Credit Suisse projects $1.6 billion fourth-quarter loss as it embarks on strategy overhaul

Switzerland's second largest bank Credit Suisse is seen here next to a Swiss flag in downtown Geneva.

Credit Suisse projected a loss of 1.5 billion Swiss Francs in the fourth quarter as it undergoes a major strategic change.

The lender has been saddled with high litigation costs due to a series of risk and compliance failures.

"These decisive measures are expected to result in a radical restructuring of the Investment Bank, an accelerated cost transformation, and strengthened and reallocated capital, each of which are progressing at pace," the bank said.

At the end of the third quarter, Credit Suisse said that net asset outflows were around six percent of assets under management. Credit default swaps spiked in the first two weeks of October after reports cast doubt over the bank's ability to meet its obligations. Credit default swaps protect the buyer against default.

The outflows from wealth management have reduced substantially from the elevated levels of the first two weeks of October.

The sale of the group's stake in British wealth tech platform Allfunds is expected to result in a 75 million Swiss Franc loss, while lower deposits and reduced assets under management are expected to result in a fall in net interest income, recurring commission and fees.

Credit Suisse expects the Investment Bank and the Group to report a substantial loss before taxes in the fourth quarter of 2022, due to adverse revenue impact from the previously disclosed exit from the non-core businesses and exposures.

Credit Suisse plans to reduce its cost base by 15%, or 2.5 billion Swiss Francs, by the year 2025. 5% of the bank's workforce is being laid off along with other non-compensation related costs.

The bank announced last week that it would restructure its investment bank by selling a large portion of its securitized products group to Apollo Global Management.

"These actions and other deleveraging measures including, but not limited to, in the non-core businesses, are expected to strengthen liquidity ratios and reduce the funding requirements of the Group," it said.

The group's capital raising proposals will be voted on by shareholders at the meeting.