The banking sector has gone through a mixed earnings season so far. Despite optimistic hopes, many of America’s top financial stocks reported worse-than-expected profits this quarter, with some even reporting surprise losses. That’s more or less what happened on Wednesday when Credit Suisse (NYSE: CS) reported it’s own Q4 results. The company ended up losing money during its last quarter for a multitude of reasons, including legal charges.
The bank saw a net loss of $2.2 billion, much worse than last year’s $398 million net loss. On top of that, net revenues tumbled by 26% compared to last year’s figures as well. Assets under management declined by 7% also, a worrying sign for any big bank. However, the news wasn’t a surprise to shareholders. Management already warned earlier that it expected a take a hit to its profits due to legal charges and other issues the bank faced earlier in 2021.
Credit Suisse is still recovering after two of its key clients, Greensill Capital and Archegos Capital management, collapsed in March of last year. Like most big investment banks, Credit Suisse also has a wealth-management business that caters to the global rich.
Following the sudden wipeouts of clients, Credit Suisse promised to change how it advised clients to make sure something like this never happened again. This included dialing back on risky-investment recommendations.
“During the last three quarters of the year, we ran the bank with a constrained risk appetite across all divisions as we took decisive actions to strengthen our overall risk and controls foundation and continued our remediation efforts,” said Credit Suisse CEO Thomas Gottstein in a statement.
To make a rough year even worse, Credit Suisse took a $1.8 billion goodwill impairment charge for another write-down of a U.S. brokerage it bought over two decades ago for around $11.5 billion. Before that, Credit Suisse had already taken a $4.0 billion charge in 2016 as well.
Even once the year wrapped up, Credit Suisse continued to find itself attracting negative attention. In early 2022, Credit Suisse saw the abrupt departure of its chairman, who was brought in just nine months earlier to help change the company’s culture. Additionally, Credit Suisse was tried in a criminal court as well, charged with allowing a Bulgarian drug gang to launder millions of euros.
All of this put together has had a terrible effect on the banks stock price. Shares are down over 4.3% in after-hours trading following the earnings miss. Compared to 12 months ago, Credit Suisse is down over 27.6%, making it one of the worst-performing major bank stocks out there.
Other big bank stocks saw their profits fall as well, although not to the same extent that Credit Suisse did. Morgan Stanley, Bank of America, and JP Morgan all had financial hiccups in their Q4 results, although they weren’t as bad as Credit Suisse’s results either.
Credit Suisse Company Profile
Credit Suisse runs a global wealth management business, a global investment bank and is one of the two dominant Swiss retail and commercial banks. Geographically its business is tilted toward Europe and the Asia-Pacific. – Warrior Trading News
