Credit Suisse Predicts New Loss in Trading, Haunting Thiam

(Bloomberg) -- Tidjane Thiam spent three years scaling back Credit Suisse Group AG’s volatile trading business, but the unit -- set for its second straight quarterly loss -- keeps haunting the bank’s chief executive officer.

Global Markets -- the bank’s principal trading business -- suffered as volatile markets pushed clients to seek shelter in cash rather than trading stocks. Credit Suisse’s forecast for full-year adjusted pretax income indicates an expected decline of about $92 million at the unit in the fourth quarter.

Thiam on Wednesday rewarded investors for sticking with him through his turnaround plan, promising to buy back as much as $3 billion in stock over the next two years. But his message of progress is undermined as the stock market selloff adds to challenges at the main trading business, and the lender predicted that revenue at the Asia-Pacific trading unit may be as much as 10 percent lower than last year.

“We see lower activity both in global markets and APAC markets,” Thiam said in an interview with Francine Lacqua on Bloomberg TV before meeting investors in London. “More in APAC markets -- you have seen the correction in Shanghai and Shenzhen, which is actually quite brutal. That leads to lower activity."

Credit Suisse Asia chief Helman Sitohang said that client activity has been the worst in 10 years in the fourth quarter, weighing on trading revenues. Structured-product sales were about 50 percent lower in the fourth quarter, he said.

Credit Suisse is more than a year into the turnaround of its equities unit, led by Mike Stewart, with a goal of being a top five player in stock trading, from seventh last year. It’s planning to sell more equity derivatives to wealth-management clients and hired more than 50 additional staff in that area, according to an investor presentation today.

Scaling down Global Markets and making it more customer focused has been one of Thiam’s key projects, but the move has made the business more dependent on shifting client sentiment. The division -- once one of the strongest trading units on Wall Street -- reported an unexpected third-quarter loss that forced the bank to abandon a revenue target.

Still, Credit Suisse said it expects profit at global markets to improve over the next two years, helped by lower funding costs, demand for structured products and the renewed push into equities trading.

©2018 Bloomberg L.P.