Credit Suisse claims it has turned a corner but investors are unconvinced
Credit Suisse said today that it has turned a corner after a “horrific” 2022, but investors were less convinced as its share price dropped by nearly 13 per cent in afternoon trading.
The sick man of European banking posted a CHF1.4bn (£1.3bn) quarterly loss today, bringing its total loss for the full year to CHF7.3bn.
But going forward, analysts at JP Morgan said “the question is whether the restructuring is fast enough considering the ongoing deterioration in the franchise.”
CEO Ulrich Koerner stressed that the bank’s restructuring plans were the right medicine, and that there were already signs the bank was returning to health.
In a call this morning, Koerner said there had been an inflow of deposits in both the wealth management business and the Asia-Pacific business during January.
Koerner said the bank had spoken to 10,000 wealth management clients and 50,000 Swiss bank clients in an outreach project to shore up support. Clients remain “overwhelmingly supportive”, Koerner said.
“The direction of travel after last year”, Koerner commented, “has come through very clearly.”
Attention, however, will remain fixed on net flows in the months ahead after the beleaguered lender saw CHF110.5m flowing out in the period, with the majority of them concentrated in October.
Bloomberg Intelligence’s Alison Williams commented that January’s inflows “provide some comfort, but more is needed to boost confidence in the franchise”.
Koerner also described the $175m acquisition of M. Klein & Company’s investment banking business as a “significant step forward” in the carve out of CS First Boston.
Credit Suisse is hoping to spin-off CS First Boston in order to simplify its overall business. CS First Boston was the name given in October to Credit Suisse’s investment bank which it hopes to turn into an independent business focused on capital markets and advisory.
Following the Klein deal, Koerner said they will now “figure out what third party capital we would like”, confirming that a potential $500m investment signalled in October remains on the cards.
Koerner suggested the bank is in contact with “several investors as we speak… to help get CS First Boston on its feet.”
Even after the spin-off, Koerner continued, the ties between Credit Suisse and CS First Boston “will stay super deep” regardless of whether Credit Suisse holds majority ownership, minority or even zero ownership.
Although the restructuring is necessary, it will prove costly. Bloomberg Intelligence’s Williams said “restructuring (is) likely to drive a sizeable 2023 group loss.”
Credit Suisse has already signalled it will face substantial losses in 2023, but hopes to return to profit in 2024.