After the horror year 2021, the big bank slipped into the “transition year” 2022. However, the weakness in the core business and the handling of CS with its Greensill report leave questions unanswered.
It is particularly bitter for CS that the asset management banks will have to struggle with a weaker environment in 2022. The big bank missed an excellent year 2021 due to self-inflicted problems.
The good news: for once, when Credit Suisse (CS) presented its annual results for 2021 on Thursday, there were no scandals. The bad news: your core business is not doing well. Analysts’ expectations were already dampened after CS sent out an advance notice two weeks ago warning of a loss. The bad numbers and the bank’s secrecy about its Greensill legacy do not give rise to much optimism.
First to the current business: Even excluding all unsightly special effects, CS only earned CHF 328 million in the fourth quarter. This is too little. Earnings were once again significantly worse than expected.
The long-awaited cooling of the financial markets, for which the entire industry is preparing itself, hits CS with full force. Your customers traded significantly less on the stock exchange. The so-called Spacs – company vehicles that were still booming at the beginning of 2021 and in whose construction and marketing CS occupies a leading position worldwide – brought in much less money for the bank than in the previous quarters.
Now all wealth management banks will have to contend with this weaker environment in 2022. It is particularly bitter for CS. She missed an excellent 2021 because of her self-inflicted problems. Their competitors formed cushions for bad times and for investments, while CS sold its representative headquarters in the heart of Basel.
It is also becoming increasingly clear that the bank is struggling with long-term problems because of its debacle. Leaving risky business areas frees up capital for more solid business areas in the long term, but also leads to less profit in the short term. It is worrying that towards the end of the year CS was only able to attract a small amount of new money. In Switzerland and Asia there were even significant outflows; And this despite the fact that the bank wanted to accelerate its growth in Asia by hiring a total of 80 additional client advisors in 2021.
On the one hand, new money is an important prerequisite for future profits. On the other hand, it is a measure of the trust that a bank currently enjoys among potential customers. Seen over the year as a whole, CS brought in too little new money: the 31 billion francs generated correspond to only around 2 percent of the total assets that CS manages or keeps in custody. For comparison: the Geneva-based private bank Pictet attracted 29 billion Swiss francs, Julius Baer 20 billion. Both are significantly smaller than the CS.
The question is to what extent the constant stream of bad news will affect the mood of bank customers. The CS employees at the front recently had to calm down angry customers on a regular basis; the quarantine violations by former President António Horta-Osório were only the final reason for this.
It’s also unpleasant that CS lets its finished Greensill report disappear completely in the drawer. The collapse of the supply chain financier Greensill in March 2021 hit key CS customers hard: Investors who invested in their roughly CHF 10 billion Greensill fund could lose more than CHF 2 billion.
CS is now arguing that publishing the report could jeopardize its legal process surrounding Greensill. This is true and not a surprise. Nevertheless, the CS should at least have summarized the most important findings and lessons and shared them with the outside world. This will now never be able to judge whether the top management of the bank did not want to protect their own top executives, who come off badly in the report, with their secrecy.
Nobody could expect a miracle. CS boss Thomas Gottstein correctly speaks of a “transition year” 2022. The bank is in the middle of a strategic turnaround and is recovering from a series of scandals. Patience is required. Investors also have to “let the bank and its partially renewed management team do it”. Against the background of the loud silence on Greensill, one can only hope that CS has actually drawn the right conclusions and placed the right leaders in the right place.