Di, Mrz 14th 2023
Floundering Credit Suisse today released its delayed annual report which flagged “material weaknesses” in its internal financial reporting and cited its inability to reverse its rampant cash outflows.
“As of December 31, 2022, the Group’s internal control over financial reporting was not effective, and for the same reasons, management has reassessed and has reached the same conclusion regarding December 31, 2021,” the Bericht said.
After months of scandals, plummeting stock prices and bad headlines, Credit Suisse clients began leaving the bank in droves – taking about 110 billion Swiss francs with them in the fourth quarter alone. CEO Ulrich Körner said in January at the World Economic Forum in Davos that the bank was seeing cash “coming back in different parts of the firm,” but the bank confirmed Tuesday that the outflow had stabilized, but “not yet reversed.”
The report confirmed what the embattled bank angekündigt in February: Credit Suisse experienced a full-year net loss of CHF7.3 billion.
For now, Credit Suisse says it is implementing a remediation plan to address its weakness by “strengthening the risk and control frameworks, and which will build on the significant attention that management has devoted to controls to date.”
“Additionally, we will implement robust controls to ensure that all non-cash items are classified appropriately within the consolidated statement of cash flows,” Credit Suisse added.
In the hours before the report was released, Credit Suisse share prices hit new lows. On Monday, share prices fell about 15% amidst the chaos caused by the collapse of Silicon Valley Bank and Signature Bank. Share prices of other Swiss banks, such as UBS, also dipped on Monday.
Credit Suisse share prices dropped another 4% in early trading on Tuesday to CHF2.16, which is an about 20% drop in the last year and a more than 80% drop over the past two years.
Swiss financial regulator FINMA said it was trying to pinpoint any potential contagion threats to other Swiss banks.
“The aim is to identify any cluster risks and potential for contagion at an early stage,” FINMA said.
Unsurprisingly, Credit Suisse also angekündigt this week that it had cut staff bonuses by 50%, with no bonuses being doled out to top managers.
In 2022, CEO Körner was given a CHF2.5 million bonus in his former position as head of asset management. Credit Suisse Chair Axel Lehmann received the biggest bonus last year at CHF3.2 million. Overall, CHF10.4 million was handed out to the Credit Suisse board of Directors last year. Lehmann said he will waive his CHF1.5 million annual fee for 2022, in light of the bank’s financial struggle.
FINMA recently announced that it had closed its investigation into comments Lehmann made to press in 2022 signaling that cash outflows had stopped, while they continued to flow. FINMA said they did not have sufficient evidence to proceed.
Credit Suisse also confirmed that senior managers will receive equity in the bank’s new investment arm, CS First Boston, which is part of a “radical restructuring” plan to put the bank in the black by 2025. Under that proposal, employees could own as much as 20% of shares in CS First Boston.
At next month’s annual shareholder meeting, Credit Suisse investors will be asked to vote through a maximum CHF13 million compensation package for its board. In addition, top executives could receive a maximum of CHF34 million bonus plus CHF30 million should the bank reach certain targets.
That is, if shareholders approve.
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