Credit Suisse slumps after flagging $1.6 billion loss; capital raise approved

Credit Suisse (SIX:CSGN) stock slumped again on Wednesday after the fallen Swiss banking giant said it expects to lose around $1.6 billion in the current quarter due to an exodus of wealthy clients.

The world’s high net worth individuals, have pulled 10% of all the assets under management at the bank’s key wealth management division since the start of October, something that will cause a sharp drop in fees at the unit around which Chief Executive Ulrich Koerner hopes to rebuild the bank.

The bank said outflows had slowed “substantially” from the first two weeks of October but “have not yet reversed.”

Its domestic division had also experienced a moderate withdrawal of around 1% of net assets, but that pales in comparison to the far more troubling developments in Wealth Management, which had echoes of the 2008 financial crisis when investors feared for the safety of their assets.

The bank noted that it had been forced to dip into its liquidity reserves, briefly taking it below certain minimum thresholds demanded by its regulators. However, it stressed that its liquidity coverage ratio and net stable funding ratio – the two main yardsticks introduced by global regulators after 2008 to stop a repeat of Lehman Brothers’ collapse – were maintained at all times.

Credit Suisse also repeated its guidance for its core tier 1 capital ratio, which measures its ability to absorb any operational losses. That followed the overwhelming approval of a CHF 4B (CHF 1 = $1.0496) capital increase that was announced in October.

By 06:05 ET (11:05 GMT), Credit Suisse stock was down 4.8% in Zurich at a seven-week low.