Credit Suisse acknowledged a “material weakness” in its financial reporting on Tuesday and announced that it would forgo bonuses for its top executives following the bank’s worst annual performance since the global financial crisis.
Chairman Axel Lehmann also proposed to “voluntarily waive” a share award valued at 1.5 million Swiss francs ($1.6 million) for the 2022-2023 financial year due to the firm’s “poor financial performance.”
In its annual report, Credit Suisse (CSGKF) revealed that its internal controls over financial reporting were ineffective, failing to adequately identify potential risks to its financial statements.
This comes after a delay in the publication of the annual report due to an eleventh-hour inquiry from the US Securities and Exchange Commission concerning cash flow statements for 2019 and 2020.
The report noted that this “material weakness” could lead to misstatements of account balances or disclosures, resulting in a significant misstatement of the bank’s annual financial statements. Credit Suisse is now urgently working on a “remediation plan” to improve its controls.
The bank’s stock initially dropped more than 3% but later recovered as European markets steadied, trading up 0.7% by 9 a.m. ET. The stock had hit a record low on Monday as the collapse of Silicon Valley Bank and Signature Bank in the US rattled investors and impacted banking stocks globally.
Customer withdrawals contributed to Credit Suisse’s largest annual loss since the 2008 financial crisis. Over the past year, the stock has plummeted by 67%.
The bank’s financial health is under scrutiny again following the SVB collapse and its effects on global markets.
Despite the SVB fallout, CEO Ulrich Körner reported that Credit Suisse experienced “material good inflows” on Monday.
Körner stated in an interview that outflows had “significantly moderated” after customers withdrew 111 billion francs ($122 billion) in the three months leading up to December. The annual report indicated that outflows had not reversed by the end of the year.
Körner described the SVB collapse as “somewhat of an isolated problem,” asserting that Credit Suisse adheres to “materially different and higher standards” in capital funding, liquidity, and other areas.
Regarding executive compensation, Credit Suisse reported that it had halved its employee bonus pool last year compared to 2021, allocating 1 billion Swiss francs ($1.1 million). Executive board members received 32.2 million francs ($35.3 million) in fixed compensation but no bonuses.
Once a major Wall Street player, Credit Suisse has suffered from a series of missteps and compliance failures in recent years, damaging its reputation and profitability, and resulting in the departure of several top executives.
In October, the bank launched a “radical” restructuring plan involving 9,000 job cuts, spinning off its investment bank, and focusing on wealth management.
Körner expressed confidence in the bank’s restructuring plan, stating, “Nobody is pleased about the share price development…I can’t manage the share price, I can manage the execution and I do.”
