Credit Suisse Q1 Profit Beats As Restructuring Bears Fruit

by Ike Obudulu Posted on April 24th, 2019

Swiss banking giant Credit Suisse Group AG (CS) reported its strongest quarterly profit in more than three years aided by its global markets and wealth management units, suggesting the Swiss bank’s three-year restructuring is starting to pay off. Gains in equities and deeper ties between trading and private banking helped offset lower revenue.

Switzerland’s second-biggest bank bucked market expectations of a profit dip and said it gained market share in equities trading during a quarter in which major U.S. rivals such as Goldman Sachs and Morgan Stanley saw revenue slides in this business.

Shares of Credit Suisse Group AG (CS) were gaining around 3 percent in Swiss trading after the banking major reported Wednesday higher profit in its first quarter, despite weak revenues. Looking ahead, the company said it is cautiously optimistic about its prospects for the second quarter of 2019.

The company said that it remains focused on increasing its returns and creating growing value over the course of 2019 and beyond.

Tidjane Thiam, Chief Executive Officer, said, “Our model is resilient; this allows us to protect our bottom line during periods when markets are challenging and provides upside when conditions improve. The first quarter was one of three very distinct months: a challenging January, a limited recovery in February followed by a strong March, which was our
second-highest revenue month in the last 39 months.”

For the first quarter, net income attributable to shareholders were 749 million Swiss francs,the highest quarterly profit since third quarter of 2015. This was 8 percent higher than last year’s 694 million francs. Earnings per share improved 12 percent to 0.29 francs from 0.26 francs last year.

Sequentially, attributable profit surged 189 percent from the fourth quarter’s 259 million francs

In the first quarter, Group reported pre-tax income of 1.06 billion francs edged up 1 percent, despite challenging market conditions.

Net revenues for the quarter, meanwhile, declined 4 percent to 5.39 billion francs from last year’s 5.64 billion francs. The drop in revenues primarily reflected weak net revenues in Investment Banking & Capital Markets, Asia Pacific and Global Markets.

Sequentially, net revenues increased 12 percent.

Net interest income dropped 3 percent from last year to 1.53 billion francs and commissions and fees fell 14 percent to 2.61 billion francs.

Provision for credit losses climbed 69 percent from the prior year to 81 million francs.

Assets under management or AuM were 1.43 trillion francs, up 3.7 percent from last year’s 1.38 trillion francs. AuM grew 6.2 percent on a sequential basis. Net new assets climbed 43.2 percent in the first quarter.

Although Credit Suisse last year wrapped up a three-year overhaul with its first annual profit since 2014, volatile earnings and high headcount in its trading division meant it faced questions over whether it was downsized enough.

“Global Markets has been the main cause of consensus earnings downgrades over the past year and with these results has now shown signs of stabilizing,” Citi analysts said.

However, in the first quarter Credit Suisse said the unit increased equity sales and trading by 4 percent, while fixed-income sales and trading fell by just 2 percent, notably less than at U.S. investment banks.

Credit Suisse shares rose by more than 3 percent to a six-month high following the results, in which it confirmed its full-year profitability target but noted it would need supportive markets, and a pickup in revenues, to hit its goals.

Last month Swiss rival UBS forecast first-quarter revenues would fall by about a third in its investment bank and by 9 percent in wealth management, its largest business.

UBS is looking to cut costs further as CEO Sergio Ermotti sounded a pessimistic note on profitability for the year.

Analysts expect first-quarter profit at UBS, which is Switzerland’s biggest bank, to have nearly halved when it reports on Thursday.

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