Credit Suisse Group announces fourth quarter and full year 2021 financial results

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Press Release

Credit Suisse Group announces fourth quarter and full year 2021 financial results

Ad hoc announcement pursuant to article 53 LR

Zurich
10.02.2022

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Credit Suisse reports pre-tax loss of CHF 522 mn in FY21, impacted by the Archegos matter, goodwill impairment and litigation provisions. On an underlying basis*, the bank posts pre-tax income of CHF 6.6 bn

Highlights for the fourth quarter of 2021

Net revenues were down 12% year on year, impacted by a reduced risk appetite across the Group in 2021, a negative impact on our franchise momentum and a return to a more normal trading environment after the exceptional conditions that prevailed for most of 2020 and 2021. This was most evident in the Investment Bank, largely due to our exit¹ of Prime Services and the strong comparable performance in 4Q20, but our Wealth Management-related businesses also saw a reduction in transaction-based revenues. The pre-tax loss of CHF 1.6 bn compared to pre-tax loss of CHF 88 mn in 4Q20, included a goodwill impairment of CHF 1.6 bn relating to DLJ and major litigation provisions of CHF 436 mn, partly offset by real estate gains of CHF 224 mn.

Reported pre-tax loss of CHF 1.6 bn for 4Q21, compared to a reported pre-tax loss of CHF 88 mn in 4Q20, predominantly driven by the previously announced goodwill impairment of CHF 1.6 bn taken in the quarter mainly relating to the acquisition of DLJ that was completed in 2000. We took major litigation provisions of CHF 436 mn in 4Q21, part of our progress towards addressing legacy issue.
On an adjusted basis, excluding significant items and Archegos*, 4Q21 pre-tax income of CHF 328 mn, down 62% year on year
On an adjusted basis, excluding significant items and Archegos*, net revenues were down 18% year on year, impacted by the cumulative effect of our reduced risk appetite during the year, more normal trading conditions and client deleveraging
NNA of CHF 1.6 bn compared to CHF 8.4 bn in 4Q20 across the Group, driven by NNA in AM of CHF 4.7 bn and in IWM of CHF 2.7 bn partly offset by net asset outflows in APAC of USD 3.2 bn (CHF 2.9 bn), which includes client deleveraging and de-risking measures we have taken, and in SUB of CHF 1.7 bn
Strong capital base, with CET1 ratio at 14.4% as of the end of 4Q21, stable compared to the end of 3Q21 and improved Tier 1 leverage ratio at 6.2% as well as CET1 leverage ratio at 4.4%; capital and leverage ratios benefitting from reductions of RWA and leverage exposure
Continued progress on remediation work on the Supply Chain Finance Funds (SCFF) matter. Returning cash to investors remains a priority; total cash paid out and current cash and cash equivalents of approximately USD 7.2 bn as of December 31, 2021

Highlights for the full year 2021

Stable net revenues with increased net revenues in the Wealth Management-related businesses, partially offset by a net revenue decrease in the Investment Bank, due to the loss related to Archegos and the cumulative impact of our reduced risk appetite in 2021 as well as our exit² of Prime Services. We had a pre-tax loss of CHF 522 mn compared to pre-tax income of CHF 3.5 bn in FY20 due to the impact of the Archegos matter, the cumulative impact of our more conservative risk approach in 2021 and a goodwill impairment of CHF 1.6 bn, taken in 4Q21; additionally, the bank took major litigation provisions of CHF 1.1 bn in FY21.

