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Credit Suisse Group reported a larger-than-expected drop in profits in the second quarter, as fallout from the Arkegos Capital Management and Greensell scandals rippled through the investment banking and wealth management businesses.
Net income was down 78% from the previous year, impacted by lower trading activity exacerbated by a loss of $ 653 million related to the Archigos scandal. The advisory business – an area of major strength in recent quarters – has seen revenue drop by more than a third, while the bank has seen billions of dollars out of Asia as it cuts relationships with some clients.
Credit Suisse is recovering from one of the most turbulent times since the financial crisis, after being rocked by the Arquegos and Greensill Capital scandals, which caused $ 5.5 billion in damage and damaged the reputation of the Bank.
New President Antonio Horta Osorio pledged reforms, saying what had happened went beyond any scandals he had experienced in his three and a half decades in the banking industry. The lender has raised $ 2 billion from investors to build capital and a strategy review is expected later this year.
“We take these two events very seriously and are determined to learn all the right lessons from them,” CEO Thomas Gotstein said Thursday. “We have significantly reduced our risk-weighted assets and our exposure to leverage, and improved the risk profile of our core services business within investment banking,” he said. added.
Credit Suisse stock saw the biggest drop during today’s trading of 5.1%, and it traded 3.4% at 9:37 a.m. in Zurich, compounding the year’s losses at 21% this year.
As part of attempts to reform the bank, Credit Suisse announced earlier this week that it has hired David Wildermouth, of Goldman Sachs Group, to become its new chief risk officer, replacing the former chief risk officer. and compliance Lara Warner, who resigned among several other key executives after the scandals.
In addition to the second quarter results, the bank also released the results of its internal Archigos disaster report, prepared by US law firms Paul, Weiss, Rifkind and Wharton & Garrison LLP.
Staff in the Key Services Unit who “systematically ignored” repeated red flags, despite saying there had been no breach, he wrote, said. was deceived. The Swiss bank said it fired 9 executives and recovered around $ 70 million in salaries, including bonuses refunded, as it sanctioned 23 people for their role in the scandal.
At investment banking – hit by the Archigos crash – fixed income trading is down 33% from a year ago, although better than the Wall Street average as banks are facing moderation in market volatility which has helped increase revenues since the start of the pandemic.
Business advisory revenues fell by a third as the bank saw a mass exodus of more than 40 major banker traders in a brain drain that could cost Credit Suisse roles in major upcoming deals, affecting its market share and billions in fees.
However, the bank noted that it has a strong balance between M&A transactions and capital markets.
The bank reported net profit of 253 million Swiss francs ($ 278 million), against a profit forecast of 380 million Swiss francs ($ 418 million).
Net sales amounted to 5.1 billion francs (5.61 billion francs), compared to 5.36 billion francs.
The investment bank’s pre-tax loss amounted to 86 million francs ($ 95 million), compared to the estimated loss of 163.8 million, or the equivalent of $ 180 million.
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