Reports

Credit Suisse Books Expected Archegos Loss; "Strong" Underlying Results

Tom Burroughes, Group Editor, 23 April 2021

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The Asia-Pacific division reported adjusted pre-tax income of $531 million. There were SFr5.4 billion of net new assets in Asia. At the overall group level, the Swiss bank, as expected, logged a significant loss from the blow-up of the Archegos hedge fund in the US to which it was exposed as a prime broker.

Credit Suisse booked an expected net loss in the first three months of 2021 – SFr252 million ($275.5 million) – as a result of the heavy blow sustained by the Archegos hedge fund blow-up to which it was exposed – taking the shine off what would otherwise have been a strong quarter. On a pre-tax basis, the Q1 loss was SFr757 million.

The Zurich-listed bank said that provision for credit losses surged to almost SFr4.4 billion in Q1, standing at SFr4.394 billion, up from SFr568 billion a year ago – or up by 80 per cent. Return on tangible equity attributable to shareholders slipped into to the red, to -2.6 per cent, against 13.1 per cent a year before.

To bolster its capital, the bank announced that it will offer two series of mandatory convertible notes (MCNs), Series A MCNs and Series B MCNs, which will be convertible into 100 million shares and 103 million shares of Credit Suisse Group, respectively. The offering is expected to close on or around 12 May. Credit Suisse has suspended its share buyback programme.

When the Archegos impact is excluded, pre-tax income surged by 280 per cent year-on-year to SFr3.596 billion, on a 35 per cent rise in net revenues to SFr7.430 billion. 

Wealth management net revenues rose by 3 per cent to SFr3.882 billion, while investment banking net revenues (measured in dollars) rose by 80 per cent, to $3.888 billion.

“Our results for the first quarter of 2021 have been significantly impacted by a SFr4.4 billion charge related to a US-based hedge fund. The loss we report this quarter, because of this matter, is unacceptable,” Thomas Gottstein, chief executive, said. 

Asia-Pacific
Within Asia, Credit Suisse said its franchise revenues rose by 39 per cent year-on-year to $1.6 billion, now accounting for 19 per cent of group revenues. 

Client business volumes – assets under management - climbed to a record $419 billion, from $402 billion at year-end 2020, mainly due to new inflows from clients.

The Asia-Pacific division reported adjusted pre-tax income of $531 million. There were SFr5.4 billion of net new assets in Asia.
 

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