Credit Suisse Trading Losses Overshadow End of Thiam Turnaround
Credit Suisse Trading Losses Eclipse Gains in Wealth Management
(Bloomberg) -- Credit Suisse Group AG’s three-year turnaround ended with more of a whimper than a bang after trading losses eroded gains in wealth management and investment banking.
The Global Markets business posted a larger-than-expected loss of 193 million francs ($191 million) in the fourth quarter, offsetting wealth management and investment banking results that beat estimates. In a tough quarter for money managers, the Zurich-based bank bucked a trend of large outflows at rivals, adding about half a billion francs of net new money.
The results at global markets demonstrate continued challenges for Thiam as he seeks to iron out trading losses while pivoting the bank to wealth management and boosting returns for shareholders as he exits the restructuring. Global Markets has steadily become less important as Credit Suisse cut volatile trading activities and wound down areas such as distressed-debt trading after heavy losses early in Thiam’s tenure.
The stock fluctuated between gains and losses in Zurich, trading 1.8 percent lower at 11.80 francs as of 10:45 a.m.
The bank gave a cautious outlook, warning that while it had seen a less negative trading environment in the first quarter compared with the end of the year, it’s still weaker than in the same period a year earlier.
The size of the loss at global markets was about 70 million francs higher than expected, with further losses also coming from the bank’s Asian markets business. Wealth management generated about 13 million francs more than expected in the quarter, while investment banking income was about 25 million francs above estimates.
Thiam made cost cuts and business exits in the trading unit a key pillar of his restructuring since joining in 2015, taking out more than 4 billion francs of costs. The former insurance executive raised more than 10 billion francs ($9.9 billion) in fresh equity, exited businesses and reallocated more of the bank’s risk capital to wealth-management. He’s now shifting the bank to returning capital and freeing up cash for potential growth after funding costs fell.
New Money
While the trading business was buffeted by market volatility and lower client activity in the fourth quarter, both revenue and income held up in wealth management business.
Credit Suisse lost about $60 million late last year after it was left holding shares in luxury parka maker Canada Goose Holdings Inc, people familiar with the matter said last month. That added to trading blunders at other European investment banks, including an $80 million loss at BNP Paribas SA, which occurred on positions the bank took on the S&P 500.
Drive Earnings
Thiam 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.
The bank also posted a loss in its Asia markets business, while doing better than expected at the Swiss unit and beating its 17 billion-franc cost base target for the end of 2018. The bank gave a muted outlook for the year.
“The uncertain political climate in a number of major world economies and the resultant potential disruptions to world trade are clear concerns,” Thiam said in the statement. “We expect to remain resilient in the face of downside risks, and believe we are well positioned to take advantage of any potential upside.
Other highlights of the bank’s results:
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To contact the reporter on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen
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