Credit Suisse Group logo in Davos, Switzerland, Monday, Jan. 16, 2023.
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shares Swiss loan The bank fell 5% to an all-time low in early trading on Tuesday after announcing it had found “material weaknesses” in its financial reporting processes for 2022 and 2021.
Shares have suffered some losses since then, but were down more than 4% at 9:30 a.m. London time.
The troubled Swiss lender revealed the warning in its annual report, which was originally scheduled for last Thursday but was delayed by a late call from the US Securities and Exchange Commission (SEC).
The SEC’s discussion related to a “technical assessment of previously disclosed amendments to the consolidated statements of cash flows for the years ended December 31, 2020 and 2019, as well as related controls.”
In its annual report on Tuesday, Credit Suisse revealed that it had identified “certain material weaknesses in internal control over financial reporting” for 2021 and 2022.
These issues relate to “failure to establish and maintain an effective risk assessment process to identify and analyze the risk of material misstatement” and various deficiencies in internal control and communication.
Despite this, the bank said it was able to confirm that its financial statements for the years under review were “fairly presented in all material respects”. [its] consolidated financial position”.
Credit Suisse went on to say that its net asset outflows have eased but “have not yet recovered”. The bank confirmed its 2022 results on February 9, which showed a full-year net loss of 7.3 billion Swiss francs ($8 billion).
Liquidity risk
At the end of 2022, the bank announced that it was seeing “significantly higher cash deposit withdrawals, non-extensions of maturing term deposits, and net asset outflows at levels significantly higher than rates in the third quarter of 2022.”
Credit Suisse saw more than 110 billion Swiss francs clawed back from clients in the fourth quarter as a host of scandals, legacy risks and non-compliance continued to plague it.
“These outflows have stabilized to a much lower level, but have not yet recovered as of this reporting date. These flows have resulted in partial utilization of liquidity buffers at the Group and entity level, and we have fallen below certain regulatory requirements at the entity level.”
Credit Suisse acknowledged that these conditions “exacerbated and may further exacerbate” liquidity risks. A reduction in assets under management will result in lower net interest income and recurring fees and charges, which in turn will impact the bank’s capital position objectives.
“Failure to repair these leaks and recover our assets and deposits under management could have a material adverse effect on our results of operations and financial condition,” the report said.
Credit Suisse reiterated that it has taken “decisive action” on legacy issues as part of its ongoing wide-ranging strategic overhaul, which is expected to lead to further “significant” financial losses in 2023.
The bank’s board took home total fixed compensation of 32.2 million Swiss francs, collectively for the first time in more than 15 years, foreshadowing a bonus, the annual report confirmed.
