Credit Suisse shares sink after biggest loss since 2008 financial crisis

Credit Suisse stocks plunged nearly 15% on Thursday as the scandal-plagued Swiss banking giant posted its biggest annual loss since the 2008 financial crisis – and warned it expects to stay in the red in 2023.

Switzerland's second-biggest bank, which unveiled a dramatic restructuring plan in October aimed at stopping the rot, reported a net loss of 7.3 billion Swiss francs (US$7.9 billion, RM34.14 billion) for 2022.

It was the worst yearly set of results for the Zurich-based lender since it shed more than eight billion Swiss francs during the global financial crisis 15 years ago.

The results sent shares plummeting, closing down 14.7% at 2.77 Swiss francs a share, while the Swiss stock exchange's main SMI index was down 0.5%.

Since March 2021, the bank's stock has lost more than 75% of its value.

The bank's restructuring focuses on drastically reducing the scale of its investment banking unit, which was at the heart of a string of scandals that included the collapse of US fund Archegos.

Citing the impact from restructuring charges and its exit from non-core businesses, Credit Suisse said in a statement that it "would also expect the group to report a substantial loss before taxes in 2023".

The restructuring costs are estimated at around 1.6 billion Swiss francs this year and around one billion francs in 2024.

Chief executive Ulrich Korner said the bank had "a clear plan to create a new Credit Suisse".

In the last quarter, its net loss attributable to shareholders amounted to nearly 1.4 billion Swiss francs.

"A weak fourth quarter concludes a terrible 2022, clearly one of the worst years in Credit Suisse's 167-year history," said Andreas Venditti, an analyst at Swiss investment managers Vontobel, noting that the bank reported losses in seven out of the last nine quarters.

"2024 might bring a turnaround, albeit with likely still minor profits. The transformation to 'new Credit Suisse' will take time."

Clients withdraw funds 

Credit Suisse recorded net asset outflows of 110.5 billion Swiss francs in the fourth quarter of last year alone, mostly in October, amid large client withdrawals.

The rate of capital outflows slowed in December and "we've seen a reversal in January," chief financial officer Dixit Joshi told reporters.

ING financial market analyst Suvi Platerink Kosonen said a "substantial change" in customer behaviour was needed to protect the bank's client franchise.

"We consider that the negative operating performance increases the risk for further rating downgrades," she said.

As part of its overhaul, Credit Suisse decided to revive its First Boston brand, named after a US investment bank it absorbed in 1990, bringing together its capital market and advisory activities.

On Thursday the bank announced the acquisition of the investment banking business of M Klein & Company for US$175 million, as part of the rejig of its investment banking arm.

The Ethos foundation, which represents pension funds in Switzerland, said it was "surprised by this amount, which seems very high given the little information we have today on this company" founded by Michael Klein, who was on the Credit Suisse board until October.

"The fact that Klein is present on both sides of this operation raises important questions in terms of governance," the foundation said.

'Simpler, more focused bank 

Credit Suisse's capital-guzzling investment banking business has been the source of heavy losses which plunged Credit Suisse's accounts into the red – eclipsing its more stable activities such as wealth management or its Swiss domestic banking services.

Credit Suisse's investment bank suffered a loss of 3.7 billion Swiss francs in 2021, then a pre-tax loss of US$3.3 billion in 2022, mainly driven by significantly lower revenues.

It was also hit by the implosion of US fund Archegos, which cost Credit Suisse more than US$5 billion.

Under its revamp, Credit Suisse will refocus on its most stable activities and reduce its merchant banking.

"2022 was a crucial year for Credit Suisse," Korner said.

"We announced our strategic plan to create a simpler, more focused bank, built around client needs and since October we have been executing at pace," the CEO said.

The bank will halve the 2022 dividend paid to its shareholders to 0.05 Swiss francs per share, while the bank's executives will not be receiving any bonuses for the year.

"If you produce such a loss, I would not expect any bonus at all," Korner told reporters.