Credit Suisse's Thiam Hints at Shareholder Payout After Pain

(Bloomberg) -- Credit Suisse Group AG Chief Executive Officer Tidjane Thiam said he’s “painfully aware” that shareholders have gone through tough times and that all options are on the table to return cash to investors as profitability improves.

“The shareholders have been through a lot. I’m painfully aware that I had to dilute my shareholders very significantly,” Thiam said Tuesday in an interview on Bloomberg TV. “As we generate more profit and the bank does better,” he said, “the goal of all this is to return capital to shareholders.”

Credit Suisse is entering its final year of an overhaul aimed at reducing the bank’s reliance on volatile trading in favor of wealth management and emerging markets. Thiam, who is scheduled to update investors Thursday on his strategy, has cut thousands of jobs, sold off risky legacy assets, and raised more than 10 billion francs ($10.2 billion) from shareholders in the past two years.

While challenges remain -- including the attack of an activist investor pushing for a breakup of the bank -- cost savings from those measures and a strong global economy should help the bank post a profit this year, with improvements in the next two years, Thiam said.

“Everything is on the table, whether special dividends or share buybacks,” he said, adding it’s for the board to decide how to return excess cash. “But that’s still further down the road, we still need to execute well to get to that point.”

Shares Rise

Credit Suisse fell 0.1 percent to 16.13 francs at 12:28 p.m. in Zurich trading. The stock was up 15 percent this year through Monday, though it’s still down about 31 percent since Thiam first announced his overhaul plan in October of 2015.

The activist, Rudolf Bohli, has so far struggled to gain traction as key Credit Suisse shareholders signaled support for Thiam. David Herro, who says his Harris Associates holds 9 percent of the Swiss bank, has said the current strategy is working and just needs more time.

Thiam said while the bank’s results are improving, employees shouldn’t expect large increases in their bonus. Credit Suisse was among the few European investment banks to increase its bonus pool for last year, raising it by 6 percent. Thiam and 12 other management board members cut their proposed bonuses earlier this year to quell criticism from shareholders who said the payouts were too generous for a bank that has posted two straight annual losses. 

‘Something Fair’

“This year, with the improvement in results, there will be a balance,” Thiam said in the interview. “You should not expect anything spectacular, but something fair. Not a big increase compared to the previous year.”

While Credit Suisse has yet to show it can boost revenue under its new strategy, it has already delivered on its promise to lower the bank’s cost base. The bank last year stepped up its cost cutting efforts, targeting a cost base of below 17 billion francs for 2018. Thiam declined to comment on any new targets.

“It’s a tricky conversation because we are in a closed period before the investor day. It is something which we will discuss then,” he said. In general, every organization should improve its productivity by 2 percent to 3 percent per year simply to keep up with economic growth and not fall behind, he said.

Divisional Targets

Another spotlight for the investor day are the bank’s divisional targets. Some analysts and competitors have put into question goals set for the bank’s Swiss Universal Bank and Asia Pacific unit.

Thiam said that analysts’ consensus for pretax wealth management profit in Asia Pacific this year is above the 2018 target, though he didn’t mention the target for the region as a whole, which was set at 1.6 billion francs for 2018. On the Swiss business, he said consensus for 2018 is already 91 percent of the target.

“If consensus is 91 percent of the target set three years ago, I think that is OK,” he said.

To contact the reporters on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net, Patrick Winters in Zurich at pwinters3@bloomberg.net, Francine Lacqua in London at flacqua@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

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