Credit Suisse expects CHF 500 million of litigation provisions to weigh on Q4 2021 profits
Credit Suisse Group today announced that the reported profits for the fourth quarter 2021 will be negatively impacted by litigation provisions of approximately CHF 500 million, partly offset by gains on real estate sales of CHF 225 million.
These litigation provisions have been incurred in respect of a number of cases where the Group has more proactively pursued settlements and primarily relate to legacy litigation matters from its investment banking business.
Before deduction of the already announced approximately CHF 1.6 billion goodwill impairment for the Group, of which approximately CHF 1.5 billion in the Investment Bank division and approximately CHF 0.1 billion in the Asia Pacific division, this is expected to result in a reported pre-tax income/(loss) for the Group of approximately breakeven for the fourth quarter 2021.
With regard to Credit Suisse underlying business results, as Credit Suisse indicated in November 2021, it has seen a reduction in transaction-based revenues in the Investment Bank and its wealth management businesses. This reflects the usual seasonal slowdown but, in addition, business activity reflects the reversion to more normal trading conditions after the exceptional environment that prevailed for most of 2020 and 2021.
Combined with the reduction in Credit Suisse overall risk appetite, including Credit Suisse’s decision to substantially exit its prime services business, this has resulted in a loss for the fourth quarter 2021 in the Investment Bank division (before the goodwill impairment).
In its wealth management businesses, there has been a significant slowdown in transaction activity in the International Wealth Management and Asia Pacific divisions, with the latter also reflecting client de-leveraging mainly due to the adverse market conditions in Asia. As a consequence, fourth-quarter 2021 net new assets for Credit Suisse’s wealth management businesses will be modestly negative, albeit more than offset by inflows in its Asset Management business.
With regard to Credit Suisse’s capital position, its year-end 2021 Group CET1 ratio is expected to exceed its ambition of 14%, while its year-end 2021 Tier 1 leverage ratio is expected to exceed 6%.
The financial results are still subject to detailed finalization and review.