23 February 2023

Credit Suisse posts biggest full-year loss since 2008 banking crisis

In 2022, the bank recorded a net loss of CHF 7.3 billion (USD 7.9 billion) due to the rapid withdrawal of funds by clients, which led to a significant decline in revenue from the wealth management, asset management and investment segments.

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This is the second year in a row in the red, with the bank's losses widening from a net loss of 1.7 billion Swiss francs in 2021. Credit Suisse warned that profits would not recover this year and that the cost of a major restructuring was likely to result in a significant pre-tax loss this year. To return to profitability and restore investor confidence, the bank is undertaking a radical restructuring, including laying off 9,000 of its more than 52,000 employees. This comes after a series of scandals, including the collapse of US investment fund Archegos Capital and lender Greensill Capital.

Credit Suisse has loaned investment firm Archegos Capital Management more than $20 billion in 2021 to fund large leveraged stock purchases. When some of those positions backfired and Archegos was unable to pay the "margin call," it led to one of the most significant sudden drops in Wall Street history and a loss for Credit Suisse of $5.5 billion.

The collapse of Archegos Capital Management, together with the insolvency of another key Credit Suisse client, Greensill Capital, caused the bank's crisis. Credit Suisse was forced to suspend $10 billion in investments linked to Greensill, a British-Australian financial services company that went into receivership on fraud charges. Although the bank has collected US$7.3 billion, it warned that around US$2 billion would be difficult to recover. The effort to recover these funds is estimated to cost USD 291 million and is expected to involve protracted litigation and disputed insurance claims, which is likely to take up to five years.

Credit Suisse shares fell 4% to 2.66 Swiss francs during the trading session on 21 February this year, their lowest level since 1985.