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Credit Suisse stresses value in investment bank after break-up call
November 2, 2017 / 8:13 AM / 22 days ago

Credit Suisse stresses value in investment bank after break-up call

ZURICH (Reuters) - Credit Suisse’s (CSGN.S) chief executive underlined his determination to keep the group’s investment bank in the face of a campaign by a hedge fund investor to split up Switzerland’s second-biggest lender.

Now more than half way through a major restructuring, CEO Tidjane Thiam hailed third-quarter results on Thursday as evidence Credit Suisse’s “integrated model” of a core wealth management business supported by two investment banking divisions was the right way forward.

“We just started the second half and we’re going to play hard until the end of 2018 to achieve our targets,” Thiam, whose three-year plan includes growing wealth management, cutting costs and settling legal cases, told a news conference.

After 6.56 billion Swiss francs ($6.56 billion) in losses in 2016 and 2015, Credit Suisse’s chalked up a third consecutive quarter in profit the three months to Sept. 30, a first since Thiam joined the bank in July 2015.

“The bank proved... it is on the right track, although the pace of improvement is somewhat slowing down,” said analysts at broker Mirabaud Securities.

Third-quarter net income attributable to shareholders was 244 million francs. This lagged a forecast of 264 million francs in a Reuters analyst poll but was ahead of the bank’s own consensus estimate for 184 million francs.

The bank kept a cautious outlook for the year ahead due to political and monetary policy uncertainties.

Shares were up 4.4 percent at 1215 GMT, well ahead of the European banking sector index .SX7P.

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The Credit Suisse logo is pictured on a bank in Geneva, Switzerland, October 17, 2017. REUTERS/Denis Balibouse

Though earnings rose significantly, Credit Suisse still has some way to go to deliver the returns investors expect from a top bank. By comparison, rival UBS (UBSG.S) last week reported quarterly net profit of 946 million francs.

Key to higher earnings will be the bank’s ongoing efforts to wind down its so-called Strategic Resolution Unit, a huge source of losses which is selling out of businesses the bank no longer wants to be in.

Swiss hedge fund RBR Capital Advisors went public last month with a campaign to split Credit Suisse into three parts, including spinning off the investment bank, a proposal it claims could double the bank’s value. Thiam said there was nothing new in the fund’s proposals.

“All the ideas that are being discussed were discussed and looked at in great detail, even by my predecessor. They are not new,” said Thiam, who still plans to meet RBR chief Rudolf Bohli next week.

RBR launched its campaign after spending 100 million francs to buy roughly 0.2 percent of Credit Suisse and has said it wants to increase its investment to 1 billion francs.

CAPITAL CUSHION

Credit Suisse’s common equity Tier 1 capital ratio, a measure of balance sheet strength that Thiam has sought to improve over the past two years, dipped to 13.2 percent from 13.3 percent in the second quarter.

Net new money inflows -- a closely watched indicator of future earnings in asset management -- totaled 10.4 billion francs across its three wealth management businesses, up 8 percent year on year. Assets under management grew 12 percent to a record 751 billion francs.

Fixed-income revenue was down 8 percent year on year. U.S rivals on average saw a 22 percent fall in FICC (fixed income, currencies and commodities) operations in the quarter.

Writing by John O'Donnell and Joshua Franklin; Editing by David Goodman and Keith Weir

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