Why Credit Suisse Could Lose Another, Yet Unreported >USD2bn on Greensill – namely GFG Alliance, Katerra, Bluestone

As of the end of March 2021, the Swiss Financial Market Supervisory Authority FINMA (FINMA) imposed a temporary add-on to our  risk weighted assets relating to credit risk in the Investment Bank of USD 6.1 billion (CHF 5.8 billion) in relation to our exposure in the US-based hedge fund matter (described below). We expect this add-on to be reduced to zero by the end of 2Q21. We have agreed with FINMA to apply a Pillar 2 capital add-on of CHF 1.9 billion (USD 2.0 billion) relating to the supply chain finance funds (SCFF) matter.
source: Credit Suisse

The amount of loss of the investors therefore is currently unknown. Based on currently available information, losses for the investors can be expected to occur predominantly in positions that, prior to March 31, 2021, had a net asset value of approximately USD 2.3 billion in the aggregate. These positions relate primarily to three groups of companies: “GFG Alliance,” Katerra and Bluestone.
source: Credit Suisse

Now while it says in the Credit Suisse press release that INVESTORS can expect to incur losses, the repercussions of litigation, loss of business, reputation damage, negative media coverage, outflows – could force another hit to the bottom line results, either this year – or ongoing, by damaging the Credit Suisse franchise.

Several of the processes discussed above are still ongoing, including the external and Board-led investigations, the process of seeking to recover amounts in respect of the SCFF matter, our review of our businesses and potential personnel and organizational changes in response to these matters. There can be no assurance that any additional losses, damages, costs and expenses, as well as any further regulatory and other investigations and actions or any downgrade of our credit ratings, will not be material to us, including from any impact on our business, financial condition, results of operations, prospects, liquidity or capital position.
source: Credit Suisse

In summary: It is quite likely that negative news flow will continue.

Also note 1) that the analyst presentations (csg-1q2021-slides-analysts.pdf) DOES NOT highlight the USD 2.3bn from SCFF. However it can be found in the small font earnings release pages (csg-earningsrelease-1q21.pdf). This is an example of management not owning up, but still trying to obfusicate and paint a brighter picture. 2) The Greensill case is called the “Supply Chain Finance Fund matter” – this could be seen as an attempt to downplay and make searching for information less easy, less transparent. Typical mitigation attempt by PR.

Questions or feedback?

Feel free to write me at contact@zuberbuehler-associates.ch or add a comment.

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