Credit Suisse, now a subsidiary of UBS (UBSG.S), posted a loss of 3.5 billion Swiss francs ($4.0 billion) in the second quarter, according to a report in Sonntagszeitung, which cited insiders at the bank. The result underscores how the 166-year-old lender, once a linchpin of Switzerland’s banking system, has been crippled by bad debt and other losses. Worries that the bank might have more undiscovered financial land mines have weighed heavily on investors, and the stock has fallen 60 percent this year.
The loss is the latest blow to the once-dominant Swiss bank, which has been in a downward spiral since a series of scandals rocked it in 2015. Its once-vaunted investment bank saw profits fall and clients flee. The company was forced to sell its stake in its private bank, which had been its core business for years, and it stumbled on new cases ranging from failing to prevent a money laundering operation by Bulgarian cocaine gangsters to a lawsuit that it failed to report secret offshore accounts for wealthy Americans. Its stock has fallen more than 95% since its pre-financial crisis peak in 1990.
A year after the scandals, Credit Suisse announced a significant overhaul, cutting thousands of jobs, selling its stake in its private bank, and raising billions of dollars. But the bank’s problems remained – a global markets division that had seen profits plummeting and a rocky relationship with its hedge fund clients was still generating significant losses. At the same time, a reshuffling of management failed to spark a turnaround. And it was struggling to rein in risk-taking that had led to its massive derivatives positions.
Despite assurances from then-CEO Tidjane Thiam that the bank had de-risked itself, markets were skeptical. Even in wealth management, where it had regained its top ranking in Euromoney’s annual survey, the problems were proving stubbornly persistent.
Ultimately, a deal to sell its stake in its global markets unit to Italy’s Banca Monte Paschi and an agreement with investors to buy the rest of its securitized products group allowed it to turn around its fortunes. But the damage was already done, and it has struggled to halt a steady flow of client outflows in recent weeks. It also warned that it would have to write off billions in a revamp and the cost of resettling the litigation brought by its former clients. It had already forecast a significant pre-tax loss for the second quarter and full year 2023 in April. Those losses were due to the move to exit from non-core businesses and restructuring and financing costs.
