A sign above the entrance of the headquarters of Credit Suisse Group AG in Zurich, Switzerland, on Monday, November 1, 2021.
Thi My Lien Nguyen | Bloomberg | Getty Images
Credit Suisse said on Wednesday that it is likely to make losses in the second quarter as the war in Ukraine and the tightening of monetary policy tighten its investment bank.
In a trade update in the early hours of Wednesday morning, the troubled lender said the geopolitical situation, the significant monetary tightening of major central banks in response to rising inflation and the disabling of stimulus measures of the Covid-19 era had led to “continued market volatility, weak customer flows. and continued deleveraging of customers, especially in the APAC region.”
Credit Suisse said that while trading revenues benefit from increased volatility, the impact of those conditions, combined with “continued low issuance levels in capital markets” and widening spreads credit, have “depressed the financial performance” of the investment bank in April and May.
“This is likely to result in losses for this division as well as losses for the Group during the second quarter of 2022,” the trade update said.
Shares of the bank fell more than 5% shortly after the markets opened on Wednesday.
Credit Suisse has suffered a number of scandals and setbacks in recent years, leading some shareholders to call for a change in leadership. President Axel Lehmann told CNBC in May, however, that CEO Thomas Gottstein has the full support to continue “rebuilding” the company.
Gottstein took over in 2020 following the resignation of his predecessor Tidjane Thiam over a prolonged espionage scandal.
The bank recorded a net loss during the first quarter of 2022 and announced a reshuffle of management as it continues to struggle with litigation costs related to the collapse of the Archegos hedge fund.
“We note that our reported earnings will also be affected by the continued volatility of the market value of our 8.6% investment in Allfunds Group,” the bank added.
The Spanish heritage technology platform Allfunds Group, which launched at the Euronext in Amsterdam in April 2021, has seen its share price fall by 52% since last year.
Credit Suisse said 2022 will remain a year of “transition” for the bank, promising to accelerate cost-cutting across the group, and provide more details to its “Deep Dive” of investors on June 28th.
The bank aims to operate a level 1 capital ratio of the group’s ordinary capital, a measure of bank solvency, of 13.5% in the short term, in line with its target of 14% in 2024.