Tuesday 27 June 2017

Credit Suisse reports 74pc drop in profits

Credit Suisse Group, Switzerland’s second-largest bank, reported a 74pc decline in third- quarter profit as lower client activity curbed trading revenue.

Net income fell to 609 million Swiss francs (€451m) from 2.35 billion francs (€1.74bn) a year earlier, the Zurich-based bank said in a statement today. Earnings missed the 861 million-franc median estimate of 11 analysts surveyed by Bloomberg.

A slump in trading also hurt revenue at US competitors, including Goldman Sachs Group and Morgan Stanley.

Chief Executive Officer Brady Dougan said the quarter was characterised by “challenging conditions with low market volumes and subdued client activity,” and reiterated the bank’s intention to boost market share at the investment bank.

“Trading volumes were pretty thin in the third quarter,” Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, said before the release. “Credit Suisse has been hit harder than competitors in the past by low client activity.”

Credit Suisse’s trading revenue slumped 41pc to 2.54 billion francs, missing analysts’ forecast for about 3 billion francs.

Goldman Sachs, Citigroup, JPMorgan and Morgan Stanley as well as Bank of America, on average reported a 24pc decline in trading revenue in the third quarter from a year earlier, data compiled by Bloomberg show.

Credit Suisse has fallen 15pc in Swiss trading this year, compared with a 2pc decline in the 54-company Bloomberg Europe Banks and Financial Services Index. UBS, the largest Swiss bank, has gained 9pc.

Hiring

The equities sales and trading business, which posted the second-highest revenue in the first half of the year behind Goldman Sachs, saw a “slower volume market,” Dougan told investors at a conference in London on September 29.

Equities revenue fell 41pc to 1.08 billion francs in the quarter, the lowest level since the end of 2008.

Fixed-income sales and trading revenue slumped to 1.46 billion francs from 2.48 billion francs a year ago. The results were helped by “strong” revenue in US residential mortgage-backed securities trading and credit businesses, the bank said.

Credit Suisse aims to be in the top five in all regions in credit, rates and foreign-exchange trading, Dougan told investors in London. The bank increased sales headcount by 25pc, 32pc and 35pc in those areas, respectively, this year.

Net new assets

The investment bank’s pretax profit dropped 77pc to 395 million francs, missing analysts’ estimates of 756 million francs.

Earnings at the wealth management unit fell 15pc to 612 million francs, while the business attracted 12.4 billion francs in net new assets.

Corporate and institutional clients unit posted a 56pc jump in profit to 224 million francs, and asset management’s earnings fell 57pc to 135 million francs.

The bank, which survived the credit crisis without government assistance, said earlier this month that it expects to meet new regulatory capital requirements without having to sell new shares or to “materially” change its growth plans and dividend policies.

A Swiss government-appointed panel proposed that the two biggest Swiss banks need to hold almost double the capital required under Basel III rules.

By 2019, the lenders need to have a common equity ratio of at least 10pc, compared with 7pc under Basel III rules, and total capital equal to at least 19pc of risk-weighted assets, compared with Basel’s 10.5pc requirement.

Credit Suisse had a Tier 1 capital ratio of 16.7pc at the end of the third quarter, compared with 16.3pc three months earlier.

Bloomberg

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