A sign above the entrance to the headquarters of Credit Suisse Group AG in Zurich, Switzerland, Monday, November 1, 2021.
Thi Mon Lien Nguyen | Bloomberg | Getty Images
Credit Suisse said on Wednesday it was expected to post a loss in the second quarter as the war in Ukraine and tighter monetary policy squeezed its investment bank.
In a trade update early Wednesday morning, the embattled lender said the geopolitical situation, significant monetary tightening by major central banks in response to soaring inflation and the unwinding of Covid-era stimulus measures 19 had caused “continued increased market volatility, low customer flows and continued customer deleveraging, particularly in the APAC region.”
Credit Suisse said that despite trading revenue benefiting from the surge in volatility, the impact of these conditions, combined with “continued weakness in capital markets issuance” and widening credit spreads, depressed the investment bank’s financial performance in April and May.
This “likely to result in a loss for this division as well as a loss for the Group in the second quarter of 2022,” the business update said.
Credit Suisse has suffered a series of scandals and incidents in recent years, leading some shareholders to demand a change in management. However, Chairman Axel Lehmann told CNBC in May that CEO Thomas Gottstein had his full support to continue “rebuilding” the company.
Gottstein took the reins in 2020 following the resignation of his predecessor Tidjane Thiam following a protracted spy scandal.
The bank posted a net loss for the first quarter of 2022 and announced a management reshuffle as it continues to face legal costs related to the collapse of hedge fund Archegos.
“We note that our reported earnings will also be impacted by continued volatility in the market value of our 8.6% investment in Allfunds Group,” the bank added.
Spanish wealth management technology platform Allfunds Group, which launched on Euronext Amsterdam in April 2021, has seen its share price fall by 52% since the start of the year.
Credit Suisse said 2022 will remain a “transition” year for the bank, pledging to accelerate cost reduction across the group, and will provide further details during its Investor “Deep Dive” on 28 June.
The bank aims to operate a Tier 1 group capital ratio, a measure of bank solvency, of 13.5% in the short term, in line with its target of 14% by 2024.