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November 5, 2021updated 09 Nov 2021 11:02am

Credit Suisse Q3 profit plummets 21% on aftermath of scandals

By Verdict Staff

Credit Suisse has reported a net profit of $476m (CHF434m) for Q3 2021, a plunge of 21% compared to CHF546m in the year-ago quarter.

The Swiss bank’s profits were hit by $620m (CHF564m) of litigation expenses related to various issues including Mozambican corruption scandal and Greensill Capital explosion.

Profits were also affected by a higher tax rate, the Swiss banking giant said in its earnings statement.

Group Highlights

Credit Suisse’s net revenues increased 5% year-on-year to CHF5.4bn in the third quarter of 2021.

The unit posted a pre-tax income of CHF1bn, up 26% year-on-year, following a CHF235m gain in connection with Archegos and a CHF129m gain related to an equity investment in Allfunds Group.

These gains were offset by litigation charges of CHF564m, the Swiss bank said.

The bank’s total operating expenses in the quarter increased 5% to CHF4.5bn as result of higher major litigation provisions and professional services fees.

CET1 ratio was at 14.4% at the end of the third quarter while Tier 1 leverage ratio was at 6.1%.

At the end of Q3 2021, Credit Suisse’s assets under management (AuM) totalled CHF1.6 trillion, up approximately 10% year-on-year.

Divisional highlights

Swiss Universal Bank (SUB) posted net revenues of CHF1.3bn in Q3 2021, a 7% increase from CHF 1.7bn in Q3 2020. On an adjusted basis, net revenues rose by 5%.

SUB’s adjusted pre-tax income, excluding significant items, of CHF586m was 26% higher than the previous year.

The unit’s adjusted operating expenses were CHF764m, 1% higher than the CHF771m in the year-ago quarter.

International Wealth Management (IWM) unit’s adjusted pre-tax income was CHF176m, which represents a decline of 25% from last year.

On an adjusted basis, net revenues were down 3% at CHF812m. The operating expense were up 5% at CHF624m, majorly driven by costs relating to IT infrastructures and sustainability initiatives.

In APAC, adjusted pre-tax income, excluding significant items, climbed 5% to $206m.

The division reported net revenues of $837m, up 5% year on year, and adjusted net revenues of $795m.

Net interest income dipped 14% during the quarter, owing to lower loan and deposit margin as well as reduction in risk appetite and deleveraging by clients.

The investment banking division of Credit Suisse registered a 9% surge in net revenues on an adjusted basis. Operating expenses increased 2% to $1.8bn.

Pre-tax income surged 25% to $582m from $465m in the year-ago period.

Credit Suisse’s asset management unit recorded CHF392m of net revenues on an adjusted basis, up 28% from CHF 306m in Q3 2020.

Adjusted operating expenses were up 2% to CHF276m from CHF270m in the year-ago period.

The unit registered net asset outflows of CHF 1.7bn, driven by outflows from Index, Credit, Insurance-linked Strategies and Fixed Income.

The division’s AuM was CHF475bn in Q3 2021.

Group strategy

Following a comprehensive assessment of its strategy, the Scandal-ridden Swiss bank is merging its wealth management operations into a single global division.

As part of the new strategy, the bank plans to infuse CHF3bn capital to the division in the next three years.

The bank also plans to shut down its prime services, which lends money to hedge funds and processes their trades.

The unit, part of Credit Suisse’s investment banking division, was responsible for the firm’s more than $5bn losses related to Archegos Scandal.

As part of revamp, Swiss and Asian investment banking units of the Swiss bank will be combined with the global business.

Following the restructure, Credit Suisse will operate four divisions, namely, wealth management, investment bank, Swiss bank and asset management.

Credit Suisse chairman António Horta-Osório said: “The measures announced today provide the framework for a much stronger, more client-centric bank with leading businesses and regional franchises. Risk management will be at the core of our actions, helping to foster a culture that reinforces the importance of accountability and responsibility.”

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