On Thursday, Credit Suisse Group (CSGN.S) reported a loss of $1.5 billion, its biggest loss since the 2008 financial crisis. It further warned there would likely be another “substantial” loss this year, as clients rushed to pull billions from the bank.
Outflows in the fourth quarter were at $120 billion. Assets under management declined from $802 billion in the beginning of 2022, to $583 billion by the ends of December. In the fourth quarter alone., following a stream of scandals and rumors, the bank saw over 110 billion Swiss francs ($120 billion) in outflows, though the bank indicated that has slowed lately.
The bank blamed rumors about its financial health which were circulating in October of 2022 for the outflows.
Swiss regulator Finma said that it would be monitoring such a situation “very closely,” however it noted the bank’s liquidity buffers were having a stabilizing effect on the situation and were being rebuilt. The outflows last year caused the bank to fail to meet some liquidity requirements, but the bank’s finance chief said Thursday that the issue has since been resolved.
Ethos, which represents some Credit Suisse shareholders described the report as “catastrophic” as the bank’s shares fell 14.7% Thursday to 2.77 francs, giving the bank a valuation of 11.1 billion francs.
The bank has begun a major restructuring, focused on cost-cutting and workforce reductions, hoping to revitalize its business. It even spun off its investment bank as a separate business, under the CS First Boston brand. In December, the bank raised 4 billion francs from investors.
Chief Executive Ulrich Koerner said in a statement to reporters, “We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation. We have done a prudent and also hopefully a somewhat careful planning,”
Analysts however were shocked by the size of the losses and the extent of the outflows.
Thomas Hallett, analyst at Keefe, Bruyette & Woods, said in a note, the bank’s “operational performance was even worse than feared and the level of outflows quite staggering. With heavy losses to continue in 2023, we expect to see another wave of downgrades and see no reason to own the shares.”
