Credit Suisse slumps to second-quarter loss as it names new chief executive

Credit Suisse announced plans for a “comprehensive” review of its businesses that would scale back its investment bank, as the troubled Swiss lender installed Ulrich Körner as chief executive and slumped to a far larger second-quarter loss than expected.

Körner, who heads Credit Suisse’s asset management business, will take over from Thomas Gottstein, who is stepping down after leading the bank through one of the most tumultuous periods in its 166-year history.

The strategic review, the bank’s second in less than a year, would reduce the importance of the investment bank and significantly cut costs, Credit Suisse said on Wednesday.

“Our goal must be to become a stronger, simpler and more efficient group with more sustainable returns,” said chair Axel Lehmann.

The bank reported a net loss of SFr1.6bn ($1.7bn) for the second quarter of 2022 after revenues dropped 29 per cent compared with the same period a year earlier. The loss was significantly higher than the SFr206mn analysts had expected.

Credit Suisse’s investment bank reported a SFr1.2bn loss in the second quarter as revenues fell by a third in both fixed income and equity sales and trading. The lender said it expected a loss in the investment bank in the third quarter.

The bank said David Miller and Michael Ebert would run the investment bank, while the unit’s chief executive, Christian Meissner, would focus on its strategic transformation. The Financial Times reported on Tuesday that Meissner was planning to leave the group.

Pre-tax income in the wealth management business dropped 74 per cent to SFr114mn compared with a year earlier, while revenues in the asset management division were down 25 per cent.

“Our results for the second quarter of 2022 are disappointing, especially in the investment bank, and were also impacted by higher litigation provisions and other adjusting items,” said Gottstein, who added that he was leaving “for personal and health-related considerations”.

Credit Suisse set aside SFr434mn of provisions for litigation, and said up to $200mn was in relation to US regulatory investigations into the use of personal messaging tools to communicate with clients. Several Wall Street banks have set aside a similar amount to the $200mn fine JPMorgan paid over the matter last year.

Credit Suisse issued a profit warning last month, the bank’s third of the year, saying market volatility had pushed back its recovery. It also said it would accelerate cost-cutting measures.

The bank said it would report on the findings of the strategic review in its third-quarter results in October. It said this would include a significant cost reduction, from about SFr17bn to SFr15.5bn in the medium term, which would be achieved through cost efficiencies and digital transformation.

However, analysts were sceptical about the bank’s ability to hit the cost-cutting targets.

“We would need to see further details on the plan, [for example] how much of the savings is related to investment bank transformation, before giving Credit Suisse the benefit of these planned cost savings as we believe the bank also needs to continue with investments in particular in technology,” said Kian Abouhossein, analyst at JPMorgan.

Credit Suisse’s shares hit a three-decade low this month, and at SFr5.14 are down more than 40 per cent this year. The shares fell 0.5 per cent in early trading on Wednesday.

Körner and Lehmann were most recently executives at Credit Suisse’s arch-rival UBS. Körner was brought in to head Credit Suisse’s investment arm in the immediate aftermath of the collapse of Greensill Capital, which led the Swiss lender to close $10bn of funds last spring.