Credit Suisse Struggles with Scandals and Financial Health Concerns
Credit Suisse Group announced its worst annual loss since 2008, as anxious clients pulled out large sums, and warned of an additional “significant” loss in the coming year. The bank experienced a sudden increase in withdrawals in the fourth quarter, with outflows exceeding $120 billion, despite reporting that the situation has been improving.
The bank’s wealth management division and investment banking unit are also expected to incur losses in the first quarter of 2023. The bank’s stock dropped 5% during morning trading. Analysts believe that with the continued losses expected in 2023, there will be another wave of downgrades and do not recommend owning the shares.
In the fourth quarter, the bank posted a net loss of $1.39 billion, bringing its total net loss for 2022 to $7.29 billion, marking its second consecutive year in the red. Credit Suisse has been impacted by several scandals in recent years, including a $5.5 billion loss on U.S. investment firm Archegos in 2021 and the freezing of $10 billion in supply chain finance funds linked to insolvent British financier Greensill.
Credit Suisse Struggles with Scandals and Outflows in Wealth Management Division
Credit Suisse has been plagued by scandals and speculation, which have affected its financial stability and caused outflows in its wealth management division. In Q4 of last year, the bank reported outflows of 92.7 billion francs, higher than the predicted 61.9 billion and putting the division’s assets under management at 540.5 billion.
This led to the bank breaching some liquidity requirements, but it has since resolved the issue. Despite this, the bank is still struggling and analysts predict little improvement in the near future. The bank attributes the outflows to “significant deposit and net asset outflows at the beginning of the quarter” and to the wider economic conditions.
Standard & Poor’s downgraded the bank in November, but it completed a 4 billion Swiss franc fundraising in December and has seen some money returning. The bank is working on a plan to transform itself and has made progress in spinning off its investment banking arm by buying Michael Klein’s advisory boutique for $175 million. The CET1 capital ratio rose to 14.1% at the end of December, higher than the expected 13.8%.
