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Credit Suisse expects a loss of $1.6 billion in the fourth quarter

Switzerland’s second largest bank Credit Suisse is seen here next to a Swiss flag in the center of Geneva.

Fabrice Coffrini | AFP | Getty Images

Swiss credit on Wednesday estimated a loss of 1[ads1].5 billion Swiss francs ($1.6 billion) in the fourth quarter as it undertakes a massive strategic overhaul.

The embattled lender last month announced a series of measures to address persistent underperformance at the investment bank and a series of risk and compliance failures that have saddled it with consistently high legal costs.

“These decisive measures are expected to result in a radical restructuring of the Investment Bank, an accelerated cost transformation and strengthened and redeployed capital, each moving in tandem,” the bank said in a market update on Wednesday.

Credit Suisse revealed that it had continued to experience net asset outflows, saying these flows were about 6% of assets under management at the end of the third quarter. The Zurich-based bank flagged last month that this trend continued in the first two weeks of October, after reports cast doubt on the bank’s liquidity position and credit default swaps increased. Credit default swaps are a type of financial derivatives that provide the buyer with protection against default.

“In wealth management, these outflows have moderated significantly from the high levels of the first two weeks of October 2022, although they have not yet reversed,” Credit Suisse said on Wednesday.

The group expects to record a loss of 75 million Swiss francs related to the sale of its shareholding in the British wealth technology platform Allfunds group, while lower deposits and reduced funds under management are expected to lead to a fall in net interest income, recurring commissions and fees. , which the bank said would likely lead to a loss for its wealth management division in the fourth quarter.

Credit Suisse expects a loss of .6 billion in the fourth quarter

“Together with the adverse earnings impact from the previously disclosed exit from non-core businesses and exposures, and as previously announced on October 27, 2022, Credit Suisse expects the investment bank and group to report a significant pre-tax loss in the fourth quarter of 2022, of up to CHF ~ 1.5 billion for the group,” the bank said.

“The Group’s actual results will depend on a number of factors, including the Investment Bank’s results for the remainder of the quarter, continued liquidation of non-core positions, any goodwill impairments, and the outcome of certain other actions, including potential property sales.”

Credit Suisse confirmed that it has begun working towards a targeted 15%, or 2.5 billion Swiss francs, reduction of its cost base by 2025 with a targeted reduction of 1.2 billion Swiss francs in 2023. Layoffs of 5% of the bank’s workforce are in times next to reductions to “other non-compensation-related costs.”

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The bank announced last week that it would accelerate the restructuring of its investment bank by selling a significant portion of its securitized products group (SPG) to Apollo Global Management, reducing SPG’s assets from $75 billion to about $20 billion by mid-2023.

“These actions and other deleveraging measures, including but not limited to non-core businesses, are expected to strengthen liquidity conditions and reduce the funding needs of the group,” it said on Wednesday.

Credit Suisse is holding an extraordinary general meeting on Wednesday, where shareholders will vote on the group’s restructuring plans and proposals for raising capital.

Credit Suisse shares fell more than 5% in early trading.

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