CS Credit Suisse Group

By John Letzing 

ZURICH-- Credit Suisse Group AG sought on Wednesday to reassure skeptics that the Swiss bank's overhaul is on track thanks in part to deeper cost cuts, even as it lowered profit targets issued last year.

Zurich-based Credit Suisse said that "challenging market conditions" mean the bank is cutting some profit targets due to weaker-than-expected performance at investment banking and asset management businesses. However, goals set for wealth management units remain unchanged.

"Our strategy is working," said Chief Executive Tidjane Thiam, while disclosing that Credit Suisse has now eliminated more jobs than anticipated as part of his strategic shift, and aims to further slash costs over the next couple of years.

Credit Suisse is in the midst of a dramatic overhaul plotted by Mr. Thiam, who took office in July 2015. The restructuring, which has involved focusing on markets in Switzerland and Asia while emphasizing wealth management at the expense of investment banking, has been hindered by swooning markets and a loss of confidence among many investors.

Shares of Credit Suisse rose more than 3% on Wednesday. The shares have declined about 40% since Mr. Thiam outlined his plans for a turnaround in October of last year.

Targets set at that time for 2018 included increasing pretax profit at the International Wealth Management unit to 2.1 billion Swiss francs ($2.1 billion). That target, due to lower-than-anticipated performance fees at the unit's asset management business, has been lowered to 1.8 billion francs, Credit Suisse said.

While targets for its wealth management business in Asia remain unchanged, Credit Suisse said a worse-than-anticipated investment banking result in the region--particularly in equities trading--means that instead of more than doubling pretax profit at that unit to 2.1 billion francs by 2018 (compared with 2014), as had been anticipated, the bank now expects to reach 1.6 billion francs in pretax profit.

The target of increasing pretax profit at Credit Suisse's Switzerland-based operation to 2.3 billion francs by 2018, from 1.6 billion francs in 2014, remains unchanged. The bank said on Wednesday that plans for a partial, initial public offering of shares in its Swiss unit by next year remain on track. The bank hopes the offering will raise about 4 billion francs and further add to its capital cushion.

Credit Suisse said it is ramping up efforts to cut costs, and now expects the cost of running the bank to be less than 17 billion francs by 2018, compared with the previous target of less than 18 billion francs. Part of the bank's restructuring has involved plans for 6,000 job cuts, though the bank said it had actually cut 6,050 positions as of earlier this month. The cuts include thousands of jobs in Switzerland, where the bank has deep roots going back to the 19th century and sprawling retail and wealth management businesses.

Mr. Thiam declined to comment on plans for further job cuts. He said seeking out "productivity gains" must "become a way of life for the bank, " and noted that the heads of each business will introduce a so-called efficiency program as part of investor day presentations scheduled for Wednesday.

The CEO also indicated that some Credit Suisse investment bank results may improve in the current quarter, compared with the third quarter, in both fixed income and equities businesses.

Since the bank set its profit goals last year, Credit Suisse executives have been forced to concede that hitting them would be challenging due to worsened market conditions.

Last March, Credit Suisse had to update its restructuring plans after executives discovered nearly $1 billion in losses that had piled up at the investment bank's trading business amid a transition in the unit's leadership.

At that time, Credit Suisse said it would further slash the amount of risk-weighted assets held at the investment bank, and would sell about 1 billion francs in assets, including real estate, to bolster its capital position.

On Wednesday, Credit Suisse said the trading unit, dubbed the global markets business, is on track to hit its cost goals, and its "accelerated restructuring" is mostly complete.

Write to John Letzing at john.letzing@wsj.com

(END) Dow Jones Newswires

December 07, 2016 03:53 ET (08:53 GMT)

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