Credit Suisse’s share price plummets as it posts first annual loss since 2008, plans 4,000 job cuts: Tidjane Thiam issues warning of global uncertainty

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Credit Suisse's share price plummeted this morning on news it is planning to cut 4,000 jobs following its first annual loss in eight years, alongside a warning that it is "not clear" when financial markets will start to rebound.  

The figures

The Swiss lender has reported a pre-tax loss of CHF 2.42bn (£1.65bn) for the full year – worse than the CHF 2.09bn that analysts had forecast – and a fourth quarter loss of CHF 6.4bn, largely as a result of "substantial charges, which are not reflective of our underlying business performance". 

Core pre-tax income for the year was CHF 88m, and for the fourth quarter was a loss of CHF 5.3bn. On an adjusted basis, it was an income of CHF 4.2bn and a loss of CHF 400m respectively "consistent with our underlying business performance". 

The board is proposing a dividend of CHF 0.7 per share. 

But investors clearly weren't happy: Credit Suisse's share price opened down more than nine per cent. It has since fallen to levels not seen since the early 1990s. 

Why it's interesting

Credit Suisse has used the fourth quarter to speed up its cost-savings programme across the bank, having identified areas that will permanently reduce its cost base by CHF 500m per year. 

The bank is planning to cut around 4,000 jobs worldwide as a result – including employees, contractors and consultants.

Combined with the measures already implemented, such as the transfer of its US private banking arm, Credit Suisse will have achieved a total saving of CHF 1.2bn a year, or 34 per cent, of the CHF 3.5bn of savings targeted by end-2018.

But the bank is also showing the strains in the global markets, noting that its own positive performance was hurt by "challenges" in markets across the world. 

"The fourth quarter of 2015 was characterised by volatile market conditions, pressures on market liquidity, a sharp decline in oil prices, widening credit spreads, continued uncertainty linked to asynchronous monetary policies, and large fund redemptions by market participants affecting asset prices," chief executive Tidjane Thiam explained. 

Fixed income is a particular issue, and although the group has been reducing its positions "aggressively" under its new strategy, there were still some "significant" positions. "Our focus will be on continuing to make the fixed income business model significantly less volatile and inventory dependent along the lines of our successfully transformed equities business," the new chief executive said. 

However there were some rays of light – the fourth quarter was Credit Suisse's best in terms of announced M&A transactions in the last five years, with Thiam saying "the overall pipeline into 2016 is strong, notwithstanding the challenging market conditions in January.”

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What Credit Suisse said

The outlook is not great, according to Thiam. 

“Clearly the environment has deteriorated materially during the fourth quarter of 2015 and it is not clear when some of the current negative trends in financial markets and in the world economy may start to abate," he admitted this morning. 

“A combination of uncertainties on Chinese growth, the abrupt drop in oil prices, large industry mutual fund redemptions of financial assets, asynchronous policies by leading central banks, lower liquidity, a strong Swiss franc have all contributed to making the fourth quarter of 2015 challenging with lower levels of client activity, lower levels of issuance and material shifts in the prices of some asset classes. In that context, the bank has delivered a resilient performance.”

“Market conditions in January 2016 have remained challenging and we expect markets to remain volatile throughout the remainder of the first quarter of 2016 as macroeconomic issues persist. We expect to continue to make progress on the key dimensions of our strategy as we continue the restructuring of the bank to position it well for the future, beyond 2016.”

In short

Credit Suisse is making good progress internally – but the bigger issue is what is happening in global markets.