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Credit Suisse problems deepen as lender warns of fourth quarter loss

The logo of Swiss bank Credit Suisse is seen at a branch in Zurich, Switzerland, November 3, 2021. REUTERS/Arnd WIegmann

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  • Bank reports legal provisions of 500 million Swiss francs
  • Wealth management assets fall
  • Falling risk appetite hits businesses

ZURICH, Jan 25 (Reuters) – Credit Suisse (CSGN.S) warned on Tuesday it would post a fourth-quarter loss as the scandal-hit lender reported new legal charges and said the activities of its trading divisions and wealth management had slowed.

Switzerland’s second-largest lender announced plans in November to rein in its investment bankers and pour money into looking after the fortunes of the world’s rich as it tries to rein in a freewheeling culture that has plagued it. cost billions. Read more

He said the investment bank would make a loss in the final quarter of the year, while the wealth management business saw an overall decline in assets.

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In addition to previously announced charges, Credit Suisse will make a new statutory provision of CHF500 million to settle legacy matters related to the investment bank, putting it on track for an overall quarterly loss of around 1. 6 billion Swiss francs ($1.75 billion).

“The cleanup of legacy investment banking charges threatens to become a never-ending story,” Zuercher Kantonalbank analysts said in a note, adding that they see no reason to invest in the bank’s shares. , which were about 0.5% lower at 09:00. GMT.

Credit Suisse has tried to turn the page on a slew of negative headlines and reform its risk management culture, an effort delayed by the abrupt departure of the chairman appointed nine months earlier to lead this transformation. Read more

He said the investment bank had been hurt by a slowdown in transaction-based revenue.

“Combined with the reduction in our overall risk appetite, including our decision to substantially exit our prime services business, this resulted in a loss for the fourth quarter of 2021 in the Investment Bank division,” the lender said.

It said its core wealth management businesses would also be hit by a slowdown in transactions, which would translate into “moderately negative” net new assets for those businesses.

“While we already expected lower transaction and trading revenue, the declines are likely larger than expected. Additionally, we could also have been somewhat bullish on costs,” Vontobel analysts wrote.

Credit Suisse pointed to a slowdown in Asia and a return to more normal business conditions after the exceptional activity that prevailed for much of 2020 and 2021.

Major U.S. banks also signaled last week that the huge surge in trading volumes during the pandemic began to moderate as expectations of a series of U.S. interest rate hikes and increased spending on consumption tempered investment rates.

Investors and analysts are waiting to see how the bank’s troubles, including two major scandals in March 2021, will affect Credit Suisse’s client relationships.

On Tuesday, he said his asset management business, hit at the time by the collapse of $10 billion in funds tied to insolvent supply chain finance firm Greensill, saw inflows of capital in the last quarter of 2021, helping to “more than offset” wealth management fund outflows. Read more

For the first nine months of 2021, Credit Suisse reported net profit of 435 million francs, down nearly 86% year on year. On a pre-tax basis, income amounted to CHF 1.064 billion.

($1 = 0.9162 Swiss francs)

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Reporting by Brenna Hughes Neghaiwi and Paul Arnold; edited by Sherry Jacob-Phillips, Kirsten Donovan

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