Credit score Suisse fluctuates within the fourth quarter, burdened by provisions for a US litigation
LONDON – Credit Suisse posted a better-than-expected loss in the fourth quarter of 2020 due to higher litigation provisions.
The Swiss bank reported a net loss of CHF 353 million ($ 392.8 million) for the fourth quarter of 2020 on Thursday, which was better than market expectations. According to Refinitiv, analysts had forecast a net loss of 558.5 million francs for the quarter and a net profit of 2.8 billion francs for the year. Credit Suisse ended 2020 with a net profit of 2.7 billion francs.
The Swiss bank told markets in January that it would plunge to an above-expected loss in the final quarter of 2020 after allocating $ 850 million to a US real estate debt litigation. Credit Suisse then reached a $ 600 million settlement last week.
Thomas Gottstein, CEO of Credit Suisse, said in a statement: "Despite a challenging environment for societies and economies in 2020, we have seen strong underlying performance in wealth management and investment banking while addressing historical issues."
Speaking to CNBC's Geoff Cutmore on Thursday, he said he was "very happy" with the results and that 2021 will be "the year to look forward to growth". "We had an excellent start, all five divisions are active," said Gottstein.
Further highlights of the quarter:
The CET 1 rate, a measure of the solvency of banks, reached 12.9% compared to 12.7% in the previous year. Sales amounted to 5.2 billion francs compared to 6.2 billion francs in the previous year. The total cost of ownership was CHF 5.2 billion compared to CHF 4.8 billion at the end of 2019.
The bank’s wealth management business saw revenue fall 24% year over year in the fourth quarter. Global Investment Banking, on the other hand, recorded a 19% jump in sales compared to the previous year.
Credit Suisse had already announced in January that it would buy between CHF 1 and 1.5 billion of its own shares from January 12. The bank has now added that it will pay a dividend of CHF 0.2926 per share based on its shares in 2020 results.
Credit Suisse sounded cautious about the pandemic. "We would point out that the COVID-19 pandemic is not behind us and the pace of recovery remains uncertain despite the ongoing fiscal and monetary stimulus," the lender said in a statement.
The share price was slightly lower in the early European trading hours.
More SPACs in 2021
SPACs (Special Purpose Acquisitions Company) have drawn a lot of interest in the US to raise capital. By and large, it's an investor-founded Shell company that raises money by going public and then uses the funds to buy another company.
Around 200 SPACs went public in 2020. Virgin Galactic and Nikola Motor are just two examples of companies that went public through the merger with SPACs.
"Overall, the SPAC business was very strong in the market in 2020 and is even stronger in Asia and Europe," Credit Suisse's Gottstein told CNBC, describing the process as a "clear alternative to traditional IPOs".
"We are definitely seeing a pickup in interest in SPACs in Europe and we will see more in 2021 than we did in (20) 20, but there are some structural drawbacks against the US dollar due to negative interest rates," added Gottstein.
In the euro zone, interest rates are still in negative territory, mainly due to the Covid-19 crisis. In the United States, the federal government rate is close to zero, but it is still positive.