Credit Suisse reports net revenues of CHF 4.4 bn and pre-tax loss of CHF 428 mn along with a CET1 ratio of 13.8% in 1Q22
"The first quarter of 2022 has been marked by volatile market conditions and client risk aversion. These conditions, together with the impact from our reduction in risk appetite in 2021 as we took decisive actions to strengthen our overall risk and controls foundation, had an adverse impact on our net revenues. Our operating expenses were higher year on year, driven in particular by higher previously reported litigation expenses of CHF 703 mn for the quarter as we continued our proactive approach to resolving litigation matters. Against this backdrop, we reported a pre-tax loss for the quarter; however, on an adjusted* basis, we reported a pre-tax income of CHF 300 mn, including the adverse impact of CHF 206 mn of losses related to Russia’s invasion of Ukraine.
2022 is a transition year, and our clear focus remains on the disciplined execution of our new Group strategy as announced in November 2021: strengthening our core, simplifying our organization and investing for growth. We went live with our new structure in January; have reduced the allocated capital in the IB by USD 2.5 bn, 82% of our ambition of more than USD 3.0 bn; and have made significant progress on various other strategic priorities. I am confident that we are well positioned to build a stronger and client-centric bank that puts risk management at the core to deliver sustainable growth and value for investors, clients and colleagues."
Thomas Gottstein, Chief Executive Officer of Credit Suisse Group AG
Summary of 1Q22 performance
For our first quarter of 2022 we saw net revenues decrease by 42% year on year, driven by a decline in Investment Bank (IB) net revenues, down 51%, on a USD basis; a decline in Wealth Management (WM) net revenues, down 44%; as well as a decline in Asset Management (AM) net revenues, down 10%. These were only slightly offset by a revenue increase in Swiss Bank (SB) for the quarter, up 8% year on year. Reported net revenues included real estate gains of CHF 164 mn, offset by a loss of CHF 353 mn related to our equity investment in Allfunds Group and CHF 148 mn from Russia-related impacts. We had adjusted* net revenues of CHF 4.6 bn, down 38% year on year.
The economic environment and market conditions throughout the quarter placed challenges on a number of our business areas with changes in interest rate expectations, inflationary pressures as well as geopolitical tensions impacting wider market conditions and business activity.
We recorded a net release of provision for credit losses of CHF 110 mn for 1Q22, including a CHF 155 mn release related to an assessment of the future recoverability of receivables related to Archegos, which was partly offset by CHF 58 mn of provision for credit losses related to Russia’s invasion of Ukraine.
Reported operating expenses of CHF 5.0 bn were up 26% year on year primarily driven by litigation provisions of CHF 703 mn, of which major litigation provisions were CHF 653 mn, and increased cash accruals for compensation due to normalized deferral levels of CHF 214 mn. We had CHF 152 mn of select strategic investments such as the centralization of our procurement processes, investments in Group-wide infrastructure, as well as risk and compliance. Our adjusted* operating expenses for 1Q22 of CHF 4.2 bn were up 9%, primarily driven by the increased cash accruals for compensation due to normalized deferral levels.
We reported a pre-tax loss of CHF 428 mn compared to a pre-tax loss of CHF 757 mn in 1Q21. Our adjusted* pre-tax income for 1Q22 was CHF 300 mn, down 92% year on year, including Russia-related losses of CHF 206 mn, and compared to an exceptionally strong 1Q21, primarily reflecting reduced client activity and capital markets issuances in volatile market conditions, as well as reflecting the cumulative reduction in risk appetite throughout 2021, increased cash accruals for compensation due to normalized deferral levels and the impact of hedging volatility due to flattening yield curve on Treasury books.
We reported a net loss attributable to shareholders of CHF 273 mn, compared to net loss attributable to shareholders of CHF 252 mn in 1Q21.
We had Group NNA of CHF 7.9 bn in 1Q22, compared to CHF 28.4 bn in 1Q21. Our global wealth management NNA for 1Q22, which includes our Wealth Management (WM) division and Private Banking Switzerland, were CHF 4.6 bn; we recorded positive NNA across all regions in WM despite volatile markets. The contributions on a regional level from WM and Private Banking Switzerland were CHF 2.1 bn in Switzerland, CHF 0.6 bn in EMEA, CHF 1.8 bn in APAC and CHF 0.1 bn in Americas. Swiss Bank’s NNA of CHF 6.0 bn was largely driven by its institutional clients business.
We maintained a resilient capital base with our CET1 capital ratio at 13.8%, our CET1 leverage ratio at 4.3% and our Tier 1 leverage ratio at 6.1% at the end of 1Q22.