Profit Warning Issued By Credit Suisse For The Second Quarter, Citing Ukraine Conflict And Interest Rate Hikes

Credit Suisse warned on Wednesday that it expects to lose money in the second quarter due to the Ukraine conflict and tightening monetary policy.

The embattled lender said in a trading update early Wednesday morning that the geopolitical situation, significant monetary tightening from major central banks in response to soaring inflation, and the unwinding of Covid-19 era stimulus measures had resulted in “continued heightened market volatility, weak customer flows, and ongoing client deleveraging, particularly in the APAC region.”

Despite the fact that trading revenues have benefited from the increase in volatility, Credit Suisse stated that the impact of these conditions, combined with “continued low levels of capital markets issuance” and widening credit spreads, has “depressed the financial performance” of the investment bank in April and May.

According to the trading update, this is “expected to result in a loss for this division as well as a loss for the Group in the second quarter of 2022.”

The bank’s stock dropped more than 5% shortly after the market started on Wednesday.

Credit Suisse has seen a run of scandals and mistakes in recent years, prompting some shareholders to advocate for a leadership change. Chairman Axel Lehmann told CNBC in May that CEO Thomas Gottstein had his full support to continue the company’s “rebuilding.”

Gottstein took president in 2020 after predecessor Tidjane Thiam resigned during a lengthy surveillance scandal.

The bank recorded a net loss for the first quarter of 2022 and announced a management transition as it continues to deal with litigation costs related to the collapse of the Archegos hedge fund.

 “We would note that our reported earnings will also be affected by continued volatility in the market value of our 8.6% investment in Allfunds Group,” the bank added.

Allfunds Group, a Spanish wealthtech platform that will debut on Euronext Amsterdam in April 2021, has had its share price fall 52 percent year so far.

Credit Suisse stated that 2022 will be a year of “transition” for the bank, promising to increase cost-cutting throughout the business and providing more information at its Investor “Deep Dive” on June 28.

In the short term, the bank intends to maintain a group common equity tier one capital ratio of 13.5 per cent, in accordance with its goal of 14 per cent by 2024.

(Adapted from FT.com)

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