CS Credit Suisse Group

Results bounce back in first quarter as lender's yearslong restructuring effort begins to pay off

By Brian Blackstone and Pietro Lombardi 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 25, 2019).

ZURICH -- Credit Suisse Group AG 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.

The better-than-expected first-quarter results follow the bank posting for 2018 its first annual profit since 2014 after completion of a three-year restructuring plan late last year. The overhaul streamlined the investment-banking division and boosted its wealth-management business.

"We are now operating with a lower risk profile, a stronger capital base and a structurally lower cost base," Credit Suisse chief executive Tidjane Thiam said.

The bank's share price was up 3.7% in early trading Wednesday.

Net profit for the period was 749 million Swiss francs ($735 million) compared with 694 million Swiss francs a year earlier, the bank said Wednesday, the highest quarterly profit since the third quarter of 2015. Revenue fell to 5.39 billion Swiss francs from 5.64 billion Swiss francs.

Both revenue and net profit beat analysts' expectations of a net profit of 682 million Swiss francs on revenue of 5.20 billion Swiss francs, according to a consensus forecast provided by the bank, despite weakness in its investment banking division.

"The first quarter was one of three very distinct months: a challenging January, a limited recovery in February followed by a strong March," Mr. Thiam said. The bank said it was "cautiously optimistic" about its prospects for this quarter.

Mr. Thiam launched the restructuring in October 2015, months after joining the bank as CEO. Credit Suisse posted three-straight annual losses from 2015 through 2017 -- due to restructuring costs, legal settlements and U.S. corporate tax changes -- but earned a profit of 2.06 billion Swiss francs last year.

In the international wealth-management unit, pretax profit rose 8% on year during the first quarter to 523 million Swiss francs compared with expectations of 435 million Swiss francs. The unit brought in nearly 10 billion Swiss francs in new money, bringing assets under management for the division to 786 billion Swiss francs at the end of March.

Pretax profit in global markets was 282 million Swiss francs, exceeding expectations of 171 million Swiss francs.

"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," said analysts at Citi.

The investment banking and capital markets unit struggled last quarter, with a 36% drop in net revenues from one year earlier leading to a loss of 94 million francs. The bank cited the effects of the U.S. government shutdown as well as economic and political uncertainties that led to an absence of deals in the early part of the year.

Some of that weakness was expected after Sergio Ermotti, chief executive of its Swiss rival UBS Group AG, warned last month that early 2019 was "one of the worst first quarter environments in recent history," a comment that ricocheted across Swiss banking.

But after falling to around 11 Swiss francs per share in the wake of Mr. Ermotti's comments, Credit Suisse shares have recovered to 14 Swiss francs per share early Wednesday. That is still well below the roughly 21 Swiss franc level where it traded when the restructuring was launched in late 2015.

Credit Suisse repurchased 261 million Swiss francs worth of its shares last quarter and plans to buy back at least one billion francs in shares in 2019.

Write to Brian Blackstone at brian.blackstone@wsj.com and Pietro Lombardi at Pietro.Lombardi@dowjones.com

(END) Dow Jones Newswires

April 25, 2019 02:47 ET (06:47 GMT)

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