Credit Suisse has flagged that it may swing to a net loss in the fourth quarter of 2020 (Q4 2020) after putting aside an additional $850m provision for a prolonged legal dispute in the US.
The case concerns municipal-bond insurer MBIA, with whom the bank had been engaged in a tussle since 2009 over a US residential mortgage backed security (RMBS) issued in 2007.
Go deeper with GlobalData
Credit Suisse had already booked a $300m provision over the dispute and last month said that it faces up to $680m in costs over the dispute.
Commenting on the decision, the Zurich-based bank said: “Although Credit Suisse previously set aside USD 300 million in provisions in connection with this case and continues to believe it has strong grounds for appeal, we indicated on December 1, 2020, that we would evaluate the need for additional provisions.
“This review is now concluded, and we expect to increase our provisions for the MBIA case and other RMBS-related cases by a total of USD 850 million.”
However, the bank intends to start its share repurchase programme on 12th of this month.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe bank also gave an update on its trading performance in December 2020.
It said that its wealth management operations reported stronger year-on-year transactional activity, mainly in Asia. This partially offset the adverse FX translational impact from the strengthening of the Swiss Franc and pressure on net interest income.
The bank further said that its investment bank “continued to perform well”, with 4Q20 USD revenues growing by over 15% from the previous year.
The latest provision comes on top of the $450m impairment it booked last November for a stake in alternative investment firm York Capital Management, which intends to wind down its European hedge funds business.
Credit Suisse, which took a stake in the investment firm in 2010, will take the charge in Q4 2020.
The bank is scheduled to post its Q4 20 results on 18 February 2021.
These provisions will affect the performance of Credit Suisse, which has shown resilience last year despite Covid-19 headwinds.
In Q3 2020, Credit Suisse reported a 38% year-on-year slump in net profit, missing analyst expectations, with the exclusion of a one-off gain that lifted prior year’s performance.
The bank’s net income attributable to shareholders was CHF546m in Q3 2020, compared with CHF881m a year earlier.
