Credit Suisse Posts Q1 Loss, Announces Raft Of Executive Changes

Tom Burroughes

27 April 2022

Credit Suisse, beset by a run of losses and controversies, posted a net loss to shareholders of SFr273 million in the first quarter of 2022, against a loss of SFr252 million a year ago but far narrower than the negative result of SFr2.085 billion in the final three months of 2021. Separately, Switzerland’s second-largest bank announced a raft of top-line management changes today.

The Zurich-listed lender said that net revenues fell by 42 per cent in Q1 2022 from a year ago to SFr4.412 billion; total operating costs rose 26 per cent year-on-year to SFr4.95 billion. The bank reported a net release of provision for credit losses of SFr110 million, against a provision figure of SFr4.394 billion a year earlier.

The bank has, alongside a number of other international lenders, had exposures to Russia – as previously disclosed – and also flagged a few days ago that the Q1 results will be affected by its decision to boost litigation provisions by about SFr600 million . The provisions' increase came after a Bermuda court ruled in March that former Georgian Prime Minister Bidzina Ivanishvili and his family were due damages from Credit Suisse’s local life insurance arm.

Credit Suisse is seeking to battle back to profitability after a run of problems, such as losses sustained more than a year ago from its exposure to failed New York-based hedge fund/family office Archegos, and losses in its asset management arm linked to the failure of UK supply chain finance group Greensill a year ago. The bank was also accused a few weeks ago of having held accounts for clients involved in crimes including torture and money laundering. The bank reacted furiously, stating that the claims were unjustified and based on out-of-date figures.

“The first quarter of 2022 has been marked by volatile market conditions and client risk aversion. These conditions, together with the impact from our reduction in risk appetite in 2021 as we took decisive actions to strengthen our overall risk and controls foundation, had an adverse impact on our net revenues,” Thomas Gottstein, chief executive, said in a statement. “Our operating expenses were higher year-on-year, driven in particular by higher previously-reported litigation expenses of SFr703 million for the quarter as we continued our proactive approach to resolving litigation matters.”

“Against this backdrop, we reported a pre-tax loss for the quarter; however, on an adjusted basis, we reported a pre-tax income of SFr300 million, including the adverse impact of SFr206 million of losses related to Russia’s invasion of Ukraine. 2022 is a transition year, and our clear focus remains on the disciplined execution of our new Group strategy as announced in November 2021: strengthening our core, simplifying our organisation and investing for growth,” he said.

Wealth management
Within its wealth management arm, Credit Suisse said that pre-tax income, on an adjusted basis, fell to SFr212 million, slumping by 74 per cent year-on-year, but was up from the final three months of 2021. The reduction in reported pre-tax income reflected “certain headwinds,” it said, such as a loss on the equity investment in Allfunds Group of SFr353 million, litigation provisions of SFr237 million, an adverse Russia-related impact of around SFr99 million, including credit provisions of SFr40 million.

Lower transaction activity and higher costs also hit pre-tax income, the bank said; operating costs also rose due to increased cash accruals for compensation resulting from normalised deferral levels, technology investments, higher compliance and risk costs, and a larger number of relationship managers, it said.

The wealth management arm reported net revenues of SFr1.2 billion, falling 44 per cent. The business logged SFr4.8 billion in net new assets for the quarter, with inflows mainly in the Swiss ultra-high net worth business and Asia-Pacific as well as its external asset manager business. The wealth arm logged assets under management of SFr707 billion at the end of March, down from SFr757 billion a year earlier and SFr743 billion in the preceding quarter, reflecting “unfavourable markets' movements and structural effects, including certain de-risking measures and SFr10.4 billion related to sanctions imposed in connection with Russia’s invasion of Ukraine, partially offset by favourable foreign exchange-related movements and net new assets."

New faces and departures
The bank announced that David Mathers, chief financial officer since 2010 and CEO of Credit Suisse International since 2016, wants to leave the bank to pursue other opportunities. Mathers will stay in his posts until successors for both roles are found. Meanwhile, the bank has launched an internal and external search.

Francesca McDonagh is taking over as chief executive of the Europe, Middle East and Africa region from Francesco De Ferrari, CEO of the wealth management division; De Ferrari has been in the post ad interim since January 2022. McDonagh, who will be based in Zurich, will also join the executive board, reporting directly to Gottstein. Most recently, she had been group CEO at the Bank of Ireland since 2017.

Helman Sitohang, CEO of the Asia-Pacific region, intends to step down on 1 June. Edwin Low, who has been with the bank since 1996, will replace him on the executive board and report directly to Gottstein. Low, who is co-head of investment banking APAC based in Singapore, is also CEO for Southeast Asia. Before joining Credit Suisse, he worked at Schroders Australia and with law firm Mallesons Stephen Jaques, where he was admitted as a barrister and solicitor.

Sitohang, who was appointed CEO of APAC in 2014, will stay with Credit Suisse and become senior advisor to the group CEO, focusing on core clients and strategic development in the APAC region, an important growth market for Credit Suisse. Sitohang will also serve on the APAC Advisory Council. He joined Credit Suisse in 1998 and has served in senior roles at the company including head of the investment bank in APAC.

Markus Diethelm will join on 1 July as general counsel, succeeding Romeo Cerutti, who will retire after more than 10 years in the position. He reports Gottstein. Diethelm was most recently at UBS, where he served as general counsel.

The appointments are subject to regulatory approval.