Credit Suisse Q3 Profit Up, Revenues Weak, Outlook Positive

by Ike Obudulu Posted on November 1st, 2018

Swiss banking giant Credit Suisse Group AG (CS) on Thursday reported significantly higher group pre-tax profit in its third quarter, while core pre-tax profit was flat. The company also reported weak net revenues amid more challenging conditions and lower levels of client activity. The shares were losing around 4 percent in the morning trading in Switzerland.

The outlook for global economic growth in the final quarter of 2018 remains positive, despite continued geopolitical tensions surrounding global trade and the potential impact of monetary policy changes by central banks.

Looking ahead to 2019, Credit Suisse anticipates further profit improvement from measures that are directly within its control, including the run-off of the Strategic Resolution Unit and lower funding and restructuring charges, which is expected to lift Return on Tangible Equity to 10-11 percent for 2019.

Further, the company said it believes to be on track to achieve its 2018 target of cumulative net cost savings of more than 4.2 billion francs and benefit from the operating leverage created in 2019 and beyond.

For the third quarter, net income attributable to shareholders was 424 million Swiss francs, up 74 percent from last year’s 244 million francs. Pre-tax income climbed 68 percent to 671 million francs from 400 million francs.

Sequentially, attributable profit fell 34 percent and pre-tax profit dropped 36 percent from the preceding second quarter.

The third-quarter adjusted pre-tax income was 856 million francs, 38 percent higher than third quarter of 2017. It was the strongest third quarter since 2014 on an adjusted basis, the company said.

Core pre-tax profit was 978 million francs, same as last year. Meanwhile, Strategic Resolution Unit recorded narrower net loss.

Provision for credit losses surged 103 percent from last year to 65 million francs.

The company also reported lowest quarterly adjusted costs in last five years, and said it is on track to achieve adjusted operating cost base target of less than 17 billion francs by end of 2018.

Net revenues for the quarter, meanwhile, declined 2 percent to 4.89 billion francs from 4.97 billion francs last year. Sequentially, net revenues dropped 13 percent.

Core net revenues were 5.04 billion francs, lower than prior year’s 5.23 billion francs.

Investment Banking & Capital Markets or IBCM net revenues climbed 15 percent to $543 million, driven by higher advisory and equity underwriting fees, significantly outperforming the Street.

Total assets under management or AuM were 1.41 trillion at the end of the quarter, up 4.5 percent from the previous year. Wealth Management AuM was 785 billion francs, up 4 percent year-on-year.

In Switzerland, Credit Suisse shares were trading at 12.74 francs, down 3.67 percent.

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