Credit Suisse Issues 'Concerning' Outlook Showing Loss Of Assets 'Far Above' Expectations

Zinger Key Points
  • Credit Suisse expects to report a "substantial loss" in the fourth quarter of up to approximately CHF1.5 billion ($1.59 billion).
  • "The loss of assets at the company that was ... far above what had been anticipated," David Faber says.
Credit Suisse Issues 'Concerning' Outlook Showing Loss Of Assets 'Far Above' Expectations

Shareholders of embattled Credit Suisse Group CS approved a proposal to issue new equity on Wednesday. The Swiss bank's turnaround plans don't appear to be good enough in the near term, however, as investors are fleeing the name after management unveiled a worse-than-expected outlook for the fourth quarter.

What To Know: Credit Suisse expects to report a "substantial loss" in the fourth quarter of up to approximately CHF1.5 billion ($1.59 billion), due to the rapid rollout of its previously announced strategic transformation plans.

"These decisive measures are expected to result in a radical restructuring of the Investment Bank, an accelerated cost transformation, and strengthened and reallocated capital, each of which are progressing at pace," Credit Suisse said.

In early October, Credit Suisse shares tanked on reports the lender could be battling liquidity issues.

The Swiss bank's credit default swaps, which provide investors with protection against financial risks and essentially measure how a company's financial health is perceived by the market, soared to record levels

Credit Suisse then announced plans to transform its investment bank into a capital-light, advisory-led banking business with an increased focus on the markets.

On Wednesday, Credit Suisse said it is executing on its strategic commitments to strengthen its balance sheet and reduce risk by engaging clients proactively and accessing markets. The bank said it recently issued approximately $5 billion through two bond sales. Credit Suisse shareholders also voted to approve capital increases during an extraordinary general meeting on Wednesday.

Related Link: Troubled Lender Credit Suisse Flags Massive Loss For Q4 As It Speeds Up Turnaround Plans

Why It Matters: Credit Suisse said it began experiencing deposit and net asset outflows in early October at levels that substantially exceeded the rates incurred in the third quarter.

"At the Group level, as of November 11, 2022, net asset outflows were approximately 6% of assets under management at the end of the third quarter," Credit Suisse said.

Lower deposits and assets under management are expected to lead to reduced net interest income and a loss for its Wealth Management business in the fourth quarter.

Credit Suisse previously noted that it expected a loss in the fourth quarter, but it didn't slap numbers on its expectations until this week.

David Faber, co-host of CNBC's "Squawk On The Street," called the firm's updated outlook "concerning" Wednesday morning on the show. 

"In part because the loss of assets at the company that was, I am told by people close to the situation, far above what had been anticipated," Faber said.

CS Price Action: Credit Suisse has a 52-week high of $10.56 and a 52-week low of $3.70.

The stock was down 6.11% at $3.84 Wednesday afternoon, according to Benzinga Pro.

Photo: Kecko from Flickr.

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