Investment

Credit Suisse trading swings back to profit in boost for Thiam

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The bank said its cautiously optimistic about the second quarter as client confidence returns and positive momentum in March continues into April.

Wednesday 24, April 2019

(Bloomberg) --Credit Suisse Group’s main trading business swung to a profit after two quarters of losses, as Switzerland’s second-largest lender emerged relatively unscathed from what rival UBS Group called one of the worst environments in recent history.

The lender’s main trading unit posted a pre-tax profit of CHF 282 million ($276 million), more than the CHF 170 million in a company-compiled analyst estimate and the Asia-Pacific trading business broke-even after two years of losses.

The result relieves the biggest headache for Chief Executive Officer Tidjane Thiam, whose tenure has been plagued by surprise trading losses.

Thiam has pivoted the bank away from volatile investment banking and toward the more stable business of wealth management. With his three-year turnaround now complete, the CEO is promising more consistent returns and a share buyback of at least CHF 1 billion this year.

The figures give the first detailed indication how European banks have fared at the start of the year.

Additionally, Sergio Ermotti, Thiam’s counterpart at UBS, has warned that the first quarter was one of the worst in recent history, pushing revenue at its investment bank down by a third.

Trading at all biggest Wall Street firms fell 14 per cent on average in the quarter, driven by a 21 per cent slump in equities, as clients remained on the side-lines after a tumultuous end to 2018 and as a US government shutdown at the beginning of the year delayed some transactions.

Credit Suisse, posted a four per cent increase in revenue from fixed income and equities trading increased 0.7 per cent, when compared with figures reported a year earlier. About 60 per cent of Credit Suisse’s trading revenue comes from fixed income, which performed better in the first quarter than equities.

Thiam has shrunk the trading unit, winding down areas such as distressed-debt trading after heavy losses early in his tenure. As a result, investment banking and private banking now contribute each roughly 40 per cent to group revenue.

While that is down from three years ago, when almost half the bank’s business depended on investment banking, Credit Suisse remains more reliant on the business than UBS, where the securities unit accounted for a little more than a quarter of last year’s top line.

To make up for lost revenue, Thiam has expanded wealth management, particularly in Asia, where most of the world’s new millionaires and billionaires are minted. Wealthy clients added CHF 9.6 billion in net new assets during the quarter.

TAGS : Credit Suisse, Tidjane Thiam, UBS Group, investment banking, wealth management

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