A Credit Suisse office in London.
A Credit Suisse office in London.Dan Kitwood (Getty Images)

Credit Suisse acknowledged on Tuesday the existence of “material weaknesses” in its financial reports for the last two years due to the ineffectiveness of internal controls. The entity’s communication, in the midst of the banking crisis in the United States, comes a few days after the US Securities and Exchange Commission (SEC) issued a statement to the institution that led it to postpone the disclosure of its annual results. Investors reacted quickly to the news and the shares of the Swiss entity lost 5% in the ‘pre-market’ of the New York Stock Exchange.

In the document, finally presented this Tuesday, the entity states that “management did not design or maintain an effective risk assessment process to identify and analyze the risk of material misstatement in its financial statements”. However, it details that the financial results for 2022 are not affected by these difficulties.

PwC, the institution’s auditor, acknowledged in a complementary statement that it had identified “failures” in the bank’s internal control system. In particular, the company details that “management has not developed or maintained effective controls over the completeness, classification and presentation of non-monetary items in the consolidated statements of cash flows”.

Both pieces of information seem to point directly against the entity’s previous direction, in particular its chief financial officer, David Mathers. The former treasurer of Deutsche Bank, Dixit Joshi, has been in charge since October of last year of turning the page and solving the dark clouds that settle in the company.

For its part, the investment bank made public this Tuesday that its current chairman, Axel Lehmann, had waived his annual bonus of 1.5 million euros corresponding to 2022 due to “the weak financial results of the group. However, not everything is bad news for him: the Swiss banking regulator, Finma, decided last week to close the investigation against him for exaggerated statements in specialized media.

Shares in the Zurich-based entity hit a new low on Monday on concerns over its financial outlook and fears of contagion in Europe from the situation in the United States. Credit Suisse shares are down 4% in early morning, pushing the red numbers to 20% so far in 2022 and up to 80% over the past two years.

strategy in doubt

“The need for renewal is evident”, highlights the letter from the entity’s directors in the annual report. And the plans do not seem to be immediate: they hope to restore stability and “sustainable and profitable growth” only in 2025.

However, the annual report details that the entity was unable to contain the bleeding of deposits that had been suffering since October. In November, Credit Suisse recognized the outflow of 92,000 million dollars (85,890 million euros) in savings from its customers, which amounted to 120,000 million dollars (112,000 million euros) in the entire fourth quarter of 2022. bank, Ulrich Koerner, acknowledged on Tuesday that withdrawals had been moderate but not stopped.

In particular, the Swiss entity highlights its plans to revitalize the CS First Boston brand, its New York-based subsidiary. Credit Suisse plans to promote a business with a “reduced risk profile” while creating a new opportunity to attract outside capital.

Likewise, the entity considers that 2023 will be another year of red numbers, the result of its restructuring, sale of business units and dismissal of more than 9,000 jobs.

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