Credit Suisse says strong results vindicate strategyHeat Profit
Credit Suisse has pointed to better-than-expected results for the third quarter as vindication of its restructuring strategy, emboldening its efforts to resist pressure from an activist shareholder wanting to break up the group.
The Swiss bank lifted adjusted pre-tax income by 90 per cent to SFr620m in the three months to September, beating analysts’ expectations.
The bank said it now expects to lose just SFr2bn of client money this year as the wealthy “regularise” their tax affairs to deal with new transparency rules, lower than previous guidance of SFr3bn to SFr5bn of tax-related outflows this year.
Tidjane Thiam, chief executive, did not directly reference recent calls for Credit Suisse’s break-up from hedge fund RBR Capital Advisors in remarks on the results but claimed they vindicated the bank’s two-year-old restructuring programme.
“We have been profitable for a third quarter in a row,” said Mr Thiam, describing the “broad-based profitable growth” in Credit Suisse’s wealth management business and the “resilience” of its reshaped Investment bank.
Mr Thiam has shifted the bank towards managing the wealth of the world’s richest families, expanding into Asia and curtailing Investment bank activities. However, RBR criticised Credit Suisse’s “persistent underperformance” and proposed splitting up of its Investment bank and asset management units into independent companies.
Under Mr Thiam, Credit Suisse is also cutting costs. It will report costs this year that are at least Sfr2.7bn lower than in 2015. In addition, it has “de-risked” its vulnerability to Market shocks, cutting assets in its global Markets division by SFr148bn to Sfr291m in the past two years.
Like other wealth managers, Credit Suisse has had to weather low global levels of activity by clients, which have hit revenues. But it said the performance of its wealth management divisions had been “very strong” in the third quarter, with assets under management 12 per cent higher than a year earlier at SFr751bn.
Investment banks across the globe have also been hit by low Market volatility, which has led clients to trade less. Adjusted pre-tax profits in Credit Suisse’s global Markets division fell to $101m in the third quarter, down from $151m in the same quarter a year earlier and worse than analysts expected.
Still, Credit Suisse’s global Markets revenue fell less than its peers. The Swiss bank’s fixed income revenues were down just 8 per cent year-on-year versus an average fall of about 22 per cent at US rivals and even bigger falls at Deutsche Bank and UBS. Credit Suisse’s equities revenues increased by 5 per cent for the quarter from a year earlier and versus a 3 per cent increase in revenues at US peers.
In its Investment bank and capital Markets unit, which advises clients on deals and fundraisings, adjusted pre-tax profits were $54m, little changed from $55m a year earlier. Mr Thiam described the two unit’s performance as “resilient”.
Credit Suisse was also relatively optimistic about the final three months of the year, saying it expected global economic growth to remain strong overall in the fourth quarter, “which could be a significant tailwind for our activities in spite of continuing geopolitical uncertainty”.
In April, Credit Suisse launched a SFr4bn share sale and abandoned plans to list its Swiss division in a move meant to quash fears about its capital strength. Third-quarter results showed the “common equity tier one” ratio — a key measure of financial strength — was in line with analysts’ expectations at 13.2 per cent.