Credit Suisse Assets Surge to Record in Wealth Management Pivot
(Bloomberg) -- While Credit Suisse Group AG wasn’t immune to the trading slump that engulfed rivals, Chief Executive Officer Tidjane Thiam’s pivot to wealth management propelled assets under management to a record.
Thiam is shifting the bank from more volatile trading to the calmer business of managing money for the world’s wealthiest, targeting entrepreneurs who will need investment advice in combination with corporate advisory and trading services. The strategic change has been complicated by pressure from investors over the bank’s capital levels and a local activist investor who has said that the bank should be broken up.
His pivot is now paying off: the bank’s wealth management businesses added net new assets of 10.4 billion francs ($10.4 billion), an 8 percent increase compared with a year earlier and driving assets under management rose to a record 751 billion francs. Profit is also starting to accelerate. Net income was 244 million francs, compared with estimates for profit of 200 million francs in a Bloomberg survey of seven analysts. Revenue was in line with analyst estimates.
While wealth managers have been under pressure from negative interest rates and generally higher cash holdings of investors since the financial crisis, Swiss banks including Julius Baer and UBS have sought to offset the challenges through measures including cost cuts, recruiting initiatives and increased loan volumes. UBS has seen an outflow of deposits related to its decision to charge some holders for keeping euros with the bank.
“We expect global economic growth to remain strong overall in the fourth quarter, which could be a significant tailwind for our activities in spite of continuing geopolitical uncertainty,” the bank said. “We expect to see a continued strong performance in our wealth management business, albeit with seasonally lower net new money inflows.”
The Global Markets unit, led by Brian Chin, missed expectations for pre-tax income in the third quarter, joining the trading malaise at other global investment banks. The unit had income of 71 million francs, compared with company compiled estimates for profit of 99 million francs. The unit has been a focal point of Thiam’s overhaul. The bank fired thousands of traders in London and New York and shifted capital to other units.
The bank CET1 ratio was 13.2 percent, in line with analyst estimates in a company-compiled survey.
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