“Investors were definitely disappointed,” said Andreas Thomae, corporate governance specialist at fund company Deka Investment, on Friday. CEO Ulrich Körner and Chairman of the Board of Directors Axel Lehmann have repeatedly stated that the outflows have stabilized. “And then we learn that the outflows have slowed down, but are continuing. Unfortunately, the top management has lost confidence with investors as a result,” said the expert.
Credit Suisse announced on Thursday that clients had withdrawn assets under management of CHF 110.5 billion in the fourth quarter alone, leaving the major Swiss bank with CHF 1.29 trillion under their care at the end of the year. Körner also explained that the institute collected new money in the Asia-Pacific region and in the Swiss business in January. However, he did not want to answer the question of whether customers across the entire group had carried money to the institute net.
JP Morgan analyst Kian Abouhossein wrote that he is currently not sure if the company is making a full turnaround. “The question arises as to whether the restructuring is going fast enough given the decline in the business.” After plummeting nearly 15 percent on Thursday, Credit Suisse shares recouped some of the losses on Friday, gaining 3.4 percent. Nevertheless, market participants remained skeptical. “How quickly will CS recover from the massive damage it has suffered over the past year?” asked Vontobel analyst Andreas Venditti.
Rating agency Fitch said the financial statements, which included a quarterly loss of CHF 1.4 billion, show the magnitude of the challenge to bring Credit Suisse back into the black. Fitch warned of the risks associated with implementing the reorganization over the next two to three years. If the bank’s assets under management fail to recover sustainably, the core business with the rich and super-rich would suffer sustained damage.
The Swiss financial market supervisory authority Finma described the outflow of funds as “considerable”. However, the big bank had very high liquidity buffers, which had had the intended stabilizing effect. “It is clear that Finma monitors the banks very closely in such situations.” The price of credit default insurance rose 24 basis points to close at 320 basis points on Friday, according to S&P Global Market Intelligence.
“The ongoing outflows are frightening,” explained Deka specialist Thomae. That absolutely has to change. “We need evidence that the customer loyalty measures are working.” The bank’s capital is sufficient for the time being. Credit Suisse has the chance to achieve the turnaround. But at the same time earning money in the core business, scoring points in investment banking, reducing costs and restructuring the bank is a mammoth task. “If none of that works and the investment bank is left a log, the top management will have to go over the books again and consider the next step: becoming a pure wealth manager like Julius Baer.”
Zurich (Reuters)
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