Credit Suisse posts first loss since 2008, sees tough markets

[February 04, 2016]  By Michael Shields

ZURICH (Reuters) - Credit Suisse reported its first full-year loss since 2008 after booking a big impairment charge at its investment banking business, sending its share price tumbling and piling pressure on new Chief Executive Tidjane Thiam.

Shares fell more than 12 percent on Thursday to hit their lowest level since 1992 after Switzerland's second largest bank signaled a difficult beginning to the year. Its stock price is now down 32 percent since the start of 2016.

Thiam, who took over the bank in July, said he would stick with his plan to focus more on wealth management in emerging economies and cut costs in the investment bank, despite the turbulent start to markets this year.

"We have a clear strategy, clearly we are implementing it in difficult markets and our outlook for the first quarter remains very cautious," Thiam told an analyst call.

"(We have) very unique market conditions and they are challenging, but fundamentally we are maintaining the objectives and the targets we have presented".

Four months on from when Thiam set out his strategy, many analysts are still unsure how Credit Suisse will hit growth targets, which include more than doubling Asia Pacific pretax income by 2018.

The bank posted a 2015 net loss of 2.94 billion Swiss francs ($2.92 billion), worse than the median estimate of a 2.12 billion loss in a Reuters poll.

It booked a goodwill impairment charge of 3.8 billion francs in the fourth quarter as a result of the new strategic direction Thiam is pursuing.

The impairment was mostly related to the acquisition of U.S. investment bank Donaldson, Lufkin & Jenrette in 2000, it said.

The lender said it saw net outflows of funds in two of its three main wealth management divisions during the period, though it target market of Asia Pacific was the exception.

Rival UBS this week announced its best annual results since 2010 although it also saw an outflow of funds and weakening margins at its flagship wealth management business.

JP Morgan Cazenove analysts called Credit Suisse's results "very messy", noting an underlying loss before tax versus market expectations of a profit. The bank's common equity tier 1 capital ratio of 11.4 percent also lagged consensus even after a 6 billion franc capital raising last year, it noted.

Credit Suisse said it had accelerated cost savings so that it had taken action on 34 percent of the measures planned by 2018, or 1.2 billion of the targeted 3.5 billion francs, with around 4,000 jobs being cut.

However, the bank has not dispelled scepticism about its ability to meet its growth targets.

"Reaching the targets by 2018 seems more unrealistic than ever," analysts at Zuercher Kantonalbank said.

(Editing by Oliver Hirt and Brenna Hughes Neghaiwi; Editing by Mark Potter and Keith Weir)

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