Credit Suisse Group revealed a larger-than-expected decline in second-quarter profit, after the reverberations of the fallout reverberated Archegos Capital Management Scandals, Greensell Via the investment bank and wealth management business.
Net income fell 78% from the previous year, impacted by the decline in trading business exacerbated by a $653 million loss related to the Archigos scandal. The advisory business – a major area of strength in recent quarters – saw revenue fall by more than a third, while the bank saw outflows of billions of dollars in Asia as it cut ties with some clients.
Credit Suisse is recovering from one of the most turbulent periods since the financial crisis, after it was rocked by the Arquegos and Greensill Capital scandals, which caused $5.5 billion in damage and damaged the bank’s reputation.
New President Antonio Horta Osorio pledged reforms, saying that what happened went beyond any scandals he had experienced in his three and a half decades in banking. The lender has raised $2 billion from investors to shore up capital and a review of the strategy is expected later this year.
“We take these two events very seriously and are determined to learn all the right lessons,” CEO Thomas Gotstein said Thursday. “We have significantly reduced our risk-weighted assets and leveraged exposure, and improved the risk profile of our core services business at the investment bank,” he added.
Credit Suisse’s share recorded the largest decline during today’s trading by 5.1%, and it was traded down by 3.4% as of 9:37 am in Zurich, deepening its losses for the year to 21% this year.
As part of attempts to reform the bank, Credit Suisse said earlier this week that it has hired David Wildermouth, of Goldman Sachs Group, to become its new head of risk management, replacing former chief risk and compliance officer Lara Warner, who has resigned among several other key executives. after scandals.
In addition to the second-quarter results, the bank also published the results of its internal report on the Archigos debacle, prepared by US law firms Paul, Weiss, Rifkind and Wharton & Garrison LLP.
The staff at the Key Services Unit who “systematically ignored” the repeated red flags, despite saying there was no crime, he wrote, had been mistaken. The Swiss bank said it had fired 9 executives and recovered about $70 million in salaries, including reimbursed bonuses, as it sanctioned 23 people for their role in the scandal.
At the investment bank — hit by the Archigos crash — fixed-income trading is down 33% from a year earlier, although better than the Wall Street average, as banks face moderation in market volatility that has helped boost incomes since the pandemic began.
Deal advisory revenue fell by a third as the bank saw a mass exodus of more than 40 major deal-making bankers in a brain drain that could cost Credit Suisse roles in upcoming major deals, affecting its market share and billions in fees.
However, the bank noted that it has a strong balance of M&A deals and capital markets.
The bank reported net income of 253 million Swiss francs ($278 million), versus forecasts for a profit of 380 million Swiss francs ($418 million).
Net revenue amounted to 5.1 billion francs ($5.61 billion), compared to 5.36 billion francs.
The investment bank’s loss before tax amounted to 86 million francs (95 million dollars), compared to 163.8 million estimated losses, equivalent to 180 million dollars.