Credit Suisse issues fourth quarter profit warning as legal costs rise

A Credit Suisse logo in the window of a Credit Suisse Group AG bank branch in Zurich, Switzerland.

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Credit Suisse said on Tuesday its fourth-quarter earnings are expected to be “negatively affected” by higher litigation provisions.

The Swiss bank said a charge of about 500 million Swiss francs ($545 million) should push its profits to break even.

The profit warning comes after a string of high-profile scandals that have rocked the bank in recent years. More recently, President Antonio Horta-Osorio resigned earlier this month after breaking Covid-19 quarantine rules.

“Credit Suisse Group (Group) today announced that reported earnings for the fourth quarter of 2021 will be negatively impacted by litigation provisions of approximately CHF 500 million, partially offset by property sales gains of CHF 225 million. francs,” the bank said in a statement. trade update Tuesday.

“These litigation provisions have been incurred in connection with a number of cases where the Group has more proactively sought settlements and relate primarily to litigation inherited from our investment banking business.”

Credit Suisse added that this should result in a “reported pre-tax profit/(loss) for the Group of approximately break-even for the fourth quarter of 2021”.

The bank is due to release its fourth quarter results on February 10.

The Swiss lender’s investment bank suffered considerable blows in 2021 due to its involvement with collapsed investment firm Archegos Capital and insolvent supply chain finance firm Greensill.

The departure of Horta-Osorio, who was brought in to clean up the bank’s corporate culture following these sagas, followed the high-profile resignation of former CEO Tidjane Thiam in early 2020 following a a bizarre and protracted spy scandal.

Switzerland’s second-largest lender also reported lower trading revenue from its investment banking and wealth management businesses on Tuesday. He attributed this to both a seasonal slowdown and a “return to more normal trading conditions” after the unusually high volumes seen in 2020 and 2021.

The investment bank is on track to post a loss due to reduced risk appetite and exiting its blue-chip services business, Credit Suisse said. It constituted a depreciation of 1.5 billion Swiss francs for the division.

The wealth management core business should also be hurt by a slowdown in transactions, giving a “moderately negative” net inflow

Credit Suisse has announced that its 2021 CET1 ratio – a measure of bank solvency – should, however, exceed its target of 14%, while its Tier 1 leverage ratio – a measure of financial strength – should exceed 6%.

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