On Tuesday, Credit Suisse, the multinational financial institution based in Switzerland, finally released its annual reports and financial statements for 2022 after an unusually long delay. The annual report was released in the midst of a banking and financial crisis in the western world.
In the annual report, the bank acknowledged that it had identified significant weaknesses in its internal control over financial reporting as of December 31, 2021, which persisted through December 31, 2022.
The bank’s external auditor, PricewaterhouseCoopers, also noted in their report that they have an unfavorable view of the effectiveness of the Bank’s internal control over financial reporting, and this was disclosed in the annual report..
Credit Suisse’s release of its annual report and statement on material weaknesses coincides with a period of banking instability in the United States, where several banks are facing liquidity issues and closures.
Additionally, Credit Suisse’s shares are experiencing a sharp decline on the stock markets due to the bank’s past involvement in numerous scandals, as well as the ongoing loss of customer deposits and clientele.
This article summarizes the financial performance of Credit Suisse Bank based on the consolidated financial statements that were made public on March 14, 2023.
Net revenue and income
Based on the consolidated statements, Credit Suisse Bank recorded a net loss of 7.3 billion Swiss francs in 2022, marking the second consecutive year of the bank incurring a net loss. In 2021, the bank had reported a net loss of 1.02 Swiss francs.
The bank’s net revenue also declined from 23 billion francs to 15.2 billion francs. While there was an increase in income from interest and dividends, the rise in interest expenses, coupled with a sharp drop in revenue from trading activities, had a significant impact on the bank’s net revenue.
Credit Suisse’s substantial net loss in 2022 was also attributed to increased general expenditure of 7.6 billion francs and restructuring expenses of 467 million. These factors further contributed to the bank’s significant financial setback during the year.
Decrease in fees and commissions
As business decreased there was a sharp decline in its revenue from commissions and fees by almost 32%. The bank’s underwriting business revenue also plummeted to 560 million francs in 2022, marking a massive 78% drop compared to 2021.
Similarly, revenue from brokerage services also decreased from 3 billion francs to 2.2 billion francs.
Assets and Liabilities
Credit Suisse, one of the largest investment banks in the world, experienced a significant erosion in total assets. The total assets of the bank declined from 759 billion Swiss francs in 2021 to 530 billion Swiss francs.
This decline was mainly attributed to the decreasing value of trading assets, net loans, and cash and similar funds at banks and in hand.
During the fourth quarter of 2022, Credit Suisse witnessed a net outflow of assets at a very high level of 110 billion francs. Most of the net outflow of assets was visible in the wealth management division of the bank.
The fair value of trading assets also decreased from 111 billion francs in 2021 to 65 billion francs. Similarly, cash and other dues from banks went down by nearly 100 billion to 67 billion francs.
Moreover, the liabilities of the bank also came down during the last 12 months to 530 billion from 759 billion in 2021. This decrease was primarily driven by the decrease in customer deposits.
Deposits
Credit Suisse has been facing a major problem over the past two quarters due to a significant amount of deposit withdrawals. This is believed to be caused by the current macroeconomic conditions and the back-to-back lawsuits that the bank has faced regarding its alleged involvement in illegal businesses.
As a result, various customers have decided to stop doing business with Credit Suisse and started withdrawing their deposits.
From December 31, 2021, to December 31, 2022, customers withdrew deposits worth 252 billion francs, resulting in a 61% decrease in the total value of deposits.
This is a significant drop from the 412 billion francs in deposits that the bank held in 2021. At the end of 2022, Credit Suisse had 246 billion francs in deposits
Most of the erosion in deposits came from interest bearing demand deposits and time deposits.
Financial information of segments and other entities
Wealth management
Credit Suisse’s wealth management segment experienced a substantial decline in net revenue in 2022, with a decrease of 29% resulting in a revenue of 4.9 billion francs. This was a significant drop from the 7 billion francs earned in 2021.
Additionally, the segment incurred a loss of 631 million francs, which is in contrast to the 2.3 billion francs in income earned in 2021.
The total assets owned by the wealth management segment also declined by 25%, indicating a significant impact on the business
Investment Bank
The investment bank of Credit Suisse experienced a decline in net revenue, as it fell from 9.9 billion francs in 2021 to 4.6 billion francs in 2022. This drop in revenue is mainly due to the economic volatility and macroeconomic conditions that have affected the overall financial position of the bank.
In addition, the total assets of the investment bank also decreased by nearly 46%, indicating a significant impact on the business
Performance of Credit Suisse Group AG
Credit Suisse Group AG recorded a 34% decline in net revenue to 14.9 billion Swiss francs in 2022 compared to the previous year.
The group suffered a net loss of 7.2 billion francs. Additionally, assets under management decreased by 20% to 1.29 billion francs.