Credit Suisse (CSGN.CH) is trading over 10% lower today following the release of an earnings report for Q3 2022. The Swiss bank reported a massive net loss that was 8 times greater than the market expected. However, a bulk of this loss is a non-cash loss resulting from impairment charges related to strategic review. Let's take a closer look at the results of Credit Suisse!
Net loss 8 times bigger than expected!
Credit Suisse reported a net loss of 4.03 billion CHF for Q3 2022. This compares to a market forecast of 505 million CHF net loss. However, pre-tax loss amounted to "just" 342 million CHF and was smaller than the 491 million CHF loss expected by the market. Where did such a big net loss come from then? Bank took a 3.7 billion impairment charge on deferred tax assets related to a strategic review and said in a statement that it plans to radically restructure its investment bank. Bank expects restructuring charges between Q4 2022 - 2024 to amount to 2.9 billion CHF. Restructuring charges as well as software and real estate impairments are expected to amount to around 250 million CHF in the final quarter of 2022.
Media reports take their toll
Credit Suisse has been in the center of the market chatter in September as a bank that could potentially trigger the next 'Lehman moment'. Some media reports suggested that the Bank may be heading for a collapse that would send shockwaves not only across Swiss or European banking industry but also across the globe due to the size of the institution. It looks like those reports took their toll by spooking investors and deposit-holders as Credit Suisse noted that it saw significant deposit and AUM outflows in early October.
Capital needed for restructuring
While clients of the Credit Suisse were spooked by dismal media reports on the condition of the Bank, stakeholders do not seem to be as scared. The Bank will need to raise additional capital for restructuring and plans to raise around 4 billion CHF via new share issuance for qualified investors and new rights offering to existing investors. Saudi National Bank has already committed to provide 1.5 billion CHF of financing.
Share prices slumps over 10%
While the Bank has drawn restructuring plans and started to look for additional capital to boost its capital ratios, the market does not seem to be convinced. Share price of Credit Suisse dropped over 10% today with the stock erasing a big part of the recent recovery move. A sell-off has been halted at 61.8% retracement of a recent upward correction for now but another wave of selling cannot be ruled out. Note that this retracement can be found in the psychological 4.00 CHF price zone, what may additionally boost its significance.
Credit Suisse (CSGN.CH) at H1 interval. Source: xStation5
