Credit Suisse expects to report net loss in Q4 2020
Credit Suisse Group AG (SWX:CSGN) expects to post a net loss for the final quarter of 2020, according to an update provided today.
The loss partially reflects an increase in provisions related to US residential mortgage backed security (RMBS) lawsuits. Credit Suisse and MBIA have been in a civil legal dispute in New York since 2009 in respect of warranties regarding a US RMBS issued in 2007. On November 30, 2020, the judge presiding over this legacy case issued an order requiring both parties to submit estimates of damages in respect of these mortgages which could result in a judgment against Credit Suisse of up to approximately USD 680 million.
Although Credit Suisse previously set aside USD 300 million in provisions in connection with this case and continues to believe it has strong grounds for appeal, the Group indicated on December 1, 2020, that it would evaluate the need for additional provisions. This review is now concluded, and Credit Suisse expects to increase its provisions for the MBIA case and other RMBS-related cases by a total of USD 850 million.
This charge will be reflected in Credit Suisse’s financial results for the fourth quarter of 2020. As a consequence of this increase, together with the expected impairment charge in respect of Credit Suisse’s non-controlling interest in York Capital Management, Credit Suisse forecasts a net loss in 4Q20.
Credit Suisse says that its trading performance in the final month of 2020 continued at similar levels to those summarized at the Investor Update on December 15, 2020. In the Wealth Management businesses, stronger year-on-year transactional activity, particularly in Asia, partly offset the adverse FX translational effect from the strengthening of the Swiss Franc and some pressure on net interest income.
Credit Suisse’s Investment Bank continued to perform well, with USD revenues in 4Q20 increasing by more than 15% compared to 4Q19.
As announced at the Investor Update issued last month, Credit Suisse intends to buy back a minimum of CHF 1.0 billion and up to CHF 1.5 billion of shares in 2021, subject to market and economic conditions. The program will commence on January 12, 2021.