Credit Suisse has posted a loss in Q4 2020, driven by litigation provisions of CHF757m that outweighed strong performance in its investment management business.

The bank had warned of a loss last month, after setting aside an additional $850m for a prolonged legal dispute in the US with municipal-bond insurer MBIA.

Since 2009, the bank has locked horns with MBIA over a US residential mortgage backed security (RMBS) issued in 2007.

Recently, Credit Suisse settled the matter by paying $600m to MBIA.

Moreover, in November last year, the bank also revealed plans to book an impairment of around $450m for a stake in alternative investment firm York Capital Management.

Key metrics

Credit Suisse reported a net loss of CHF353m in Q4 2020, versus a profit of CHF852m in the corresponding quarter of 2019.

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Hit by the litigation provisions and York impairment, the Swiss bank posted a pre-tax loss of CHF88m in Q4 2020, compared with a profit of CHF1.21bn in the previous year.

The bank’s pre-tax income for the full year ended December 2020 stood at CHF3.47bn, a 27% slump from a year ago.

Net revenues in Q4 2020 dropped 16% year-on-year to CHF5.22bn, while in FY20 the figure remained stable at CHF22.4bn.

Total operating expenses for the three-month period ended December 2020 were CHF5.17bn, a 7% rise from CHF4.83bn in the prior year.

Wealth management business reported net revenue of CHF3.1bn in Q4 2020, down 24% from the same quarter of 2019. Transaction-based revenues rose 7%, recurring commissions and fees dropped 6% while net interest income decreased 14%.

Net revenue in global investment banking soared 19% year-on-year to $2.5bn in Q4 2020.

Capital Markets & Advisory surged 63%, Fixed Income Sales & Trading remained unchanged, while Equity Sales & Trading rose 5%.

Total net new assets (NNA) were CHF8.4bn at the end of last year. Swiss Universal Bank (SUB) contributed CHF1.7bn, International Wealth Management (IWM) accounted for CHF10.6bn while Asia Pacific (APAC) reported outflow of CHF1.1bn.

In wealth management businesses, NNA totalled CHF1.1bn.

Credit Suisse’s CET 1 ratio at the end of December 2020 stood at 12.9%, compared with 12.7% in the prior year.

Divisional highlights

In SUB, reported net revenues slumped 20% to CHF1.39bn in Q4 2020 from CHF1.73bn a year ago.

The division’s reported pre-tax income plunged 44% to CHF487m from CHF867m over the period.

IWM reported a pre-tax loss of CHF12m, hit by the York impairment. The unit’s reported net revenues decreased 42% to CHF952m from CHF1.63bn.

The APAC unit’s reported net revenues of CHF784m in Q4 2020 were 5% higher than the previous year. Its reported pre-tax income increased 18% year-on-year to CHF237m.

Credit Suisse Group CEO Thomas Gottstein said: “Despite a challenging environment for societies and economies in 2020, we saw a strong underlying performance across Wealth Management and Investment Banking, while addressing historic issues.”

Gottstein has a positive outlook for the current year.

He noted: “Looking forward into 2021 and beyond, we aim to further accelerate growth in Wealth Management and deliver sustainable returns in Investment Banking. We remain strongly committed to positioning Credit Suisse as a leader in sustainability and driving digitalization and automation to generate positive operating leverage.”