflows of 110.5 billion Swiss francs in the fourth quarter of last year alone, mostly in October.
The rate of capital outflows slowed in December and "we've seen a reversal in January," chief financial officer Dixit Joshi told reporters.
ING financial market analyst Suvi Platerink Kosonen said a "substantial change" in customer behaviour was needed to protect the bank's client franchise.
"We consider that the negative operating performance increases the risk for further rating downgrades," she said.
As part of its overhaul, Credit Suisse decided to revive its First Boston brand, named after a US investment bank it absorbed in 1990, bringing together its capital market and advisory activities.
On Thursday the bank announced the acquisition of the investment banking business of M. Klein & Company for $175 million, thus taking a step forward in the transformation of its investment banking arm.
'SIMPLER, MORE FOCUSED BANK
Credit Suisse's capital-guzzling investment banking business has been the source of heavy losses which plunged Credit Suisse's accounts into the red -- eclipsing its more stable activities such as wealth management or its Swiss domestic banking services.
Credit Suisse's investment bank suffered a loss of 3.7 billion Swiss francs in 2021, then a pre-tax loss of $3.3 billion in 2022, mainly driven by significantly lower revenues.
It was hit by the implosion of US fund Archegos, which cost Credit Suisse more than $5 billion.
Under its revamp, Credit Suisse will refocus on its most stable activities and reduce its merchant banking.
"2022 was a crucial year for Credit Suisse," Korner said.
"We announced our strategic plan to create a simpler, more focused bank, built around client needs and since October we have been executing at pace," the CEO said.
The bank will halve the 2022 dividend paid to its shareholders to 0.05 Swiss francs per share, while the bank's executives will not be receiving any bonuses for the year.
"If you produce such a loss, I would not expect any bonus at all," Korner told reporters. -- Reuters
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