Group AG warned it would lose about $1.6 billion in the fourth quarter after customers withdrew their investments and deposits over concerns about the bank’s financial health.
Switzerland’s No. 2 bank by assets said outflows were about 6% of its total assets of $1.47 trillion, or about $88.3 billion, between September 30 and November 11. removed $66.7 billion from the bank. Credit Suisse at the end of October he said a social media frenzy surrounding his health was causing big outings.
The rapid pace of withdrawals It meant the bank’s liquidity fell below some requirements at the local level, the bank said. It said it maintained its required group-level liquidity and funding ratios at all times. Banks must keep enough liquid assets on hand to meet expected cash outflows in a 30-day period, under post-financial crisis-era rules.
Credit Suisse shares fell 5% on Wednesday. If it holds, the decline would take the price below its lowest closing level on Sept. 29, according to FactSet. Shares are down almost 60% this year.
The cost of insuring the bank’s debt against default increased on Wednesday.
The warning comes at a precarious time for the bank, which weeks ago launched a radical review of its operations. Credit Suisse received shareholder approval Wednesday on a plan to raise more than $4 billion in new shares. It is in the process of selling a large group within its investment bank to free up capital, as part of its turnaround effort.
The new shares are sold to new and existing investors. The Saudi National Bank said that take a stake of up to 9.9% as a new shareholder. Some analysts worry that the new capital raising won’t be enough if the Credit Suisse revamp doesn’t go as planned. The bank’s capital needs depend on the sale and exit of certain businesses, and on the performance of its continuing businesses.
Chairman Axel Lehmann said shareholders showed their confidence in the bank by approving the share increase.
Shrinking client assets means Credit Suisse has less money to manage and earns less in fees. A broader slowdown in activity at its wealth management and investment banking division contributed to the warning of a pretax loss of about $1.6 billion for the quarter, he said.
In total, more than $100 billion has flown out of the bank since June, according to Credit Suisse documents. He said client balances have stabilized at his Swiss bank and outflows have slowed in wealth management, but have not reversed.
Wealth management, the business of managing the money of the wealthy, is Credit Suisse’s largest and most important business. The bank’s reform is aimed at reducing its reliance on Wall Street venture operations and doubling down on the ongoing fee-charging business of working with the world’s ultra-rich.
The large outflows indicate that some of those wealthy clients have grown wary of Credit Suisse’s woes despite its more than 160-year history. The bank was hit hard when a client, family office Archegos Capital Management, defaulted in March 2021, prompting a loss of more than $5 billion.
Uncertain markets have meant that clients do not transact as many between wealth managers. However, cross-town rival UBS Group AG reported around $35 billion in net new assets from free generation from wealth and asset management clients in the third quarter.
Concerns about the bank. came to a head in October when commenters on the social media platforms Twitter and Reddit questioned the bank’s health.
Credit Suisse warned last month that it would post a net loss in the fourth quarter, partly due to the costs of the overhaul. It posted back-to-back quarterly losses this year after beginning to restructure its operations late last year. In the fourth quarter of last year, it lost about $1.7 billion.
The bank said it is still targeting a capital ratio of at least 13% between 2023 and 2025 as it restructures.
Write to Margot Patrick at email@example.com
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