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February 10, 2022

Credit Suisse Q4 loss widens to $2.2bn over litigation costs

Credit Suisse Group has registered attributable net loss of $2.2bn (CHF2bn) in Q4 2021, ending a rocky year that was marred by poor bets and ‘major’ litigation provisions.

In Q4 2020, the bank reported attributable net loss of CHF353m.

For the full year ended 31 December 2021, net loss attributable to the bank’s shareholders stood at CHF1.6bn, compared to the year-ago figure of CHF2.7bn.

Factors driving the annual loss included CHF1.1bn in litigation costs, a CHF1.62bn goodwill impairment related to a 2000 takeover of a US investment bank. 

The implosion of $10bn in supply chain finance funds linked to insolvent British finance firm Greensill and a $5.5bn loss from the Archegos collapse added to the Swiss lender’s troubles in 2021.

The bank had already flagged a loss last month.

Credit Suisse CEO Thomas Gottstein said: “2021 was a very challenging year for Credit Suisse. Our reported financial results were negatively impacted by the Archegos matter, the impairment of goodwill relating to the Donaldson, Lufkin & Jenrette (DLJ) acquisition in 2000 and litigation provisions, as we look to proactively resolve legacy issues.”

Key group metrics

Credit Suisse’s net revenue fell 12% year-on-year to CHF4.58bn in the three months to December 2021.

Total operating expenses climbed 20% to CHF6.19bn from CHF5.17bn over this period.

The bank registered a pre-tax loss of CHF1.6bn in the quarter to December 2021, as against CHF88m a year earlier. This was due to a goodwill impairment on the DLJ acquisition and litigation provisions of CHF436m in the quarter.

On an adjusted basis, Q4 21 pre-tax income dropped 62% to CHF328m from CHF861m.

The bank’s CET 1 ratio, a key measure of strength, reached 14.4% at the end of 2021 from 12.9% in the previous year.

Divisional highlights

In Swiss Universal Bank, net revenues increased 7% year-on-year to CHF1.48bn in Q4 2021.  The division’s reported pre-tax income increased 47% to CHF716 from CHF487m during this time.

The bank’s International Wealth Management (IWM) unit reported a pre-tax income of CHF35m, an 88% slump from CHF293m in the same quarter of 2020. Its reported net revenues of CHF716m were 26% lower than Q4 2020.

The APAC unit’s reported net revenues slipped 23% to CHF671m in Q4 2021 from CHF871m in Q4 2020.

Gottstein added: “Over the coming quarters, we expect to implement our strategy progressively. We have set clear financial goals for all our divisions and are now focused on delivering on our strategic objectives.

“I am confident that we are well-positioned to build a stronger and customer-centric bank that puts risk management at the very core of its DNA in order to deliver sustainable growth and value for investors, clients and colleagues.”

Outlook for 2022

Credit Suisse warned that restructuring and compensation costs will adversely impact this year’s performance.

The bank also stated that benefits of its focus on core operations and “structural costs savings” will only come in 2023.

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