Credit Suisse Profit Jumps as Focus on the Wealthy Pays Off -- 3rd Update
November 02 2017 - 8:00AM
Dow Jones News
By Brian Blackstone
ZURICH -- Credit Suisse Group AG on Thursday reported a sharp
rise in third-quarter profit on strong growth at its
wealth-management division, indicating the Swiss banking giant's
strategic shift toward managing wealthy clients' money is paying
off.
The results -- which come after crosstown rival UBS Group AG
reported strong profit growth last week -- provide relief for the
Swiss banking sector, which has been beset for years by negative
interest rates, hefty legal settlements and regulatory changes to
bring its rules in line with global norms on the automatic exchange
of client information.
"I think in Switzerland people can take comfort from the joint
success of Credit Suisse and UBS," Credit Suisse Chief Executive
Tidjane Thiam told a press conference.
Credit Suisse said net profit came in at 244 million francs
($244.2 million) for the quarter, compared with 41 million francs
in the same period last year. Analysts expected the bank to report
a profit of 211 million francs, according to a consensus forecast
provided by the bank.
The rise was driven by improvement at its international
wealth-management unit, where pretax income grew 59% to 382 million
francs, boosted by strong growth in Asia.
Net new assets rose 8% to 10.4 billion francs, pushing the
bank's assets under management to a record high of 751 billion
francs.
Investors welcomed the upbeat numbers, with Credit Suisse shares
rising almost 4% by midday local time to hit the highest level
since January 2016.
Credit Suisse is two years into an overhaul under Mr. Thiam, who
took the reins in 2015. The bank is reorienting away from
profitable, but volatile, investment banking toward the more stable
business of managing money for well-heeled clients.
However, restructuring hasn't been without costs. Despite the
rising stock price Thursday, the bank's shares are still down about
30% since the turnaround program began. That's partly because of
two capital increases, in 2015 and this year, which increased the
number of shares in issue, diluting their value.
Mr. Thiam noted that Credit Suisse's 40 billion franc market
capitalization is back to where it was in early 2015.
Credit Suisse said it generated cost savings of about 400
million francs in the third quarter, taking nine-month cumulative
cost savings to about 1 billion francs. The bank said it is
confident that it will reduce annual costs to below its 18.5
billion francs target by the end of the year.
"Our bottom-up analysis made us comfortable with Credit Suisse
cost targets, and we see potential for better delivery," said
analysts at Morgan Stanley.
Mr. Thiam reaffirmed the bank's strategy weeks after a small,
Swiss-based hedge fund, RBR Capital Advisors AG, said it wanted
Credit Suisse to split itself into an investment bank, a wealth
manager and an asset manager. Mr. Thiam said Credit Suisse
considered a broad range of options in 2015 before it launched its
shift toward wealth management. "We believe in our strategy, it's
working," he said.
"We're very happy to listen and talk and explain," Mr. Thiam
said, calling the bank's recent discussions with RBR "very friendly
and constructive."
Credit Suisse's earnings come after rival UBS Group AG last week
posted a 14% rise in net profit from one year earlier and also
credited its wealth management unit.
UBS has also undergone a strategy shift -- initiated years
before Credit Suisse -- by turning its focus to wealth management
and while maintaining a scaled-back investment banking unit.
Despite competing in the same markets, recent data suggest there
are enough billionaires to go around, particularly in Asia, for
Swiss wealth managers. According to a UBS report last week,
billionaire wealth jumped 17% last year to $6 trillion. Asia
welcomed a new billionaire every other day, reflecting that
region's growing economic might.
"There is enough growth [in wealth management] that UBS and us
can both prosper," said Mr. Thiam.
--Pietro Lombardi contributed to this article.
Write to Brian Blackstone at brian.blackstone@wsj.com
(END) Dow Jones Newswires
November 02, 2017 07:45 ET (11:45 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Credit Suisse (NYSE:CS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Credit Suisse (NYSE:CS)
Historical Stock Chart
From Apr 2023 to Apr 2024