Credit Suisse will draw on existing capital as new losses trigger reshuffle

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The logo of Swiss bank Credit Suisse is seen at its headquarters on Paradeplatz square in Zurich, Switzerland October 1, 2019. REUTERS/Arnd Wiegmann

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  • First quarter net sales down 42%
  • Wealth management and investment banking behind the decline
  • Bank adds $725m to statutory provisions, resulting in loss
  • The Tier 1 capital ratio weakened to 13.8% from 14.4%
  • The bank has no capital increase plans – source

ZURICH, April 27 (Reuters) – Credit Suisse plans to draw on existing capital to weather a difficult transition period, a source familiar with the matter said on Wednesday, even as a first-quarter loss added to the difficulties of the Swiss bank and triggered a new managerial reshuffle.

Still reeling from the billions in losses accumulated in 2021, Credit Suisse’s (CSGN.S) fourth quarter in red over the past 18 months contrasts sharply with its biggest rival UBS (UBSG.S) which recorded its best first trimester in 15 years. Read more

Damaged by a series of costly coups and a long list of court cases the bank described as legacy cases, Credit Suisse posted a net loss of 273 million Swiss francs ($284 million) in the past few months. first three months of the year.

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Shareholder reaction to what has been described as a freewheeling culture at Switzerland’s second-biggest bank has grown, and analysts said the nearly halving of its net income was a concern major.

“Clearly, the underlying business trends are…very poor,” the Citi analysts wrote. Moody’s analyst Alessandro Roccati said the bank’s results were “credit negative” for bondholders.

Bank executives said capital could remain constrained over the next six months as it continues to make significant compliance and risk spending, although a source familiar with the matter said an increase capital was not considered. Read more

A reduced appetite for risk, coupled with tough market conditions, hurt the bank’s net income in the first quarter, although business is slowly picking up, chief executive Thomas Gottstein said.

Credit Suisse also announced that three of its most senior executives, including Chief Financial Officer David Mathers, are stepping down. After the changes, Credit Suisse’s Executive Board will be made up entirely of managers who took up their current roles in 2020 at the earliest.

Incoming chief legal officer Markus Diethelm will be tasked with reviewing the bank’s legal strategy when he takes over from longtime lawyer Romeo Cerutti, a source familiar with the matter said.

The bank has appointed Edwin Low to head its Asia-Pacific business, replacing veteran banker Helman Sitohang who remains as an adviser, and tapped Bank of Ireland’s Francesca McDonagh to lead its Europe, Middle East region. and Africa (EMEA). Read more

The bank has tried to reform its risk management culture and turn the page on a series of scandals, which have prompted multiple management upheavals, abrupt departures and internal and external investigations.

In recent months he became a defendant in the first criminal case against a major bank in Switzerland and a court in Bermuda ruled in March that a local unit owed billionaire Bidzina Ivanishvili more than $500 million for a long-running fraud. date committed by a former adviser. Read more

The bank said it inflated legal provisions by 703 million francs in the first quarter, which contributed to its weak results. Credit Suisse had warned last week that it lost money in the quarter and the loss ultimately turned out to be worse than a 252 million franc hit last year.

“Today’s detailed release is another negative surprise,” Jefferies analysts said in a note. “Removing all of the above point items and moving to an adjusted base, the situation remains concerning in our view.”

Credit Suisse shares were down 0.7% at 13:15 GMT but remained above their 2022 low reached on March 7.

Investors are looking for signs of the impact of the series of scandals on client relationships at the bank, seen as the foundation of Credit Suisse’s key wealthy and ultra-wealthy segments in its wealth management business.

It said its core wealth management business, which it was trying to consolidate, saw 4.8 billion francs in client inflows in the first three months of the year, driven mainly by ultra- wealthy in Switzerland as well as its Asian and foreign customers. asset management companies.

The company’s revenue fell 44%, however, as the bank pointed to a slowdown in its tie-up with wealth and investment bank Global Trading Solutions – an area the bank is targeting for growth as part of its new strategy – as well as a drop in brokerage. and product charges.

Credit Suisse announced in November it would rein in its investment bankers and quit Prime Services, the firm responsible for booking a multibillion-dollar hit after the company collapsed American investment fund Archegos in March 2021. read more

On Wednesday, he said he had cut capital allocated to the investment bank by $2.5 billion since the end of 2020 and remained on track to release more than $3 billion through 2022.

Investment banks came under pressure from a global trading slump, but volatility fueled by concerns about rising interest rates and the economic fallout from the war in Ukraine helped investors trading desks to exceed expectations.

Along with a sharp decline in capital markets revenue seen by other competitors, Credit Suisse saw a 47% drop in equity sales and trading revenue following its exit from prime services. Sales of derivatives and cash trading were also down, while sales and trading of fixed income securities were down 50%.

The bank will now face scrutiny from investors at its annual general meeting on Friday. Read more

($1 = 0.9627 Swiss francs)

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Reporting by Brenna Hughes Neghaiwi; Editing by Michael Shields, Muralikumar Anantharaman and David Clarke

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