Credit Suisse blunders undermine CEO’s repair job

LONDON, March 9 (Reuters Breakingviews) – It’s never good when a company delays the release of its annual report. It’s even worse if it happens while trying to win back anxious clients and investors. Credit Suisse’s (CSGN.S) latest mishap predates boss Ulrich Körner and seems relatively minor in the grand scheme of things. Yet the accumulation of blunders undermines his quest to revive the bank.
Credit Suisse said on Thursday it would not publish its 2022 annual report on the day, as previously planned, prompting its shares to fall by roughly 5%. The Zurich-based bank blamed the postponement on a “late call” the previous evening from the U.S. Securities and Exchange Commission (SEC), which had questions about accounting revisions the lender had made to its 2020 and 2019 cash flow statements. That prompted Körner and his fellow executives to “briefly delay” the release to understand more thoroughly the SEC’s position, the Swiss bank said.
The affair looks more like a glitch than a major bookkeeping problem. Last March, in its 2021 annual report, Credit Suisse said it changed the way it accounted for certain items in the 2020 and 2019 cash flow statements, including share-based compensation and foreign-exchange fluctuations. Some of the line items consequently rose or fell by several billion Swiss francs, but the changes netted out to zero. In other words, it moved some non-cash charges to a different part of the statement in a way that didn’t change the overall numbers or the balance sheet, which is a much more important document for banks. Credit Suisse’s reference to the “late call” suggests that the SEC, rather than the bank, is the party that didn’t get its act together fast enough.
Still, it’s unlikely that the watchdog called for the first time on Wednesday night about an issue that dates back a year or more. And the accumulation of goofs may be more meaningful than any individual misstep. Reuters reported in February that the Swiss financial regulator is reviewing remarks Chairman Axel Lehmann made about outflows in late 2022. Separately, the group reckons it has 1.2 billion Swiss francs of possible losses from historic litigation that are not covered by its existing provisions, but that estimate is highly uncertain, implying future shocks may be possible.
The scarcest commodity at Credit Suisse right now is confidence, among both its clients and investors. Customers pulled about 111 billion Swiss francs of money in the final three months of 2022, and its battered shares trade at less than one-quarter of forecast 2023 tangible book value, using Refinitiv estimates. That means any hiccup, however minor, has the ability throw Körner’s revival off course.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
CONTEXT NEWS
Credit Suisse on March 9 said it would delay the publication of its 2022 annual report.
The bank blamed the postponement on a “late call” on the evening of March 8 from the U.S. Securities and Exchange Commission, which had questions about revisions Credit Suisse previously made to its 2020 and 2019 cash flow statements, as well as the related controls processes.
The lender said in its 2021 annual report, released in March 2022, that it had restated various parts of its 2020 and 2019 cash flow statements. The revisions included a 70 million Swiss franc change to the 2020 figures to reflect accounting issues related to securities lending and borrowing.
In the same annual report, Credit Suisse also changed the way it accounted for past share-based compensation, certain non-cash exchange rate movements and hedges. The alterations meant that some line items in its 2020 and 2019 cash flow statements rose or fell by several billion Swiss francs.
Shares in Credit Suisse were down 4.9% to 2.55 Swiss francs as of 0956 GMT on March 9.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
Editing by Lisa Jucca and Streisand Neto
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