Sunday 25 September 2016

Credit Suisse posts first loss since 2008, sees tough markets

Published 04/02/2016 | 08:53

Enda Kenny with Tim O’Hara, Credit Suisse’s CEO of Global Markets. Photos: Conor McCabe
Enda Kenny with Tim O’Hara, Credit Suisse’s CEO of Global Markets. Photos: Conor McCabe

Credit Suisse reported its first full-year loss since 2008 after it took a big impairment charge for its investment banking business under new Chief Executive Tidjane Thiam.

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Shares fell more than 9pc in early trading to hit their lowest level since 1992 after Switzerland's second largest bank also signaled a difficult start to the year.

"Market conditions in January 2016 have remained challenging and we expect markets to remain volatile throughout the remainder of the first quarter of 2016 as macroeconomic issues persist," Thiam, CEO since July, said on Thursday.

In October Thiam embarked on the biggest overhaul of Credit Suisse in almost a decade. He has raised fresh equity from investors, increased its bet on wealth management, slimmed down its investment bank and cut jobs.

Just over four months on, many analysts are still unsure how Credit Suisse will hit growth targets, which include more than doubling Asia Pacific pretax income by 2018.

The bank posted a 2015 net loss of 2.94bn Swiss francs ($2.92bn), worse than the median estimate of a 2.12bn loss in a Reuters poll.

As expected, it booked a goodwill impairment charge of 3.8bn francs in the fourth quarter as a result of the new strategic direction Thiam is pursuing.

The impairment was mostly related to the acquisition of Donaldson, Lufkin & Jenrette in 2000, it said.

JP Morgan Cazenove analysts called the results "very messy", noting an underlying loss before tax versus market expectations of a profit. The bank's common equity tier 1 capital ratio of 11.4pc also lagged consensus even after a 6bn franc capital raising last year, it noted.

Rival UBS this week announced its best annual results since 2010 but a surprise outflow of funds and weakening margins at its flagship wealth management business cast a shadow.

Credit Suisse said it had accelerated cost savings so that it had taken action on 34pc of the measures planned by 2018, or 1.2bn of the targeted 3.5bn francs.

However, the bank has not dispelled scepticism about its ability to meet its growth targets.

"Reaching the targets by 2018 seems more unrealistic than ever," analysts at Zuercher Kantonalbank said.

Reuters

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