Dive Brief:
- Credit Suisse warned investors Wednesday it would lose roughly $1.6 billion in the fourth quarter.
- Credit Suisse shareholders Wednesday approved a $4.2 billion capital raise to finance a strategic revamp, announced last month, that would break up the bank’s investment-banking division and refocus on wealth management clients.
- Those wealth-management clients are leading the charge to pull assets from the bank. Credit Suisse saw $88.3 billion in outflows between Sept. 30 and Nov. 11, the bank reported Wednesday. Wealth-management customers removed $66.7 billion of that — amounting to 10% of the bank’s assets under management, according to Bloomberg. The $88.3 billion figure represents 6% of the bank’s $1.47 trillion in assets, The Wall Street Journal reported.
Dive Insight:
Although the outflows have been “reduced substantially from the elevated levels of the first two weeks of October 2022,” they have yet to reverse, Credit Suisse said Wednesday.
The pace of withdrawals pushed the bank’s liquidity below some local-level requirements, the bank said.
The cost to insure the bank’s debt against default rose Wednesday. Volatility in that cost in early October prompted several wealthy families based in the Middle East to pull assets from Credit Suisse, according to Bloomberg.
At least one analyst compared Credit Suisse’s downturn — unfavorably — to losses suffered by a rival bank during the 2007-08 financial crisis.
“Wealth management outflows at 10 per cent of assets under management in the fourth quarter (until 11 November) are very material at a level seen by UBS in the global financial crisis on an annualized basis and not in one quarter,” JPMorgan analyst Kian Abouhossein said, according to the Financial Times. “Credit Suisse is not out of the woods yet in terms of stabilizing the franchise.”
Axel Lehmann, Credit Suisse’s chair, said Wednesday’s shareholder vote, in particular, “confirms confidence in the strategy, as we presented it in October.”
“We are fully focused on delivering our strategic priorities to lay the foundation for future profitable growth,” Lehmann said in a statement Wednesday.
About 92% of shareholders approved a measure granting shares to new investors including the Saudi National Bank through a private placement.
Ammar AlKhudairy, the Saudi National Bank’s chairman told CNBC last month the 9.9% stake his bank gained in Credit Suisse was acquired at “floor price.” AlKhudairy urged Credit Suisse “not to blink” on its restructuring.
Roughly 98% of shareholders approved a second capital-raise measure that would issue newly registered shares with preemptive rights to existing shareholders.
Credit Suisse’s expected $1.6 billion fourth-quarter loss isn’t final — though Wednesday’s warning puts a figure to a deficit the bank flagged last month. Final quarterly results will depend on “a number of factors,” the bank said Wednesday, including performance throughout November and December, exit from non-core business and goodwill impairments.
Credit Suisse is still targeting a capital ratio of at least 13% between 2023 and 2025, it said. CEO Ulrich Korner predicted last month the bank would be profitable by 2024.
The restructuring would lessen the impact the bank feels from trading losses, and make the lender more reliant on steady fees collected from holding the assets of the ultra-rich. The revamp also is expected to entail roughly 9,000 job cuts, including 2,700 this quarter — some of which were reported Tuesday.
Credit Suisse’s recent losses, regarding the latter, appear to be other Swiss wealth managers’ gains. UBS saw a $17 billion uptick in wealth-management assets in the third quarter. Julius Baer, meanwhile, added roughly $4 billion in wealth-management assets between July and October, Bloomberg reported.
