Credit Suisse reports loss in second quarter results, CEO resigns

On Wednesday, Credit Suisse posted a huge second-quarter loss as its earnings were severely impacted by the results of its investment bank and growing litigation provisions. The bank also announced the resignation of its CEO Thomas Gottstein.

The Swiss bank reported a net loss of 1.593 billion Swiss francs (approx. $1.66 billion), significantly less than the 398.16 million Swiss franc loss that experts had projected.

Credit Suisse acknowledged that its posture was not tailored towards profiting from the turbulent market conditions and that strong areas including capital markets, were seriously affected by lower capital markets issuance operations and decreased customer engagement.

In a Wednesday statement, Gottstein said the just-reported quarter's results were "disappointing" and noted that a series of external variables, such as geopolitical, macroeconomic, and market challenges, "significantly affected" the results.

“Today marks a leadership change for Credit Suisse. It has been an absolute privilege and honor to serve Credit Suisse over these past 23 years. It has been my passion since day one to deliver best-in-class service to our clients,” Gottstein said.

Ulrich Koerner, the former CEO of the bank's asset management division, will succeed Gottstein, who assumed the position in early 2020 after the prior CEO Tidjane Thiam resigned following a scandal.

In May, Gottstein received the complete support of Credit Suisse Chairman Axel Lehmann, who also refuted rumors that the board had considered removing him. He described Gottstein as a terrific person who performed greatly in an interview with CNBC on Wednesday, but he also noted two significant developments since their discussion at the World Economic Forum in Davos.

Despite having a strong backlog of transactions, given the present market conditions, these transactions may be challenging to execute, Credit Suisse said in its report.

The bank said it anticipates the division to incur a greater loss this quarter given the sustained downturn in customer engagement that has characterized trading so far in 3Q22 and exacerbated seasonal losses.

Operating costs increased by 10% year over year and included 434 million Swiss francs in large litigation provisions for several legal disputes.

Following a net loss of 273 million Swiss francs in Q122 due to losses associated with Russia and ongoing legal expenses associated with the Archegos hedge fund scandal, the Swiss bank reported poor earnings on Wednesday.

 

Similarly, after suffering a 4.4 billion franc loss due to the failure of Archegos, Credit Suisse's net income in Q2 2021 fell by 78% to 253 million Swiss francs.

 

Early in June, Credit Suisse issued a warning that the second quarter would likely end in a loss, noting the worsening geopolitical environment, aggressive monetary policy regulation by central banks, and the phasing down of stimulus programs from the Covid-19 pandemic.