Credit Suisse, Switzerland’s second-largest bank, has reported its first profit loss since 2008, coming in CHF2.94 billion ($2.92 billion) in the red for 2015.
Adjustments in the investment sector are the main reason for the loss, but restructuring costs and other provisions also played a role.
Most of those adjustments are due to the ill-fated acquisition of the US investment bank Donaldson, Lufkin & Jenrett (DLJ) in 2000, as Credit Suisse announced on Thursday. Credit Suisse purchased that bank for about $3.8 billion more than its fair market value, resulting in goodwill assets which the bank amortised in the fourth quarter of 2015. Other significant losses were CHF821 million in litigation costs and CHF355 million restructuring costs related to the job cuts.
If not for those factors, Credit Suisse would have ended the year in the black, with a CHF4.2 billion profit gain. Last year, the bank reported a gain of CHF6.3 million.
Pre-tax profits in the investment bank’s trading sector fell from CHF2.7 billion in 2014 to CHF1.1 billion last year. According to Credit Suisse, that decline is mainly due to stock market turbulence and losses in the bond business. The investment bank’s consulting segment also reported profit declines.
Analysts and the media had been expecting the downturn in profits at Credit Suisse, but the contrast with cross town rival UBS could not have been starker. On Tuesday, UBS posted a 79% increase in annual net profits to CHF6.2 billion, with CHF949 booked in the last quarter of 2015.
"Market conditions in January 2016 have remained challenging and we expect markets to remain volatile throughout the remainder of the first quarter of 2016 as macroeconomic issues persist," Tidjane Thiam, who became the bank’s CEO in July, said in a statement.
Thiam has been at the helm of a restructuring effort for the bank, set to take place through 2018. Last year, Credit Suisse announced it would be cutting jobs, including 1,600 in Switzerland, in an effort to save CHF6 billion in capital by selling stock and cutting CHF3.5 billion in costs.
On Thursday, the bank specified those details, saying that 4,000 of its 48,200 jobs worldwide would be cut in the coming years and that the restructuring programme would be accelerated.
Credit Suisse also announced on Thursday that its Asian market, international private banking wealth management and Swiss business showed good results in 2015.
swissinfo.ch and agencies