Investment bank Credit Suisse warns of a slowdown in trading

Credit Suisse has warned that its investment bank will report a loss in the fourth quarter as trading revenues have slowed, the latest blow to a Swiss lender that has wavered since Antónia Horta-Osória’s exit this month.

In the last quarter of 2021, there was a slowdown in investment bank revenue, which partly reflected a “return to more normal trading conditions,” Credit Suisse said on Tuesday.

In addition to the decline, the bank also said it would need SFR 500 million ($ 545 million) in the fourth quarter to cover court settlements, mostly related to its investment banking.

The warning limited a gloomy 12 months for the second-largest Swiss bank, highlighting closing $ 10 billion in funds associated with Greensill Capital, a record loss in trading after the collapse of the family office of Archegos Capital and departure of the Horta-Osório chair due to coronavirus quarantine violations.

Shares of Credit Suisse have fallen more than 10 percent since last week’s Horta-Osória resignation, and have fallen nearly 40 percent since March.

The record loss in trading resulting from the collapse of Archegos prompted the bank to do so exit prime broking and reduce the amount of risk he took. Credit Suisse said the reset of the strategy hit the investment bank’s profit in the quarter.

“Despite removing staff and customer uncertainty with the group’s new strategy in November, it is clear that short-term momentum remains very weak and ambitions to increase the top line still seem a distant prospect,” said Andrew Coombs, an analyst at Citigroup. “We expect these results to challenge management’s leadership again.”

Credit Suisse did not provide details of the litigation behind the provision, but they do not apply to closed funds to finance the Greensill supply chain, where a torrent of lawsuits which involves investors and SoftBank is expected to take years to resolve.

The hit from the provision will be partially offset by gains of 225m SFr from the sale of the property, the bank added.

His struggles in the last quarter were not limited to his investment bank. Credit Suisse’s wealth management department, which is racing to catch up with Swiss competitor UBS, has experienced a “significant slowdown in transaction activities” in the Asia-Pacific region, it is said.

“We expect this result to be far worse than the others and calls into question a new strategy that is to allocate more capital to wealth management and the development of this business,” Coombs said.

The bank previously announced that it would undertake a quarter of a decrease in the value of goodwill of 1.6 billion SFr. Prior to that, the bank as a whole was expected to close even in that period.