Credit Suisse Swings to a Q4 Loss After Reserving $850 Million for a Legal Dispute in US

By Luigi Wewege Thursday, February 18, 2021

Credit Suisse, a Swiss investment business company, posted a Q4 net loss that still beat analysts’ expectations.

Credit Suisse building in Zurich, Switzerland.

High Provisions for Legal Disputes

The Swiss banking business reported a net loss of 353 million Swiss francs ($393.6 million) for Q4 2020, versus the consensus estimates of 558.5 million francs ($622.7 million), and an annual net income of 2.8 billion Swiss francs ($3.12 billion), higher than a net income of 2.7 billion Swiss francs ($3.01 billion).

“Despite a challenging environment for societies and economies in 2020, we saw a strong underlying performance across Wealth Management and Investment Banking, while addressing historic issues. The steady execution of the strategic initiatives we announced last July supports our growth agenda and allows for further investment in our businesses,” said Thomas Gottstein, CEO at the company

“Looking forward into 2021 and beyond, we aim to further accelerate growth in Wealth Management and deliver sustainable returns in Investment Banking,” he added.

Last month, Credit Suisse warned that it would be sustaining a bigger-than-expected loss in Q4 2020 after the bank reserved $850 million for a legal dispute over property debt in the US last week, the bank managed to settle the dispute with $600 million.

Gottstein emphasized that he was happy with the outcome and that this year is where the bank can expect growth. He said that the company is experiencing an “excellent start” to the new year with all five business divisions being “up.”

The company’s wealth management business reported a 24% drop in Q4 revenue year-over-year (YOY), while Global Investment Banking said its revenue climbed by 19% YOY.

The banking business said last month it would start buying between 1 billion ($1.12 billion) and 1.5 billion Swiss francs ($1.67 billion) of its own stock starting on January 12. The company previously reinstated the buyback program in October 2020.

In addition to that, the company said it will pay a dividend of 0.2926 Swiss francs ($0.33) per share. Despite Credit Suisse reporting a positive start to the year, the company is cautious about the full-year prospects.

“We would caution that the COVID-19 pandemic is not yet behind us and, notwithstanding the continued fiscal and monetary stimuli, the pace of recovery remains uncertain,” the business said in a statement.

Summary

Credit Suisse reported it swung to a loss in the Q4 as it had to reserve $850 million for a legal property dispute in the US.

About the Author


Headshot of Luigi Wewege

Luigi Wewege is the Senior Vice President and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an instructor at the FinTech School which provides online training courses on the latest technology and innovation developments within the financial services industry. Luigi is also the published author of "The Digital Banking Revolution."

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