Biggest loss in 7 years for Credit Suisse

Credit Suisse CEO Tidjane Thiam has pledged to focus the second-largest Swiss bank on wealth management to tap growth across Asia.
Credit Suisse CEO Tidjane Thiam has pledged to focus the second-largest Swiss bank on wealth management to tap growth across Asia.PHOTO: REUTERS

Bank posts quarterly shortfall of $8.1 billion; trading slump worsens securities unit losses

ZURICH • Credit Suisse Group posted the biggest quarterly loss in seven years as it wrote off goodwill and set aside provisions for litigation, while a slump in trading deepened losses in the securities unit.

The bank had a shortfall of 5.8 billion Swiss francs (S$8.1 billion) after a profit of 691 million francs a year earlier, hurt by a goodwill impairment of 3.8 billion francs, it said in a statement yesterday.

That is the biggest quarterly loss since 2008, when the financial crisis toppled lenders around the globe, and worse than the 4.3 billion franc loss estimate of five analysts in a Bloomberg survey.

Credit Suisse chief executive officer Tidjane Thiam, 53, has pledged to focus the second-largest Swiss bank on wealth management to tap growth across Asia, with the securities divisions hurt by tougher capital rules and a drop in revenues.

The bank will accelerate the implementation of its cost-cutting programme, including 4,000 job cuts, citing a "particularly challenging environment".

"The numbers are terrible," said Mr Dieter Hein, an analyst at AlphaValue based near Frankfurt, who is reviewing his recommendation on the shares.

"The bank has started on its new strategy and is finally moving away from investment banking. In the mid- to long-term, it is right to focus on growth in Asia, but what bad timing, given the current environment," Mr Hein said.

The shares slumped as much as 13 per cent, the biggest intraday drop since 1991, and were down 12 per cent at 14.50 francs, at 10.26am in Zurich yesterday (5.26pm Singapore time).

They have slumped about 33 per cent this year.

Banks around the globe are shrinking their investment banking divisions amid tougher capital requirements and a slump in revenue.

At Deutsche Bank, the securities unit slipped into a loss in the fourth quarter, as co-CEO John Cryan sought to cut costs and boost profitability by eliminating thousands of jobs.

UBS on Tuesday reported a drop in profit at its wealth management division and investment bank.

At Credit Suisse, the global markets division, which houses the biggest part of trading businesses, booked a pre-tax loss of 3.5 billion francs, including part of the goodwill impairment amounting to 2.7 billion francs.

The trading unit swung to a loss amid lower client activity and "significant" losses on existing positions, Credit Suisse said. Revenue dropped 37 per cent to 1.1 billion francs from a year earlier.

Mr Thiam said in an interview that the bank is "very confident" about reaching its target of cutting costs by 3.5 billion francs by 2018.

Credit Suisse cut overall variable remuneration by 11 per cent, with bonus reductions of more than 30 per cent at divisions such as global markets "that have underperformed", he said.

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A version of this article appeared in the print edition of The Straits Times on February 05, 2016, with the headline 'Biggest loss in 7 years for Credit Suisse'. Print Edition | Subscribe