Credit Suisse expects a pre-tax loss of up to CHF 1.5 billion in the fourth quarter

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ZURICH — Credit Suisse expects to post a pre-tax loss of up to 1.5 billion Swiss francs ($1.58 billion) in its fourth quarter, the struggling Swiss bank said, as it winds down is preparing to ask shareholders for permission to increase its equity by $4 billion.

Wednesday’s profit warning comes as a blow to the bank which had previously said it expected to make a net loss in the last three months of the year but did not give a figure.

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Credit Suisse is due to hold an extraordinary general meeting on Wednesday where it will seek approval for a capital increase to fund a recovery from the biggest crisis in its 166-year history.

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The lender’s reputation was marred by a series of scandals and losses, including a loss of $5.5 billion due to the dismantling of the American investment company Archegos, and he had to freeze $10 billion in funds from supply chain finance linked to insolvent UK financier Greensill.

On Wednesday, he said the « challenging » economic and market environment had a negative effect on customer activity across his businesses.

“In particular, investment banking has been impacted by the substantial slowdown in industry-wide capital markets and reduced activity in sales and trading activities, compounding normal seasonal declines, and relative underperformance of the group, » the second-largest Swiss bank said in a statement. statement.

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“Credit Suisse expects the investment bank and the group to post a substantial pre-tax loss in the fourth quarter of 2022, of up to CHF 1.5 billion for the group.”

This follows a pre-tax loss of 342 million francs in the third quarter and 1.94 billion francs since the start of the year.

The bank’s shares were listed down 1.9% in pre-market activity in the Swiss market.

Client activity remained subdued in the Wealth Management and Swiss Bank divisions, a situation that is expected to continue in the coming months.

Additionally, cash outflows accelerated at the start of its fourth quarter, the bank said.

At the group level, as of November 11, net asset outflows represented approximately 6% of assets under management at the end of the third quarter.

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In Wealth Management, outflows have fallen « substantially » from the high levels of the first two weeks of October, but they have not yet reversed, and amounted to around 10% of assets under management at the end of the third quarter 2022.

The bank highlighted its efforts to improve its balance sheet and reduce risk, including bond sales that raised $5 billion and the sale of part of its securitized product group.

In late October, Credit Suisse unveiled a plan to cut thousands of jobs and shift its focus from investment banking to the less turbulent realm of wealth management.

He said he was also making progress towards his goal of cutting costs by 15% by 2025, including cutting spending by about 1.2 billion francs by the end of 2023.

“The Group continues to execute the decisive strategic actions detailed on October 27, 2022, to create a simpler, more focused and more stable bank,” he said. ($1 = 0.9507 Swiss francs) (Reporting by John Revill; Editing by Paul Carrel and Maria Sheahan; Editing by Ana Nicolaci da Costa)