Credit Suisse Posts Loss on Impairment, Trading Downturn

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Credit Suisse Group AG swung to a loss in the fourth quarter as it wrote off goodwill and set aside provisions for litigation, while trading losses also contributed to a slump at the two investment-banking divisions.

The bank slipped into a shortfall of 5.8 billion Swiss francs ($5.8 billion) from a profit of 691 million francs in the year-earlier period, hurt by goodwill impairment of 3.8 billion francs, it said in a statement on Thursday. Credit Suisse That missed the 4.3 billion-franc estimate of five analysts in a Bloomberg survey.

“Given the particularly challenging environment we face, we decided in the fourth quarter to accelerate the implementation of our cost-savings program across the bank, ” Chief Executive Officer Tidjane Thiam said. The Zurich-based lender will accelerate plans to cut 4,000 jobs and save 500 million francs a year, he said.

Credit Suisse reported earnings for the first time since it was reorganized under a plan to prioritize wealth management and shrink the securities unit. As the bank embarked on its new strategy, markets were convulsed by volatility that deterred clients from trading.

The global markets division, one of five new units, booked a pretax loss of 3.5 billion francs, including part of the goodwill impairment amounting to 2.7 billion francs. The trading unit swung to a loss amid lower client activity and “significant” losses on existing positions, Credit Suisse said. Revenues dropped 37 percent from a year earlier.

Investment banking and capital markets posted a pretax loss of 497 million francs amid a slowdown in activity and writedowns. Pretax profit at the Swiss Universal bank dropped 48 percent to 367 million francs in the fourth quarter from a year earlier, while Asia Pacific reported a loss of 617 million francs for the period.

“We’ve cut our bonuses as you imagine,” Thiam said in an interview with Francine Lacqua on Bloomberg TV. “The total bonus by about 11 percent and for divisions that have under-performed, like global markets, by more than 30 percent, which is very strong.”

The bank proposed a dividend of 70 centimes per share with an option for shareholders to get stock instead. The shares have dropped about 24 percent this year.

 

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