Credit Suisse warned it faced another quarterly loss as weak performance by parts of its investment bank weighed on profits.
The Swiss bank said the impact of Russia’s invasion of Ukraine, monetary tightening by central banks in response to inflation and the unwinding of measures implemented during the Covid-19 pandemic have all hurt its profitability.
The measures have resulted in “continued increased market volatility, weak customer flows and continued customer deleveraging, particularly in the APAC region,” it said in a statement.
While its advisory revenue remained “resilient” and some of its trading activities benefited from market volatility in the three months to June, widening credit spreads and continued declines in issuance on capital markets “depressed the financial performance of this division in April and May and is likely to result in a loss for this division as well as a loss for the Group in the second quarter of 2022,” he added.
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A potential loss for Credit Suisse is another headache for the Swiss bank, which is still recovering from the impact of successive crises, including a $5.5 billion hit from the collapse of family office Archegos. Capital, and its exposure to supply chain finance company, Greensill.
Credit Suisse warned in April that it faced a loss in the first quarter of 2022 because it had set aside 600 million francs for legal provisions. Its net loss amounted to 273 million francs during the period. If the Swiss bank posts a loss in the second quarter of 2022, it will have been in the red for five of the last seven quarters.
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The Swiss bank said it was ready to accelerate cost-cutting initiatives.
“While we look forward to the second half of the year, 2022 will remain a year of transition for Credit Suisse. Given the economic and market environment, we are accelerating our cost initiatives across the group. with the aim of maximizing savings from 2023,” he added. said.
In a note, Citigroup analyst Andrew Coombes said Credit Suisse’s predicament within its investment was “largely self-inflicted.”
“While other banks – such as Morgan Stanley and Goldman Sachs – continue to post near-record quarters in investment banking, Credit Suisse is now consistently posting a loss in this division,” he said.
Credit Suisse has hired a lot of dealmakers at its investment bank as it seeks to replace around 65 senior bankers who have left since March last year when news of Archegos broke. It increased compensation costs by 13% to 1.1 billion francs in the first quarter.
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