Net loss attributable to shareholders of CHF 1.6 bn, compared to net income attributable to shareholders of CHF 2.7 bn in FY20
Reported pre-tax loss of CHF 522 mn, down significantly year on year, compared to pre-tax income of CHF 3.5 bn in FY20; FY21 included gains made on our equity investment in Allfunds Group of CHF 602 mn as well as gains on real estate sales of CHF 232 mn. Results in FY21 were affected by the impact of CHF 4.8 bn relating to Archegos, CHF 1.6 bn in the form of a goodwill impairment, CHF 1.1 bn relating to major litigation provisions, a CHF 113 mn impairment related to the valuation of our non-controlling interest in York Capital Management and CHF 103 mn of restructuring costs
On an adjusted basis, excluding significant items and Archegos*, FY21 pre-tax income of CHF 6.6 bn, up 51% year on year
On an adjusted basis, excluding significant items and Archegos*, net revenues of CHF 22.5 bn, up 2% year on year, driven by higher net revenues across AM, IB and SUB, partly offset by lower net revenues in IWM
Adjusted operating expenses, excluding significant items and Archegos*, of CHF 16.1 bn, down 4%, reflecting underlying cost discipline and resulting from lower variable compensation costs, partially offset by increased professional services fees and investments in strategic initiatives, including hiring of relationship managers in APAC and hiring in risk and controls. Reported operating expenses of CHF 19.0 bn, up 7% year on year, mainly driven by the goodwill impairment taken in 4Q21 in IB and APAC, partially offset by decreased compensation and benefits
Group AuM of over CHF 1.6 trn as of December 31, 2021, up approximately 7% year on year; NNA of CHF 30.9 bn with NNA in AM, IWM and SUB offsetting net asset outflows in APAC
Wealth Management AuM of CHF 827 bn, up from CHF 795.3 bn as of December 31, 2020, with NNA of CHF 11.3 bn, supporting recurring commissions and fees’ growth of 9% year on year

* Refers to results excluding certain items included in our reported results. These results are non-GAAP financial measures. For a reconciliation to the most directly comparable US GAAP measures, see the Appendix of this Media Release.

¹ With the exception of Index Access and APAC Delta One
² With the exception of Index Access and APAC Delta One

Read the full Press Release (PDF)

Important information

This document contains select information from the full 4Q21 Earnings Release and 4Q21 Results Presentation slides that Credit Suisse believes is of particular interest to media professionals. The complete 4Q21 Earnings Release and 4Q21 Results Presentation slides, which have been distributed simultaneously, contain more comprehensive information about our results and operations for the reporting quarter, as well as important information about our reporting methodology and some of the terms used in these documents. The complete 4Q21 Earnings Release and 4Q21 Results Presentation slides are not incorporated by reference into this document.

Credit Suisse has not finalized its 2021 Annual Report and Credit Suisse’s independent registered public accounting firm has not completed its audit of the consolidated financial statements for the period. Accordingly, the financial information contained in this document is subject to completion of year-end procedures, which may result in changes to that information.

This document contains certain unaudited interim financial information for the first quarter of 2022. This information has been derived from management accounts, is preliminary in nature, does not reflect the complete results of the first quarter of 2022 and is subject to change, including as a result of any normal quarterly adjustments in relation to the financial statements for the first quarter of 2022. This information has not been subject to any review by our independent registered public accounting firm. There can be no assurance that the final results for these periods will not differ from these preliminary results, and any such differences could be material. Quarterly financial results for the first quarter of 2022 will be included in our 1Q22 Financial Report. These interim results of operations are not necessarily indicative of the results to be achieved for the remainder of the full first quarter of 2022.

We may not achieve all of the expected benefits of our strategic initiatives. Factors beyond our control, including but not limited to the market and economic conditions (including macroeconomic and other challenges and uncertainties, for example, resulting from the COVID-19 pandemic), changes in laws, rules or regulations and other challenges discussed in our public filings, could limit our ability to achieve some or all of the expected benefits of these initiatives.

In particular, the terms “Estimate”, “Illustrative”, “Ambition”, “Objective”, “Outlook”, “Goal”, “Commitment” and “Aspiration” are not intended to be viewed as targets or projections, nor are they considered to be Key Performance Indicators. All such estimates, illustrations, ambitions, objectives, outlooks, goals, commitments and aspirations are subject to a large number of inherent risks, assumptions and uncertainties, many of which are completely outside of our control. These risks, assumptions and uncertainties include, but are not limited to, general market conditions, market volatility, increased inflation, interest rate volatility and levels, global and regional economic conditions, challenges and uncertainties resulting from the COVID-19 pandemic, political uncertainty, changes in tax policies, regulatory changes, changes in levels of client activity as a result of any of the foregoing and other factors. Accordingly, this information should not be relied on for any purpose. We do not intend to update these estimates, illustrations, ambitions, objectives, outlooks, goals, commitments or aspirations.

In preparing this document, management has made estimates and assumptions that affect the numbers presented. Actual results may differ. Annualized numbers do not take into account variations in operating results, seasonality and other factors and may not be indicative of actual, full-year results. Figures throughout this document may also be subject to rounding adjustments. All opinions and views constitute judgments as of the date of writing without regard to the date on which the reader may receive or access the information. This information is subject to change at any time without notice and we do not intend to update this information.

