Credit Suisse books second straight annual loss amid 'significant' outflows

By Scott Kanowsky 

Investing.com -- Credit Suisse Group AG (SIX:CSGN) has booked a narrower net loss in the fourth quarter that was in line with estimates, as the embattled lender looks to a sweeping new restructuring plan to revitalize its performance after a period of heavy customer withdrawals.

Switzerland's second-largest bank posted a net loss of CHF1.39 billion (CHF1 = $1.0881) for the three months until the end of December, decreasing by 33% year-on-year. Company-compiled forecasts had seen the figure coming in at CHF1.34B.

The Zurich-based group said it was hit by "the challenging economic and market environment, significant deposit and net asset outflows at the beginning of the quarter and the execution of our strategic actions."

Credit Suisse's annual loss subsequently slipped to CHF7.29B, the worst mark since the 2008 financial crisis and its second-straight yearly loss. Although the result was not substantially worse than the loss of CHR7.2B anticipated by analysts, chair Axel Lehmann has previously called 2022 a "horrifying" time for the company.

The results come after the company unveiled a broad overhaul of its operations in October following a series of corporate scandals and disappointing earnings that have caused its share price to slide by over 60% and its debt ratings to tank.

On Thursday, Credit Suisse confirmed one of the key pillars of the plan: the purchase of renowned dealmaker Michael Klein's investment banking business, The Klein Group, for $175 million. The long-awaited move will see this concern combined with Credit Suisse's carved-out capital markets and advisory divisions under a new entity known as CS First Boston.

Under the terms of the deal, which is expected to close in the first half, Klein will become Credit Suisse's chief executive officer of Banking and the Americas, as well as designated CEO of CS First Boston.

"The creation of an independent CS First Boston is an important step in the wider transformation of Credit Suisse and the creation of a simpler, more focused bank built around the needs of our clients,” said group CEO Ulrich Körner in a separate statement.

Along with an ongoing management shake-up and staff reductions, the company will also focus its operations around wealth management and edge away from riskier investment banking activities. Körner, who took over the role last summer, has said this reshaping will take three years to implement.

In the near-term, Credit Suisse has warned that the difficult trading conditions it faced throughout last year will continue into 2023 despite "comprehensive measures" to increase client engagement, regain deposits, and shore up its cost base. The firm flagged that its wealth management and investment banking units, in particular, will post losses in the first quarter.

These weak anticipated returns, along with the disposal of non-core businesses and restructuring charges, are now expected to lead to a "substantial" pre-tax loss this year.