Credit Suisse to see some losses in Q1 amid geopolitcal crisis

The bank announced on Wednesday that it would set aside an additional SFr600 million ($631 million) for litigation provisions in the first quarter

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Credit Suisse has warned that a substantial increase in its legal provisions will result in a first-quarter loss, the latest setback for the Swiss bank, which has struggled to draw a line under repeated crises in recent years.

The bank announced on Wednesday that it would set aside an additional SFr600 million ($631 million) for litigation provisions in the first quarter, bringing the total to almost SFr700 million for “developments in legal actions that began more than a decade ago.” This is a 60% increase over the previous quarter.

Credit Suisse claimed that the consequences from Russia’s invasion of Ukraine will leave it with roughly SFr200 million in “negative revenues and provisions for credit losses,” in addition to the far greater legal provisions.

The bank did not specify the type of litigation covered by the rules, but the rise comes less than a month after Bidzina Ivanishvili, Georgia’s former prime minister, won a long-running legal battle against it.

The bank’s client Ivanishvili and his family were awarded damages “significantly in excess of $500 million,” according to the judge in the case. Credit Suisse will release its first-quarter results on April 27. Its stock has dropped more than 20% this year.

“Credit Suisse . . . continues to be hit by company-specific one-offs, in particular litigation risk, and [this] points, we think, to further downside risk to consensus earnings forecasts,” said Flora Bocahut, an analyst at Jefferies.

In January, the bank announced that it had set aside SFr436 million in the fourth quarter to meet legal settlements, but that these were largely related to its investment banking division. Credit Suisse’s Bermudian life insurance company was sued by Ivanishvili, a private banking client.

Loan Suisse disclosed a gross credit exposure to Russia of SFr1.6 billion at the end of 2021, shortly after Russia’s invasion of Ukraine. Derivatives and financing exposures in the investment bank, trade finance exposures in the domestic Swiss bank, and loans in the wealth business, according to the lender.