Credit Suisse has announced its Q1 2023 financial results, highlighting a pre-tax income of CHF 12.8 billion ($14.1 billion) and a CET1 capital ratio of 20.3%. The quarter was marked by growing challenges, primarily stemming from the planned merger with UBS Group AG, which was revealed in March.

Credit Suisse Sees Significant Asset Outflows

The bank's performance during the quarter was significantly impacted by a CHF 15 billion write-down in Additional Tier 1 (AT1) capital notes, ordered by the Swiss Financial Market Supervisory Authority (FINMA) in light of the impending merger.

Nonetheless, the adjusted results reveal that the company's net revenue reached CHF 2.8 billion, representing a decline of 40% compared to the same period in 2022. Additionally, the final adjusted pre-tax loss amounted to CHF 1.3 billion, witnessing an increase of CHF 300 million compared to Q4 2022.

Credit Suisse's problems resulted in substantial asset and deposit outflows, with impacted assets under management (AuM) of CHF 1.3 billion. Deposit outflows represented 57% of the quarter's Wealth Management and Swiss Bank net asset outflows. It means that during the three-month period ending in March, it experienced a net outflow of assets worth more than CHF 61 billion.

The strongest outflow of assets was observed in Wealth Management, amounting to 9% of the AuM reported in the previous quarter. Adjusted revenues for the division decreased by 33% year-over-year, and its adjusted pre-tax loss was CHF 115 million.

Credit Suisse Cuts Employment and Abandons Acquisition of the Klein Group

Despite the turbulence surrounding the merger, "Credit Suisse is taking proactive measures to protect its client franchise, manage risks and facilitate operational stability," the company commented in the quarterly report. The bank is making headway on cost transformation programs and risk reduction initiatives following a review of its financial plans.

In the Special Purpose Group (SPG), the bank has successfully reduced asset equivalent exposures by approximately USD 48 billion since Q3 2022, amounting to more than 85% of the targeted reduction of USD 55 billion. This significant reduction has positively impacted SPG and its related financing businesses.

Additionally, the Non-Core Unit (NCU) has seen substantial reductions in Risk Weighted Assets (RWA) and leverage exposure, with a decrease of approximately USD 4 billion and USD 14 billion, respectively, since Q4 2022. These reductions demonstrate Credit Suisse's commitment to optimizing its balance sheet and minimizing risk.

In terms of cost actions, the bank has made notable progress on its cost transformation program, with adjusted operating expenses in Q1 2023 dropping by 6% year-over-year. This decrease is attributed to lower general and administrative expenses and a reduction in compensation and benefits. Furthermore, Credit Suisse has achieved a reduction of 9% in its workforce since Q3 2022, contributing to its cost-saving efforts.

Credit Suisse announced job cuts as early as January and continued with them in March. The process accelerated this month when news of the UBS takeover emerged. The bank has decided that a total of 36,000 jobs will need to be cut across both units.

Lastly, in light of the recently announced merger with UBS Group AG, Credit Suisse Group AG and M. Klein & Co LLC have mutually agreed to terminate the acquisition of The Klein Group, LLC (the investment banking business of M. Klein & Co. LLC). The decision to acquire Klein was announced in February when Credit Suisse reported CHF 7.3 billion annual loss.

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