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A sign above the entrance to a Credit Suisse Group AG bank branch in Geneva, Switzerland. (Photo: Bloomberg

Portfolio > Asset Managers

Credit Suisse Posts $4B Loss Ahead of Crucial Revamp

By Myriam Balezou and Marion Halftermeyer

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What You Need to Know

  • The investment bank will be radically restructured over the next three years after the unit posted a pretax loss of 666 million francs.
  • The restructuring will probably result in another loss in the fourth quarter, the company said.
  • The wealth management unit posted a pretax profit of 21 million francs in the quarter, a drop of 95% from a year earlier.

Credit Suisse Group AG reported its fourth straight loss as its investment bank continued to struggle, wealthy clients fled and the lender booked a charge related to a critical overhaul that’s been in the making for months.

The net loss of 4.03 billion Swiss francs ($4.08 billion) in the three months through September included a 3.7 billion-franc impairment of deferred tax assets that is related to the revamp, Credit Suisse said Thursday.

The investment bank will be radically restructured over the next three years, Credit Suisse said, after the unit posted a pretax loss of 666 million francs. Clients across the bank pulled 12.9 billion francs amid uncertainty linked to the bank’s revamp.

Credit Suisse warned that it will probably record another loss in the fourth quarter because of costs related to its transformation. The firm announced a raft of other changes, including thousands of job cuts, the sale of its securitized products group and a capital increase to the tune of 4 billion francs, as Chief Executive Officer Ulrich Koerner and Chairman Axel Lehmann seek to put an end to years of scandals and management missteps.

Shares of Credit Suisse slumped 19% in Zurich trading, as investors digested the impact of the capital increase.

Speculation about how the bank plans to address the loss of investor confidence already prompted some clients to cut business in recent weeks. The bank said it “experienced a significant level of deposit and assets under management outflows” in the first two weeks of October, following negative press and social media coverage.

“While these outflows have stabilized since this period, they have not yet reversed,” the bank said in its statement.

The wealth management unit posted a pretax profit of 21 million francs in the quarter, a drop of 95% from a year earlier. Profit was reduced by an impairment of IT-related assets, mark-to-market losses in its financing group in Asia, and litigation provisions.

In the investment bank, fixed-income trading fell 28% in a quarter where peers recorded big gains, and equities trading slumped by more than half. Revenue from arranging stock and bond sales dropped by 89%, reflecting in part a $120 million writedown on leveraged finance positions that also plagued some rivals in the quarter. The business of advising on mergers saw 36% lower revenue.

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