Business & Finance
Credit Suisse Suffered a Massive $68 Billion in Outflows During Q1 as its Financial Health Deteriorated
Credit Suisse, one of Switzerland’s largest banks, has suffered net asset outflows of $68 billion in Q1, according to a statement released on April 24. The bank added that outflows continued even after its state-engineered rescue by UBS, and while they had moderated, they had not yet reversed as of the statement’s release.
The bank also reported significant withdrawals of cash deposits and non-renewal of maturing time deposits, resulting in customer deposits declining by 67 billion Swiss francs in the first quarter. At the end of March, Credit Suisse‘s main wealth management unit oversaw assets valued at 502.5 billion francs, which represents a decline from the 707 billion francs it reported for the same period in the previous year.
The outflows were triggered by the collapse of U.S. lenders Silicon Valley Bank and Signature Bank, which led to clients rapidly pulling money out of Credit Suisse. Swiss authorities scrambled to put together a rescue package, which included UBS taking over Credit Suisse for 3 billion Swiss francs in stock and assuming up to 5 billion francs in losses, as well as 200 billion francs in state financial guarantees.
Credit Suisse said that at the end of the first quarter, it had 108 billion Swiss francs of net borrowings under these facilities after paying back 60 billion. It also said it had since paid back another 10 billion.
The bank also said it had mutually agreed to terminate the planned $175 million acquisition of Michael Klein‘s investment banking business, which it had intended to spin off together with its own investment banking arm.
The news of Credit Suisse’s Q1 outflows comes after a tumultuous year for the bank, which has been beset by a number of scandals and legal issues. Last year, the bank was fined $536 million by the US Department of Justice for violating economic sanctions, and it was also embroiled in the collapse of Greensill Capital, which resulted in significant losses for the bank.
The bank’s CEO, Thomas Gottstein, has been under pressure to turn the bank around and restore investor confidence. In a statement accompanying the Q1 results, Gottstein said that the bank was “taking action to address the issues that have impacted our results and reputation over the past year.”
Gottstein added that the bank was implementing a new strategy, which would focus on reducing risk, improving operational efficiency, and investing in its core businesses. The bank has already announced plans to cut costs by $2.1 billion over the next three years and has also scaled back its investment banking operations.
Despite the challenges, Gottstein said that he remained confident about the bank’s future. “We are committed to restoring Credit Suisse’s position as a leading global bank, delivering sustainable and profitable growth for our clients, employees, and shareholders,” he said.
However, investors will be watching closely to see if the bank can turn its fortunes around. Credit Suisse’s share price has fallen by around 50% over the past year, and the bank is facing a number of legal challenges, including lawsuits from investors over its handling of the Greensill collapse.