Credit Suisse expects Q1 loss on Russia, legal provisions

Bloomberg

Credit Suisse Group AG said it expects to post a first-quarter loss due to a $210 million hit to revenues from Russia’s invasion of Ukraine, and a previously-indicated increase in legal provisions.
The Zurich-based lender said that its results, due next week, would be negatively affected by its exposure to the war both with respect to counterparty and credit-risks. It also said it will see total legal provisions increase by 600 million francs ($631 million), to a total of 700 million francs for the quarter, related to developments in a number of legal cases more than a decade old.
The negative results are yet another setback for the bank which has been forced to issue profit warnings in five of the last six quarters, as it struggles to emerge from the twin blow-ups surrounding Greensill Capital and Archegos Capital Management. The lender said in March that it is stopping new business in Russia, a step in line with global peers amid unprecedented financial sanctions.
The bank also warned of an approximate 350 million francs in losses related to a decrease in value of an 8.6% stake in Allfunds Group. The loss is expected to be offset by a recovery of 170 million francs in provisions related to Archegos and 160 million francs in real estate gains.
Shares of Credit Suisse fall as much as 2.8% in morning trading on the SIX Swiss exchange. The stock has lost almost half its value since March 2021, when the losses tied to Greensill and Archegos emerged.
European and US banks are warning of loss of business due to Russia’s invasion of Ukraine. French lender Societe Generale SA is taking a hit of about 3 billion euros ($3.2 billion) after agreeing to sell its Rosbank PJSC unit. In March, Deutsche Bank AG said it will set aside an additional 100 million euros in the first quarter to prepare for a deterioration of its loan book on the back of Russia’s war on Ukraine.
Citibank Inc. was forced to set aside $1.9 billion in reserves to cover souring loans tied to both its direct Russia exposure and industries that might be impacted by the war in Ukraine. JPMorgan Chase & Co. also reported a $902 million net reserve build related to risks of high inflation, the war in Ukraine, and Russia-associated exposure.
Credit Suisse last month warned that it may need set aside more funds for legal costs as a result of an expected Bermuda court ruling finding it liable for potentially more than $500 million in a case involving a local insurance unit. That unit has been accused by Georgian billionaire Bidzina Ivanishvili of failing to prevent convicted fraudster Patrice Lescaudron from losing $400 million of the $755 million he’d invested with the unit.
The bank also warned on lower activity in its capital markets business. Swiss rival UBS Group AG has been laying off equity capital markets bankers because of a sharp decline in revenue after a slowdown in deal-making across the industry and investment banking revenue in Europe.