Credit Suisse Group AG asked investors for more patience as the firm warned that its worst annual performance in five years won’t be followed by a rapid rebound.
A 2 billion franc ($2.2 billion) fourth-quarter loss came with the message that 2022 already got off to a weak start and that restructuring charges and a need to ramp up pay to hold on to senior bankers would mean higher costs this year. The bank’s leaders said the strategic shift it rolled out in November won’t start to bear fruit until 2023.
“This will not be a quick fix and we expect 2022 will be a transition year,” Chief Executive Officer Thomas Gottstein warned investors on a conference call. “But we have made clear progress in creating the conditions for a much more stable and predictable bank.”
Gottstein and new Chairman Axel Lehmann now need to reassure shareholders and the bank’s own staff that they can chart a credible path forward and return to profitability after Wall Street peers produced record results. The bank is emerging from one of its most turbulent periods since the financial crisis, hit by the twin collapses of Archegos Capital Management and Greensill Capital and the quick exit of the chairman who was meant to set a new course.
Analysts saw few bright spots in a quarter marred by a huge impairment charge at the investment bank and earnings that missed estimates at the key wealth management unit. Even as Credit Suisse said it’s seeing a pick up in activity, the outlook for this year is clouded by markets that are returning to more normal levels, clients de-leveraging and central banks starting to boost rates.
“There’s still a lack of evidence in these results that Credit Suisse has turned the corner, even if there does appear to be long-term value,” Citigroup analysts led by Andrew Coombs wrote in a note to investors. “It’s hard to find any positives in these results.”
Before his abrupt exit for breaching covid-related quarantine rules, ex-Chairman Antonio Horta-Osorio had sought to fix the bank’s ills by exiting the prime brokerage business at the heart of the Archegos collapse and reducing risk more broadly across the bank. The centerpiece was hiring more relationship managers for the wealth management unit and giving it more resources, taken from the investment bank.
Credit Suisse fell as much as 5.2% and traded 4.8% lower as of 12:16 p.m. in Zurich.
The bank had already flagged that it would post a loss for the fourth quarter, after taking a 1.6-billion-franc impairment charge as part of restructuring in the investment bank and exiting the prime business serving hedge funds. It also signaled additional legal provisions of 436 million francs. The charges were partially offset by gains on real estate sales of 224 million francs.
Even before Archegos and Greensill, the bank had surprised investors with a series of hits, including a writedown on an investment in hedge fund York Capital and legal provisions for a case dating back to the financial crisis. The huge impairment charge last quarter relates to its acquisition of a U.S. investment bank two decades ago.