By Ed Frankl
Shares in Credit Suisse Group AG fell Wednesday after it said it would likely make a loss in its second quarter, as it faces heightened market volatility and a weakened investment-banking performance while it presses on with a wide-ranging restructuring.
At 0750 GMT, shares were down 6.9% to CHF6.25.
The Swiss lender’s previous two quarters were unprofitable, and it said it was challenged by more volatile markets, weak customer flows and continued debt reduction by clients, especially in the Asia-Pacific and China region, in the latest three-month period.
The investment bank’s performance was depressed in April and May, and the unit will likely post a quarterly loss, amid low levels of capital-market issuance and widening credit spreads, the Zurich-based company said.
The division is being trimmed down amid a decision to reduce risk and shift focus toward wealth management, with the bank saying this year will be one of transition for the company.
While weak performance in the investment bank wasn’t unexpected, struggling performance in other parts of the bank, especially wealth management, was more disappointing, analysts at RBC Capital Markets said in a research note.
It shows the challenges Credit Suisse is facing to improve its operating performance in the current market environment, they add.
Credit Suisse also said it plans to keep a common equity Tier 1 ratio–a measure of capital strength–of around 13.5% in the short term, compared with 13.8% in the first quarter of 2022. It targets a CET 1 ratio of more than 14% for 2024.
Legal costs to settle legacy scandals and a weakened financial performance as the bank executes a plan to dial down risk after the twin collapses of Greensill Capital and Archegos Capital Management–which resulted in a financial hit of several billions of dollars–have likely eaten away some of the bank’s capital.
Cristina Roca contributed to this article.
Write to Ed Frankl at edward.frankl@dowjones.com
