Shares of Credit Suisse plunged 18% on Thursday after it announced a significant strategic overhaul and reported a worse-than-expected quarterly loss. The embattled lender reported a third-quarter net loss of 4.034 billion Swiss francs ($4.09 billion), compared to analyst expectations for a loss of 567.93 million Swiss francs. Additionally, the figure was well below the 434 million Swiss franc profit reported for the same period last year. The bank noted that the loss reflected a 3.655 billion Swiss franc impairment relating to the “reassessment of deferred tax assets as a result of the comprehensive strategic review.” Due to investor pressure, the bank revealed a major overhaul of its business in order to address underperformance in its investment bank and litigation costs that have hurt earnings. Ulrich Koerner, the new CEO of Credit Suisse, told CNBC on Thursday that the company is in the process of transforming into a new company.
During its widely anticipated strategic shift, the bank pledged to “radically restructure” its investment bank in an effort to reduce its exposure to risk-weighted assets, which determine a bank’s capital requirements. It also aims to cut its cost base by 15%, or 2.5 billion Swiss francs, by 2025. The bank expects to incur restructuring charges of 2.9 billion Swiss francs by the end of 2024. The transformation plan will see Credit Suisse split off its investment bank into an independent business called CS First Boston, raise 4 billion Swiss francs in capital through the issuance of new shares and a rights offering, and establish a unit for releasing capital for non-strategic, lower-return businesses. Of the planned 4 billion Swiss franc capital raise, the bank revealed that 1.5 billion Swiss francs would come from the Saudi National Bank in exchange for a shareholding of up to 9.9%.
