Credit Suisse has issued its third profit warning of the year and will accelerate cost-cutting measures, as market volatility pushes back the prospect of a recovery for a bank beset by crises in recent years.
The Swiss bank warned on Wednesday that it would probably report a loss in the second quarter as its investment banking division was hit by market volatility from the war in Ukraine, the tapering of pandemic stimulus measures and monetary tightening in response to rising global inflation.
Against that backdrop, the bank said it had suffered from “weak customer flows and ongoing client deleveraging, notably in the [Asia-Pacific] region”.
The group’s investment banking division also struggled in April and May because of low equity and debt issuance and widening credit spreads as countries around the world tightened monetary policy.
“The main culprit is once again the investment bank, where Credit Suisse expects the fourth quarterly loss over the last six quarters,” said Vontobel analyst Andreas Venditti.
“As a consequence, Credit Suisse announces an acceleration of its cost [cutting] initiatives. Similarly to cost measures executed in the past, the consequence is likely to be a further erosion in staff morale and therefore another negative impact on revenues.”
Shares in Credit Suisse fell 5 per cent in early trading, taking their decline for the year to more than 25 per cent.
In an interview with Bloomberg on Tuesday, Credit Suisse global head of investment banking and capital markets David Miller, said: “I’ve been using the entire first five months of this year running around seeing clients and telling them we are back.”
In January, Credit Suisse warned it would report a loss for the final quarter of 2021 on the back of a slowdown in revenues in its investment bank. Three months later, it announced that it expected a first-quarter loss due to an increase in legal provisions.
The bank is due to publish its second-quarter results on July 27, while chief executive Thomas Gottstein will provide a trading update on Thursday at a Goldman Sachs event.
Credit Suisse is also holding a day of presentations for investors on June 28 to showcase several of its new senior executives.
The bank announced a sweeping overhaul of top executive roles in April after posting a loss in the first quarter as it sought to move on from a succession of recent crises.
“As we look forward to the second half, the year 2022 will remain one of transition for Credit Suisse,” the bank said on Wednesday. “Given the economic and market environment, we are accelerating our cost initiatives across the group with the aim of maximising savings from 2023 onwards.”
The bank added that income from advisory services had benefited from market volatility so far this quarter.