Group AG warned it will make a loss in the first quarter from rising litigation costs and loan losses related to Russia.
The Swiss bank said litigation provisions will be around $740 million in the quarter because of developments in legal cases, which include a former client winning a roughly $555 million court award in Bermuda. It said results will be hit by around $212 million in negative revenues and loan-loss provisions stemming from Russia’s invasion of Ukraine, and that business activity in general was lower.
Wednesday’s update adds to the challenges to Credit Suisse’s planned turnaround after financial and reputational scandals. Two key clients, Archegos Capital Management and Greensill Capital, imploded within weeks of each other a year ago, costing Credit Suisse billions of dollars. A new chairman restructured and lowered risks, then left in January after just nine months, for violating Covid-19 restrictions.
After Archegos, Credit Suisse cut parts of its investment bank and has said it will invest more in its wealth-management business serving the global elite. Part of the first-quarter slowdown was from fewer companies raising debt and equity this year, it said. It will report earnings April 27.
The bank said the litigation provisions relate to matters from more than a decade ago. In March, a Bermuda court said it would have to pay a former billionaire client, Bidzina Ivanishvili, about $555 million for allowing a private banker to steal from him and mismanage his money until the fraud was discovered in 2015. Credit Suisse has denied the allegations and said it intends to pursue all available legal actions.
Credit Suisse also is fighting lawsuits in the U.S. over toxic securities it sold before the 2008 financial crisis, and a criminal case in Switzerland for allegedly helping a Bulgarian crime ring launder money more than a decade ago.
The cost of legal settlements has nibbled at Credit Suisse’s earnings and ability to generate capital. Swiss regulators also imposed additional capital charges over Archegos and Greensill. Litigation provisions were $1.65 billion at the end of 2021, and the bank estimated then that there could be up to another $1.6 billion in potential charges.
Credit Suisse raised $2 billion in fresh capital a year ago.
Investors in the bank are braced for additional charges from lawsuits over Greensill’s collapse. Credit Suisse ran $10 billion in investment funds with Greensill before the financing partner went bankrupt in March 2021. The bank has flagged around $2.3 billion in investments in the Credit Suisse-Greensill funds that could be challenging to collect.
Credit Suisse shares fell 1.5% Wednesday and are down 19% this year.
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Appeared in the April 21, 2022, print edition as ‘Credit Suisse Warns Of Loss From Russia And Legal Woes.’