By Noele Illien and Oliver Hirt
ZURICH (Reuters) - Credit Suisse Group on Thursday reported its biggest annual loss since the 2008 global financial crisis after rattled clients pulled billions from the bank, and it warned that a further "substantial" loss would come this year.
Battered by one scandal after another, the bank saw a sharp acceleration in withdrawals in the fourth quarter, with outflows of more than 110 billion Swiss francs ($120 billion), although it said the picture has been improving.
In a statement, Swiss regulator Finma said that while Credit Suisse's liquidity buffers had a stabilising effect on the bank and are being rebuilt, the regulator "monitors banks very closely during such situations".
The results, described as "catastrophic" by Ethos, which represents some Credit Suisse shareholders, sent the bank's shares down 14.7% on Thursday to 2.77 francs, valuing the lender at 11.1 billion francs.
Switzerland's second-biggest bank has begun a major overhaul of its business, cutting costs and jobs to revive its fortunes, including creating a separate business for its investment bank under the CS First Boston brand. The bank raised 4 billion Swiss francs from investors in December.
Chief Executive Ulrich Koerner said: "We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation."
"We have done a prudent and also hopefully a somewhat careful planning," he told reporters.
But analysts were alarmed by the scale of losses and outflows.
Credit Suisse's "operational performance was even worse than feared and the level of outflows quite staggering", Thomas Hallett, analyst at Keefe, Bruyette & Woods, said in a note.
"With heavy losses to continue in 2023, we expect to see another wave of downgrades and see no reason to own the shares."
For the fourth quarter, the bank made a net loss of 1.39 billion francs. That brought its total net loss in 2022 to 7.29 billion francs, marking its second straight year in the red.
The bank also flagged that the wealth management division and investment bank will also probably log losses in the first quarter of 2023.
The wealth management division had outflows of 92.7 billion francs in the fourth quarter, much higher than the 61.9 billion analysts had expected, putting the new total for the division's assets under management at 540.5 billion.
The haemorrhaging of funds last year led it to breach some liquidity requirements, but its finance chief said on Thursday that the problem had since been resolved.
The bank's significant deposit and net asset outflows compounded a generally bleak picture.
Andreas Venditti, an analyst with Vontobel, described last year as "clearly one of the worst years in Credit Suisse's 167-year history", and said the future offered little immediate respite.
Among a string of scandals, Credit Suisse was hard hit by the collapse of U.S. investment firm Archegos in 2021, as well as the freezing of billions of supply chain finance funds linked to insolvent British financier Greensill.
Other scandals to rock the bank included a prosecution in Switzerland involving laundering money for a criminal gang.
GRAPHIC: Credit Suisse goes off piste - https://www.reuters.com/graphics/CREDITSUISSEGP-OUTLOOK/klvygdbrgvg/chart.png
INVESTMENT BANK
Credit Suisse's investment bank made a loss of 3.8 billion francs in 2022 - roughly the same amount it paid to the division's staff.
The bank said it racked up the heavy loss as trading revenues tumbled, but it also pointed to the impact of "accelerated deleveraging" triggered by the "significant deposit outflows" in the final three months of last year.
On the plan to spin off the investment bank, Credit Suisse said it had bought former board member Michael Klein's advisory boutique for $175 million.
The plans have already prompted concerns from some investors about potential conflicts of interest.
On Thursday Ethos Foundation, which represents some Credit Suisse shareholders, said it raised "governance concerns" and that little information had been revealed about the deal.
Ethos Chief Executive Vincent Kaufmann told Reuters he was surprised by how much had been paid "given the little information we have today on this company founded and managed by Mr. Klein, member of the board of directors of Credit Suisse until October 2022 and designated CEO of the buyer (CSFB)".
Credit Suisse did not give details of other investors that may back the investment bank. Koerner last year said it had a $500 million commitment from an investor, without naming them.
Last November, rating agency Standard & Poor's downgraded the bank to just one level above junk.
($1 = 0.9195 Swiss francs)