Thiam ‘feeling good’ as Credit Suisse overhaul gains speed

Bloomberg

Halfway through Tidjane Thiam’s three-year restructuring plan, Credit Suisse Group AG is gaining traction. Switzerland’s second-largest lender reported a 78 percent increase in second-quarter profit, to 303 million francs ($312 million), as clients added about 11 billion francs in new money to its main wealth management units. Lower expenses lifted profit at the global markets trading business, still the biggest contributor to the top line, even as revenue declined because of low volatility.
Credit Suisse rose as much as 4 percent, the biggest gain since April 24. Cross-town rival UBS Group AG, which also reported higher earnings on Friday, suffered the biggest drop in six months, after its capital buffers took a hit following a regulatory review.
“It’s feeling good,” Thiam, Credit Suisse’s chief executive officer, said. “We believe all the things identified as key, we are delivering.”
Thiam, 54, has cut costs, eliminated thousands of jobs and sold down bad assets to reduce reliance on volatile debt trading in favour of more stable businesses such as wealth management. He raised $4.3 billion in capital this year, allowing the bank to hold on to its profitable Swiss unit. A push to expand in Asia has proven more difficult as the trading business in the region posted losses for three straight quarters.

Adding Assets
“The results are better than expected,” with profit better in all core divisions, JPMorgan Chase & Co. analysts Kian Abouhossein and Amit Ranjan wrote in a note to clients.
Credit Suisse’s international wealth management unit, led by Iqbal Khan, reported a 49 percent increase in pretax profit to 365 million francs. At the private banking business in Asia, profit rose 67 percent to 149 million francs from 89 million francs. The international and Asian businesses combined received 9.1 billion francs in new money from clients.
The Swiss bank, the biggest unit by revenue after the global markets business, reported 11 percent higher earnings. Clients added 1.7 billion francs in new money during the quarter. Thiam, who had initially planned to sell parts of that business to raise capital, in April reversed course, deciding to tap shareholders for fresh cash instead after a rally in European bank stocks.
“Credit Suisse delivered a strong set of results with slightly lower revenues, which was yet more than offset with much lower expenses,” said Tomasz Grzelak, an analyst at Baader Helvea AG in Zurich. “Wealth management-related businesses recorded very healthy performance.”

UBS Slumps
UBS, Switzerland’s largest bank, reported a 14 percent increase in second-quarter profit as its wealth management business got a boost from rising US interest rates. But a measure of its ability to absorb losses deteriorated as Swiss financial regulator Finma is pushing up standards in preparation for a new global regulatory framework.
Credit Suisse traded 2.9 percent higher at 2:49 p.m. in Zurich. UBS traded down 2.8 percent after earlier Credit Suisse reiterated that it’s on track to wind down its bad bank ahead of plan by the end of 2018.