Return on tangible equity, a non-GAAP financial measure, is calculated as annualized net income attributable to shareholders divided by average tangible shareholders’ equity. Tangible shareholders’ equity, a non-GAAP financial measure, is calculated by deducting goodwill and other intangible assets from total shareholders’ equity as presented in our balance sheet. Management believes that return on tangible equity is meaningful as it is a measure used and relied upon by industry analysts and investors to assess valuations and capital adequacy. For end-4Q21, tangible shareholders’ equity excluded goodwill of CHF 2,917 million and other intangible assets of CHF 276 million from total shareholders’ equity of CHF 44,032 million as presented in our balance sheet. For end-3Q21, tangible shareholders’ equity excluded goodwill of CHF 4,615 million and other intangible assets of CHF 234 million from total shareholders’ equity of CHF 44,498 million as presented in our balance sheet. For end-4Q20, tangible shareholders’ equity excluded goodwill of CHF 4,426 million and other intangible assets of CHF 237 million from total shareholders’ equity of CHF 42,677 million as presented in our balance sheet.

Beginning in 3Q21, the return on regulatory capital calculation has been updated to closer align with the actual capital and leverage ratio levels under which Credit Suisse operates, rather than the previously used minimum requirements set by regulators. Regulatory capital is calculated as the average of 13.5% of RWA and 4.25% of leverage exposure and return on regulatory capital, a non-GAAP financial measure, is calculated using income/(loss) after tax and assumes a tax rate of 30% for periods prior to 2020 and 25% from 2020 onward. Prior periods have been restated. For periods in 2020, for purposes of calculating Group return on regulatory capital, leverage exposure excludes cash held at central banks, after adjusting for the dividend paid in 2020. For the Investment Bank division, return on regulatory capital is based on US dollar denominated numbers. Return on regulatory capital excluding certain items included in our reported results is calculated using results excluding such items, applying the same methodology.

Credit Suisse is subject to the Basel framework, as implemented in Switzerland, as well as Swiss legislation and regulations for systemically important banks, which include capital, liquidity, leverage and large exposure requirements and rules for emergency plans designed to maintain systemically relevant functions in the event of threatened insolvency. Credit Suisse has adopted the Bank for International Settlements (BIS) leverage ratio framework, as issued by the Basel Committee on Banking Supervision (BCBS) and implemented in Switzerland by the Swiss Financial Market Supervisory Authority FINMA (FINMA).

Unless otherwise noted, all CET1 ratio, Tier-1 leverage ratio, risk-weighted assets and leverage exposure figures in this document are as of the end of the respective period.

Unless otherwise noted, leverage exposure is based on the BIS leverage ratio framework and consists of period-end balance sheet assets and prescribed regulatory adjustments. The tier 1 leverage ratio and CET1 leverage ratio are calculated as BIS tier 1 capital and CET1 capital, respectively, divided by period end leverage exposure. Unless otherwise noted, for periods in 2020, leverage exposure excludes cash held at central banks, after adjusting for the dividend paid in 2020.

Client business volume includes assets under management, custody assets (including assets under custody and commercial assets) and net loans.

References to Wealth Management mean SUB PC, IWM and APAC or their combined results. References to Wealth Management-related mean SUB, IWM, APAC and AM or their combined results.

Investors and others should note that we announce important company information (including quarterly earnings releases and financial reports as well as our annual sustainability report) to the investing public using press releases, SEC and Swiss ad hoc filings, our website and public conference calls and webcasts. We also routinely use our Twitter account @creditsuisse (https://twitter.com/creditsuisse), our LinkedIn account (https://www.linkedin.com/company/credit-suisse/), our Instagram accounts (https://www.instagram.com/creditsuisse_careers/ and https://www.instagram.com/creditsuisse_ch/), our Facebook account (https://www.facebook.com/creditsuisse/) and other social media channels as additional means to disclose public information, including to excerpt key messages from our public disclosures. We may share or retweet such messages through certain of our regional accounts, including through Twitter at @csschweiz (https://twitter.com/csschweiz) and @csapac (https://twitter.com/csapac). Investors and others should take care to consider such abbreviated messages in the context of the disclosures from which they are excerpted. The information we post on these social media accounts is not a part of this document.

