Credit Suisse shares sink 5% as ‘material weaknesses’ found in financial reporting

Credit Suisse shares sink 5% as ‘material weaknesses’ found in financial reporting

The Credit Suisse Group logo in Davos, Switzerland, on Monday, January 16, 2023.

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shares of Swiss credit Slumped 5% in early trade on Tuesday, hitting a new all-time low after the bank said it had identified “material weaknesses” in its financial reporting processes for 2022 and 2021.

Shares have since pared their losses slightly, but remained down more than 4% as of 9:30am London time.

The ailing Swiss lender released the observation in its annual report, originally scheduled for last Thursday but delayed by a late call from the US Securities and Exchange Commission (SEC).

The SEC call related to a “technical assessment of previously disclosed revisions to the consolidated statements of cash flows for the years ended December 31, 2020 and 2019, and related controls.”

In Tuesday’s annual report, Credit Suisse said it had identified “certain material weaknesses in our internal control over financial reporting” for 2021 and 2022.

These issues related to a “failure to develop and maintain an effective risk assessment process to identify and analyze the risk of material misstatement” and various deficiencies in internal controls and communications.

Despite this, the bank said it was able to confirm that its financial statements for the years in question are “fairly present in all material respects, [its] consolidated financial position.”

Credit Suisse went on to say that its net asset outflows have slowed but “haven’t reversed yet.” The bank confirmed its 2022 results announced on Feb. 9, which showed a full-year net loss of 7.3 billion Swiss francs ($8 billion).

liquidity risk

In late 2022, the bank announced that it had experienced “significantly higher cash withdrawals, non-renewals of maturing term deposits and net asset outflows at levels that significantly exceeded rates incurred in the third quarter of 2022.”

Credit Suisse recorded more than 110 billion Swiss francs in client withdrawals in the fourth quarter as it continued to be plagued by a series of scandals, legacy risks and compliance breaches.

“These outflows stabilized at much lower levels but had not reversed as of the date of this report. These outflows caused us to utilize partial liquidity buffers at the group and legal entity level and we remained subject to certain regulatory requirements at the legal entity level. “

Credit Suisse acknowledged that these circumstances “have exacerbated and may continue to exacerbate” liquidity risks. The reduction in assets under management is expected to result in lower net interest income and recurring commissions and fees, which in turn will impact the Bank’s capital position objectives.

“Failure to reverse these outflows and restore our assets under management and deposits could have a material adverse impact on our results of operations and financial condition,” the report said.

Credit Suisse reiterated that it has taken “decisive action” on legacy assets as part of its ongoing massive strategic overhaul, which is expected to result in another “significant” financial loss in 2023.

The bank’s board of directors collectively waived a bonus for the first time in over 15 years, the annual report confirms, taking home combined fixed compensation of 32.2 million Swiss francs.