Credit Suisse also expects dark red numbers for the fourth quarter. She has to accept alarmingly high outflows of money from customers. The share price collapses again by almost 4 percent.
Apparently, Credit Suisse is not coming out of the turbulence that easily.
In the run-up to the Annual General Meeting, where the ailing Credit Suisse is hoping for fresh capital, it shocked customers and markets with another piece of bad news. As the bank announced on Wednesday morning, it expects a pre-tax loss of up to CHF 1.5 billion for the fourth quarter. It will be the fifth quarterly loss in a row. The reason given by CS is the difficult market conditions, which are causing problems for the investment bank in particular.
Customers get impatient
The second message seems even worse: the bank continues to lose significant amounts of customer money. As previously announced, Credit Suisse recorded outflows of deposits and net assets in the first two weeks of October 2022, which were significantly above the rates of the third quarter of 2022. At Group level, net outflows amounted to around 6 percent of assets under management. That would correspond to net outflows of around CHF 84 billion.
In wealth management, these outflows have decreased, as the bank announced. However, there was no trend reversal. At the end of the third quarter, CS had to accept outflows of 10 percent of the assets under management in this important area.
“The massive net outflows in wealth management, the core business of CS alongside the Swiss bank, are very worrying – all the more so since they have not yet reversed,” explains Andreas Venditti, banking analyst at Bank Vontobel in a market analysis. Credit Suisse needs to restore confidence as soon as possible, but that’s easier said than done.
Liquidity cushions are getting thinner
In the difficult situation, the bank partially used a liquidity buffer, as stated in the statement. As a result, the liquidity ratios have fallen sharply. In certain units, liquidity temporarily fell below the regulatory requirements.
CS stock is heading for a record low in light of the news. By 10 a.m. titles had lost more than 5.5 percent. The price of 3.64 francs is no longer far from the previous low of 3.52 francs, to which Credit Suisse shares fell at times during the turbulence at the beginning of October.
Hoping for the big investors
Credit Suisse is undergoing a total restructuring. To reduce costs, 2,700 jobs are to be cut in the fourth quarter, and around 9,000 jobs are to be cut by 2025.
In order to implement the restructuring, the bank is hoping for shareholder approval today for a capital increase of around CHF 4 billion. A good part of the fresh capital is said to come from Saudi Arabia. The Saudi National Bank, a financial institution controlled by the Saudi royal family, will hold almost 10 percent of Credit Suisse shares. A few weeks ago, the Saudi and other investors committed to buying CS shares at a price of CHF 3.82, i.e. at a price that is well above the current level.
Without the fresh money, a new start for the bank is hardly possible. Despite criticism from individual shareholder representatives such as Ethos, there is a good chance that the capital increase will be accepted. No critical questions are permitted at the virtual General Assembly on Wednesday from 10:30 a.m. This has led to some harsh reactions.