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Credit Suisse falls 18% after $4bn loss in Q3 and strategic overhaul

Credit Suisse falls 18% after $4bn loss in Q3 and strategic overhaul

Swiss lender Credit Suisse’s shares tumbled 18% after the bank posted its third-quarter loss which was higher than the analyst forecasts and unveiled a massive strategic overhaul.

Credit Suisse reported a net loss of Fr. 4.034 billion ($4.077 billion) in the third quarter, which was worse than the analyst’s expectations of a loss of Fr. 567.93 million ($574 million). This was also below the quarterly profit of Fr. 434 million ($439 million).

The bank said that the loss included Fr. 3.655 billion ($3.69 billion) in impairment related to the reevaluation of deferred tax assets because of the comprehensive strategic review.

Due to the pressure from investors, Credit Suisse announced a major overhaul of its business to analyze its underperformance, several litigation costs dealt a severe blow to the bank’s earnings.

Ulrich Koerner, the newly appointed CEO of Credit Suisse, said the revamp represented the start of a “transformation into a new Credit Suisse.”

Credit Suisse also aims to decrease its cost base by 15% by 2025.

The bank may reportedly incur Fr. 2.9 billion ($2.9 billion) in restructuring costs by the end of 2024.

Under the transformation plan, Credit Suisse will convert its investment bank into an independent business, named CS First Boston, raise capital worth Fr. 4 billion ($4 billion) by issuing new shares and rights offerings, and build a capital release unit to slow down lower-return, non-strategic businesses.

Out of the planned capital raise, Fr. 1.5 billion ($1.5 billion) will be sourced from the Saudi National Bank in exchange for a 9.9% stake in the bank.

Credit Suisse had a tough last year amid dull investment banking revenues, losses incurred from its exit from Russia, and litigation costs due to failure in legacy compliance and risk management.

Vitaline Yeterian, Senior VP of global financial institutions, DBRS Morningstar, said that the loss indicated the stress that Credit Suisse suffered in its core business due to lower client activity and a dip in capital markets revenues.

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Meghna Singh

An English Literature graduate, Meghna Singh ventured into the profession of content development to incorporate her knack for writing articles across verticals including technology, healthcare, business, and alike for News Origins and Newsorigins. She has also completed her MBA in Tourism and worked as a content creator in the field of product development.