On Feb 9, 2023, Credit Suisse Group reported the most significant annual loss since the 2008 global economic crisis. This happened after frightened customers pulled billions from their accounts at the bank. The company forecasts further “substantial” losses would come this year.
A number of scandals forced a sharp acceleration in withdrawals in the fourth quarter. The cash outflow from the customers’ accounts exceeded 110 billion Swiss francs ($120 billion).
As an outcome, the bank’s shares decreased by 10%. This forced Switzerland’s second-biggest bank to significantly optimise its business, cutting costs and jobs to maintain its fortunes. The optimisation touches upon the company structure and includes creating a separate corporation for its investment bank under the CS First Boston brand. The bank completed a 4 billion Swiss franc fundraising in December.
Ulrich Koerner, Chief Executive of the bank, proves the intention to create a new Credit Suisse and to deliver on its three-year strategic transformation. But the analysts are concerned with the scale of losses and outflows as the company’s operational performance was even worse than feared, and the level of outflows quite staggering.
With heavy losses to continue in 2023, the bank expects another wave of downgrades. In the fourth quarter, the bank made a net loss of 1.39 billion francs. Its net loss in 2022 reached an impressive 7.29 billion francs, marking its second straight year in the red. The 2022 outflows exceeded all the expected thresholds. 2022 was described as the worst year in Credit Suisse’s 167-year history.
The bank board now heavily relies on investors’ support but does not give any details. Standard & Poor’s ranking agency downgraded the bank to just one level above junk.
