By John Revill

ZURICH (Reuters) - Credit Suisse expects to make a pre tax loss of up to 1.5 billion Swiss francs ($1.58 billion) during its fourth quarter, the embattled Swiss bank said, as it prepares to ask shareholders permission for a $4 billion equity hike.

The profit warning on Wednesday is a blow for the bank which had previously said it expected to make a net loss during the last three months of the year but did not give a figure.

Credit Suisse is due to hold an Extraordinary General Meeting later on Wednesday where it will seek approval for the capital increase to fund a recovery from the biggest crisis in its 166-year history.

The lender's reputation has been battered by a string of scandals and losses, including a $5.5 billion loss from the unravelling of U.S. investment firm Archegos, and it had to freeze $10 billion worth of supply chain finance funds linked to insolvent British financier Greensill.

On Wednesday it said "challenging" economic and market environment had had an adverse effect on client activity across its business.

"In particular, the Investment Bank has been impacted by the substantial industry-wide slowdown in capital markets and reduced activity in the Sales & Trading businesses, exacerbating normal seasonal declines, and the Group’s relative underperformance," Switzerland's second-largest bank said in a statement.

"Credit Suisse would expect the Investment Bank and the Group to report a substantial loss before taxes in the fourth quarter 2022, of up to CHF 1.5 billion for the Group."

This follows a pre-tax loss of 342 million francs in the third quarter and of 1.94 billion francs year-to-date.

The bank's shares were indicated 1.9% lower in premarket activity on the Swiss market.

Client activity remained subdued in the Wealth Management and Swiss Bank divisions, a situation expected to continue in the coming months.

Also, cash outflows had accelerated at the start of its fourth quarter, the bank said.

At the group level, as of Nov. 11, net asset outflows were around 6% of assets under management at the end of the third quarter.

In Wealth Management, outflows have reduced "substantially" from the high levels of the first two weeks of October, though they have not yet reversed, and were around 10% of assets under management at the end of the third quarter of 2022.

The bank highlighted its efforts to improve its balance sheet and reduce risk, including bond sales which raised $5 billion and selling part of its Securitized Products Group.

At the end of October, Credit Suisse unveiled a plan to cut thousands of jobs and shift its focus away from investment banking and towards the less turbulent area of wealth management.

It said it was also making progress towards its goal of reducing costs by 15% by 2025, including cutting expenditure by around 1.2 billion francs by the end of 2023.

"The Group continues to execute on the decisive strategic actions detailed on October 27, 2022, to create a simpler, more focused and more stable bank," it said.

($1 = 0.9507 Swiss francs)