The Swiss bank warned its current ones may not be enough for some of the cases it is facing.
Investors and other stakeholders are going to have to keep their teeth clenched. Switzerland’s second-largest bank today warned that it may have to book as much as 1.4 billion Swiss francs ($1.45 billion) in additional legal provisions for some of the cases it currently faces – on top of the 703 million francs in provisions already set aside in the first quarter.
In its first-quarter release, it indicated that the 703 million number related to «previously disclosed matters», most of which were in its Corporate Center and Wealth Management.
It then went on to mention «certain proceedings» without going into further detail, saying that it estimated the possible losses from them as anything from «zero to 1.4 billion».
Status Quo
What is surprising about the disclosure is that it reflects the status of the cases at the end of the first quarter – and is apparently not an indication of developments beyond that.
It essentially also means that investors and other stakeholders are to give the bank the benefit of the doubt as to whether the number is closer to zero or 1.4 billion - although it is more than likely they may face some, and even a great deal of scrutiny, over them at the AGM this Friday.
«The Group does not believe that it can estimate an aggregate range of reasonably possible losses for certain of its proceedings because of their complexity, the novelty of some of the claims, the early stage of the proceedings, the limited amount of discovery that has occurred and/or other factors,» Credit Suisse indicated in its earnings release.
Full Report in May
What is surprising is that it relates to the situation on the last day of the quarter and not much else. But it also disclosed that its first-quarter report was not yet final and that the auditors have not yet completed their review of its financial statements, although it is expected to release the full, completed one on May 5.
If so, it means that some of the cases may be material enough to compel the bank to disclose a so-called post-balance sheet event then. «Post-balance» being the accounting term for important-stuff-that-happens after the financial statements are closed but everyone should know about.
Stubborn Russian Exposure
The invasion of Ukraine is also having a greater toll on the business than had previously been generally understood. In its combined asset management disclosure comprising its Wealth Management, the Swiss Bank, and the Asset Management business, it indicated that it had experienced outflows of 10.4 billion francs related to the sanctions imposed after the Russian invasion of Ukraine.
Although it also showed net credit exposure to Russia was down by more than a half, it was still at 373 million francs at the end of the quarter and its gross exposure was still 1 billion. Of that, the exposure to financial institutions was 177 million francs, that to corporates was 82 million, individuals 79 million, and sovereigns 35 million.
The Swiss bank claims that it is still reducing its exposure to financial institutions. It also said the exposure from corporate and individuals is highly collateralized with assets outside of Russia. But still, at this point, it is hard to decipher why it hasn’t been able to cut the exposure more quickly – and why the outflows related to the sanctions were so high.
