Credit Suisse CEO gets first profit hat-trick after tough 2 years

Company records profit after €5.63 bn in losses in 2015 and 2016

Last month, boutique Swiss hedge fund RBR Capital Advisors urged management to break up Credit Suisse into three parts. Photograph: Arnd Wiegmann/Reuters

Last month, boutique Swiss hedge fund RBR Capital Advisors urged management to break up Credit Suisse into three parts. Photograph: Arnd Wiegmann/Reuters

 

Credit Suisse, which faces calls from an activist investor to split up the bank to boost its share price, on Thursday reported a near-six-fold year-on-year rise in third-quarter net income.

The earnings for the quarter to end-September marked the first time Switzerland’s second-biggest bank has posted three consecutive profitable quarters under chief executive Tidjane Thiam, who took over in July 2015.

“While the outlook for global economic growth has continued to improve, uncertain geopolitical developments, central bank policies and the magnitude and timing of reforms in the US, as well as historically low levels of volatility, have impacted client activity levels, which remained muted,” Mr Thiam said in a statement.

Credit Suisse is entering the second half of Mr Thiam’s three-year plan to focus on wealth management over investment banking and settle legal cases.

After 6.56 billion francs (€5.63 billion) in losses in 2016 and 2015, Credit Suisse said third-quarter net income attributable to shareholders was 244 million Swiss francs.

This lagged the forecast in a Reuters analyst poll for 264 million francs but was ahead of the bank’s own consensus report that saw net profit of 184 million francs.

Still a way to go

Credit Suisse’s stock trades well below the level when Mr Thiam took over, and boutique Swiss hedge fund RBR Capital Advisors last month urged management to break up Credit Suisse into three parts to support the share price.

Although earnings were up considerably, Credit Suisse still has a way to go to deliver the level of returns investors expect from a major bank. By comparison, Swiss rival UBS last week posted 946 million francs in quarterly net profit.

Credit Suisse’s common equity tier 1 capital ratio, an important measure of balance sheet strength which Mr Thiam has looked to improve in the past two years, dipped to 13.2 per cent from 13.3 per cent in the second quarter.

Net new money inflows - a closely watched indicator of future earnings in wealth management - totalled 10.4 billion francs across its three wealth management businesses, up 8 per cent year on year.

Reported pre-tax income at Credit Suisse’s global markets trading division, the source of billions of dollars in losses over the past two years, was $73 million, down from $92 million a year earlier.

Fixed-income revenues were down 8 per cent year on year. US rivals on average saw a 22 per cent fall in FICC (fixed income, currencies and commodities) operations in the quarter.

- Reuters