With a new strategy, Credit Suisse management wants to clarify how the distressed bank will weather the next three years. However, it’s not clear how it will survive this year.
It sounds more like a hopeful prayer than a strategy. “The actual results of the Group will be the performance of the Investment Bank for the remainder of the quarter, the continued exit of non-core positions, the impairment of goodwill and certain other actions, including the potential sale of real estate.”・Switzerland said in its fourth quarter outlook announced today.
Therefore, an equation involving at least four variables determines whether the expected loss is 1.5 billion francs ($1.6 billion). Less than. that’s all.
stocks fall again
Above all, it is uncertain whether Credit Suisse will be able to stem the outflow of client assets before the end of the year. From the end of September until 11 November he withdrew around 84 billion francs across the group. The core business with wealth management lost every tenth of his customer francs, with a total of more than 63 billion francs heading for the exit. This is almost ten times 6.4 billion francs. In terms of net outflows, the division reported in the previous third quarter.
If anything, the core business bleeding appears to be accelerating. The bank warned of “subdued” client activity in wealth management and warned that difficult market conditions were likely to persist in the coming months. After a brief moment of clarity following October’s new corporate strategy, Switzerland’s second-largest bank’s share price drifted into a fog, sometimes dropping more than 5% in morning trading. This means the stock has lost more than a tenth of his value in just one week. There is little market support for ringing.
Hundreds of millions of dollars in restructuring
A majority of shareholders approved Credit Suisse’s two capital increases, easing downward pressure. In the end, the bank will have around CHF4 billion in new funds to strengthen its capital base and fund its costly restructuring.
“Today’s vote by our shareholders marks an important step in our journey to build the new Credit Suisse,” said the Chairman. Axel Lehman About voting results.
However, the management team centered on Lehman and the CEO Ulrich Kellner It seems to be directing the company to the bank of fog. A veteran banker and cost cutter, he managed to present a radical cure to Credit Suisse in October, offering at least some reprieve. Milestones have been achieved, including the sale of a portion of And now, of course, the urgently needed financial injection.
Questions about returns
Things have gotten worse for banks since the strategy was announced in October. In a closed system, Koerner’s plan might have been very impressive. But now, in an environment that BAK Economics considers much more difficult for Swiss banks as a whole, a turnaround must occur.
It is also important that private sector bankers with more solid capital put the brakes on costs across the board. fine.Com recently observed.
Moreover, the new strategy had at least one ambiguity from the beginning. With a target return on equity of 6% by the end of 2025, banks are unlikely to earn their cost of capital. Wealth management’s revenue base is currently collapsing so quickly that perhaps that goal itself must be questioned.