Credit Suisse 'forcefully' addressing financial reporting flaws – CEO

Credit Suisse Group AG is working to "very forcefully" address material weaknesses it has found in its financial reporting controls as it continues to face pressure from outflows and concerns over its restructuring push.

The Swiss bank had failed to "design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements" and to have in place certain effective monitoring activities, it said in its 2022 annual report. The bank's financial results have not changed.

Credit Suisse is addressing the deficiencies "very forcefully with the appropriate actions," CEO Ulrich Körner said during the Morgan Stanley European Financials Conference in London on March 14, without elaborating on measures being taken. The bank could "expend significant resources" to remedy the deficiencies, it also said in its annual report, whose publication was postponed from March 9 following an intervention from the U.S. Securities and Exchange Commission.

"Our interest in our internal control system is as high as it can be," Körner said. Discussions with the SEC, which flagged an issue with cash flow statements, have concluded, the bank said.

Credit Suisse is grappling with questions over its business following a high level of client outflows, especially at its key wealth business. Asset outflows in the wealth division hit CHF92.7 billion in 2022 and more than 85% of fourth-quarter outflows were booked in October and November following the announcement of the bank's restructuring.

"Earnings momentum is coming back ... [it's] certainly not yet there […] but there is good momentum," Körner said of the business, which is expected to book another loss in the first quarter.

Withdrawals of cash deposits, meanwhile, have stabilized to much lower levels but have not yet reversed, according to the bank's annual report.

"A failure to reverse these outflows and to restore our assets under management and deposits could have a material adverse effect on our results of operations and financial condition," it said.

Credit Suisse's share price has hit record lows in recent days, exacerbated by the wider market impact of the collapse of U.S.-based Silicon Valley Bank. Its five-year credit default swaps — a measure of the cost of insuring debt — closed at a record-high of 484.99 basis points on March 13.

The Swiss bank has been on a client outreach push to convince clients to return their money to the bank, and feedback has been positive, according to Körner, who said he was "super confident" in the bank's strategy.

"[We] have a very clear strategy. And I haven't heard anyone, no stakeholder or group, telling me the strategy is not the right strategy," he said.