Credit Suisse set to buy back $3bn shares

Bloomberg

A year ago, Tidjane Thiam asked Credit Suisse Group AG shareholders to stay with the bank through its restructuring. Those that did may still be left wanting more.
Switzerland’s second-largest bank plans to buy back as much as 3 billion francs ($3 billion) of shares in the next two years, while increasing the dividend by at least 5 percent a year, it said in a statement ahead of its investor day. While it’s on track to deliver on a pledge to boost payouts to investors, that hasn’t stopped a 37 percent slump in the stock this year.
Thiam has pivoted the bank from more volatile trading in favour of wealth management, slashing thousands of jobs and tapping shareholders for billions of francs of funding. With his restructuring almost over, he can point to private banking gains even as it grapples with surprises losses and falling trading revenue. The bank is warning Asia Pacific markets revenue will decline this year and has dropped some targets for its global markets unit.
Credit Suisse rose 0.3 percent to 11.08 francs as of 10:27 am in Zurich. Thiam, in a Bloomberg Television interview, said that the decline in the stock represents a buying opportunity and that 2019 will be the bank’s first “clean” year after concluding its restructuring.
“The capital distribution plans are a bit lower than expected, the dividend increase in particular,” said Daniel Regli, an analyst at Mainfirst Schweiz. “The guidance for 2018 is light and maybe they could have said more about Global markets.”
While Credit Suisse is far from the only European lender to suffer this year, it is one of the worst performers. The bank has abandoned some targets and continues to suffer from surprise trading losses. Still, there are signs the revamp will bear fruit.
Credit Suisse is pledging to pay out at least 50 percent of earnings to shareholders in 2019 and 2020. The bank paid out a dividend of 0.25 francs per share for 2017 and 0.70 francs the year before. It warned on Wednesday that revenue from its Asia Pacific markets business may be 8 percent to 10 percent lower in 2018 than a year earlier.
“Persistent challenging market conditions have not cha-nged our positive long-term outlook, however we are mindful of the short-term headwinds,” the bank said.
The bank continues to attract inflows at a healthy clip in wealth management, adding about 100 billion francs since the beginning of the restructuring, according to its presentation on Wednesday. It now manages about 785 billion francs, profiting from global wealth which has nearly doubled in the past decade.
UBS Chief Executive Officer Sergio Ermotti has been sending a similar message to investors, pledging to drive wealth management profit higher and cut costs. He’s also said he’ll return at least 50 percent of net income to shareholders and is undertaking a $2 billion share buyback plan.
Thiam, a former insurance executive, has made cost cuts a major pillar of his strategy, focussing the restructuring on trading operations in New York and London where he’s cut
positions and reduced capital allocation to a markets divis-ion which today focusses on equities and credit trading.