Credit Suisse Reaps Wealth Management Rewards as Assets Soar

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(Bloomberg) -- Tidjane Thiam is reaping the rewards of Credit Suisse Group AG’s pivot to wealth management after the bank attracted new assets at the fastest pace in seven years.

Net new assets at the combined wealth management businesses were 14.4 billion francs ($14.7 billion) in the first quarter, beating analyst estimates, with key contributions from the Asia-Pacific and international wealth management divisions. Profit at the latter rose 66 percent to 484 million francs, while overall both earnings and revenue were better than expected.

Thiam is entering the final stages of a three-year turnaround plan that included tapping shareholders for more than 10 billion francs of fresh capital and paring back investment banking. The firm has slashed expenses and cut thousands of jobs -- mostly at the trading operations in New York and London -- as part of the focus on wealth management. Thiam, though, said it was difficult to forecast inflows going forward.

“I’m reluctant to predict net new assets, it’s quite volatile,” Thiam, who’s led the Zurich-based bank for three years, said in a Bloomberg Television interview on Wednesday. “We had a 13 percent increase in Asia, that’s really extraordinary. But a single digit to mid single digit rate is achievable.”

Wealth Management

Thiam, a former insurance executive, is betting on rising emerging-market affluence to help drive earnings in Asia and Latin America. The CEO is boosting collaboration between the firm’s wealth units and pared down trading businesses. He’s also putting deal-makers alongside private bankers in client meetings with the aim of devising financing ideas for their companies as well as topics such as their personal wealth and succession plans.

Credit Suisse soared on the results, rising as much as 5.3 percent to 17.07 francs before paring gains slightly to trade 4 percent higher as of 11:33 a.m. local time in Zurich.

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 Credit Suisse’s key competitors Julius Baer and UBS Group AG -- have sought to offset the challenges through cost cuts, recruiting initiatives and increasing loans to wealth individuals. In Switzerland, Credit Suisse says it added the most net new assets so far, though the Asia Pacific region led the way with the fresh addition of about 6.2 billion francs.

While growth in net new assets of 7.5 percent is faster than at UBS, its rival is still far bigger. UBS added 19 billion francs of net new money in the first quarter and has about 2 trillion under management, compared with 776 billion francs at Credit Suisse.

“The quality of the earnings is high driven by ongoing outperformance in wealth management,” Kian Abouhossein, an analyst at JPMorgan Chase & Co., wrote in a note to investors. Results “are very solid and better than expected.”

With the restructuring entering its final round, Thiam is focusing on growth and repaying shareholders who’ve stayed with the bank. Late last year he outlined plans to return half of the bank’s profit, mainly through buybacks or special dividends, once it strengthens capital generation. That’s not going to happen this year, it said at the time. UBS said this week it plans to start a program to buy back as much as 2 billion francs of stock this quarter.

Credit Suisse’s key trading business, which has negatively surprised in the past, also performed in line with expectations, though Thiam had to backtrack on bullish guidance from February after trading gains fizzled.

The global markets unit, led by Brian Chin and which includes credit trading and equities trading, reported 1.5 billion francs of revenue, in line with estimates. Still, profits fell seven percent at the unit with equity revenues flat and fixed income down slightly.

©2018 Bloomberg L.P.

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