Information referenced in this document, whether via website links or otherwise, is not incorporated into this document.

Certain material in this document has been prepared by Credit Suisse on the basis of publicly available information, internally developed data and other third-party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third-party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

In various tables, use of “–” indicates not meaningful or not applicable.

The English language version of this document is the controlling version.

Cautionary statement regarding forward-looking information

This document contains statements that constitute forward-looking state- ments. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements. Such forward- looking statements may include, without limitation, statements relating to the following:

our plans, targets or goals;
our future economic performance or prospects;
the potential effect on our future performance of certain contin- gencies; and
assumptions underlying any such statements.

Words such as “believes,” “anticipates,” “expects,” “intends” and “plans” and similar expressions are intended to identify forward-looking state- ments but are not the exclusive means of identifying such statements. We do not intend to update these forward-looking statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predic- tions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, targets, goals, expectations, estimates and intentions expressed in such forward-looking statements and that the ongoing COVID-19 pandemic creates significantly greater uncertainty about forward-looking statements in addition to the factors that generally affect our business. These factors include:

the ability to maintain sufficient liquidity and access capital markets;
market volatility, increases in inflation and interest rate fluctuations or developments affecting interest rate levels;
the ongoing significant negative consequences of the Archegos and SCFF matters and our ability to successfully resolve these matters;
our ability to improve our risk management procedures and policies and hedging strategies;
the strength of the global economy in general and the strength of the economies of the countries in which we conduct our opera- tions, in particular the risk of negative impacts of COVID-19 on the global economy and financial markets and the risk of continued slow economic recovery or downturn in the EU, the US or other developed countries or in emerging markets in 2022 and beyond;
the emergence of widespread health emergencies, infectious diseases or pandemics, such as COVID-19, and the actions that may be taken by governmental authorities to contain the outbreak or to counter its impact;
potential risks and uncertainties relating to the severity of impacts from COVID-19 and the duration of the pandemic, including potential material adverse effects on our business, financial condition and results of operations;
the direct and indirect impacts of deterioration or slow recovery in residential and commercial real estate markets;
adverse rating actions by credit rating agencies in respect of us, sovereign issuers, structured credit products or other credit-related exposures;
the ability to achieve our strategic goals, including those related to our targets, ambitions and financial goals;
the ability of counterparties to meet their obligations to us and the adequacy of our allowance for credit losses;
the effects of, and changes in, fiscal, monetary, exchange rate, trade and tax policies;
the effects of currency fluctuations, including the related impact on our business, financial condition and results of operations due to moves in foreign exchange rates;
political, social and environmental developments, including war, civil unrest or terrorist activity and climate change;
the ability to appropriately address social, environmental and sustain- ability concerns that may arise from our business activities;
the effects of, and the uncertainty arising from, the UK’s withdrawal from the EU;
the possibility of foreign exchange controls, expropriation, national- ization or confiscation of assets in countries in which we conduct our operations;
operational factors such as systems failure, human error, or the failure to implement procedures properly;
the risk of cyber attacks, information or security breaches or technology failures on our reputation, business or operations, the risk of which is increased while large portions of our employees work remotely;
the adverse resolution of litigation, regulatory proceedings and other contingencies;
actions taken by regulators with respect to our business and practices and possible resulting changes to our business organization, practices and policies in countries in which we conduct our operations;
the effects of changes in laws, regulations or accounting or tax standards, policies or practices in countries in which we conduct our operations;
the discontinuation of LIBOR and other interbank offered rates and the transition to alternative reference rates;
the potential effects of changes in our legal entity structure;
competition or changes in our competitive position in geographic and business areas in which we conduct our operations;
the ability to retain and recruit qualified personnel;
the ability to protect our reputation and promote our brand;
the ability to increase market share and control expenses;
technological changes instituted by us, our counterparties or competitors;
the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users;
acquisitions, including the ability to integrate acquired businesses successfully, and divestitures, including the ability to sell non-core assets; and
other unforeseen or unexpected events and our success at managing these and the risks involved in the foregoing.

We caution you that the foregoing list of important factors is not exclusive. When evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, including the information set forth in “Risk factors” in I – Infor- mation on the company in our Annual Report 2020 and in “Risk factor” in I – Credit Suisse results – Credit Suisse in our 1Q21 Financial Report.

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