Credit Suisse Adds to Second-Quarter Optimism After Rebound
Credit Suisse Gives Upbeat Market Update as Clients Boost Trades
(Bloomberg) -- Credit Suisse Group AG joined other European and U.S. banks giving a positive assessment of the second quarter, pointing to a recent boom in refinancing and greater client appetite for trading and investing after the coronavirus pandemic eased.
“We are seeing across the market a significant pickup in capital markets activity,” Chief Financial Officer David Mathers said Wednesday at the Goldman Sachs European Financial Services conference, which is being held virtually. “There is a very high degree of appetite from our corporate customers to refinance themselves -- to take on extra equity, or to refinance their debt.”
Credit Suisse is echoing other peers that have also signaled higher client activity into May, even after extreme market volatility at the end of the first quarter subsided. JPMorgan Chase & Co. expects trading revenue to swell by about 50% from a year ago, while Bank of America Corp. Chief Executive Officer Brian Moynihan said the increase at his firm might approach 10%. Deutsche Bank CEO Christian Sewing also said the postive trading momentum continued into the second quarter.
Switzerland’s second largest bank navigated a turbulent start to the year, setting aside $1 billion in the first quarter to cover the impact of the coronavirus, the biggest such hit in more than a decade. Since then, corporate debt markets have experience a massive rally after the Federal Reserve said it would buy companies’ bonds. Investors have poured billions of dollars into funds that track corporate debt.
Central bank intervention has helped Credit Suisse’s risk exposure by narrowing credit spreads while the recovery in energy prices reduced the risk of default by oil and gas companies. Trades by clients in wealth management, known as transactional revenue, have been “at an increased level of activity” since the coronavirus began, which more than compensated for lower recurring revenue related to the slump in assets under management, Chief Executive Officer Thomas Gottstein said at the same event.
Market Turn
“Immediately after the market started to turn we started to have a lot of inquiries from clients who want to reinvest, who saw upside in equity markets, who even want to put some incremental leverage on,” he said, adding that the bank is seeing increased client engagement.
Still, not everyone is navigating the markets in the same way. French rival Societe Generale SA on Tuesday signaled it may have missed out on the trading boom that buoyed rivals in the second quarter and said it’s taking longer than expected for market conditions to return to normal.
Credit Suisse’s Gottstein had previously said key profit targets and capital levels will be under pressure and the bank may need to put more cash to the side to cover bad loans or account for a drop in asset values. Assuaging some of those fears, he said on Wednesday that the bank is sticking to it’s return on tangible equity target, a key measure of profitability. Mathers said he expects the CET1 ratio to fall to around 11.5% for the second quarter, in line with previous guidance.
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