* Bank flags legal provisions of 500 mln Swiss francs
* Wealth management assets drop
* Decline in risk appetite hits business
ZURICH, Jan 25 (Reuters) - Credit Suisse warned on
Tuesday that it would post a fourth-quarter loss as the
scandal-hit lender flagged fresh legal costs and said business
in its trading and wealth management divisions had slowed.
Switzerland's second-largest lender announced plans in
November to rein in its investment bankers and plow money into
looking after the fortunes of the world's rich as it tries to
curb a freewheeling culture that has cost it billions.
It said the investment bank would make a loss in the final
quarter of the year, while the wealth management business had
seen an overall drop in assets.
On top of previously announced charges, Credit Suisse will
make a fresh 500 million Swiss franc legal provision to settle
legacy cases related to the investment bank, putting it on track
for an overall quarterly loss of around 1.6 billion Swiss francs
($1.75 billion).
"The cleaning up of legacy burdens from investment banking
is threatening to become a never-ending story," analysts at
Zuercher Kantonalbank said in a note, adding they saw no reason
to invest in the bank's shares, which were around 0.5% lower by
0900 GMT.
Credit Suisse has been trying to turn the page on a slew of
negative headlines and reform its risk management culture, an
effort set back by the abrupt departure of the chairman brought
in just nine months earlier to lead that transformation.
It said the investment bank had been affected by a slowdown
in transaction-based revenue.
"Combined with the reduction in our overall risk appetite,
including our decision to substantially exit our prime services
business, this has resulted in a loss for the fourth quarter
2021 in the Investment Bank division," the lender said.
It said its core wealth management businesses would also be
hit by a slowdown in transactions, resulting in "modestly
negative" net new assets for those businesses.
"While we already expected lower transaction and trading
revenues, the declines are likely larger than estimated. In
addition, we might also have been somewhat optimistic on costs,"
Vontobel analysts wrote.
Credit Suisse pointed to a slowdown in Asia and a reversion
to more normal trading conditions after the bumper activity that
prevailed for much of 2020 and 2021.
Major U.S. banks also flagged last week that the huge uptick
in trading volumes during the pandemic was starting to moderate
as expectations for a series of U.S. interest rate hikes and a
rise in consumer spending tempered investment rates.
Investors and analysts are waiting to see how the bank's
troubles, including two major scandals in March 2021, will
impact Credit Suisse's client relationships.
On Tuesday, it said its asset management business, hit at
the time by the collapse of $10 billion in funds linked to
insolvent supply chain finance firm Greensill, had seen inflows
in the last quarter of 2021, helping "more than offset" the
outflows from wealth management.
For the first nine months of 2021, Credit Suisse reported a
net profit of 435 million francs, down nearly 86% year on year.
On a pre-tax basis, income stood at 1.064 billion francs.
($1 = 0.9162 Swiss francs)
(Reporting by Brenna Hughes Neghaiwi and Paul Arnold; editing
by Sherry Jacob-Phillips, Kirsten Donovan)