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Credit Suisse reaps rewards as wealth business soars
TIDJANE Thiam is reaping the rewards of Credit Suisse'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 Swiss francs (S$19.5 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 per cent to 484 million francs, while overall both profit and revenue at the bank did better than expected.
Mr 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 bank has slashed expenses and cut thousands of jobs - mostly at the trading operations in New York and London - to reduce the reliance on volatile businesses. It's also exited some operations, including private banking in the US.
"We've now completed nine quarters of our 12-quarter restructuring programme," Mr Thiam, who's led the Zurich-based bank for three years, said in a statement on Wednesday.
"2017 was a year of stabilisation and consolidation of the business and we have planned 2018 to be a year of acceleration in our performance."
That's starting to look the case in the bank's wealth management business at least, with Mr Thiam, a former insurance executive, 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.
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 - 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 per cent 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 two 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, Mr 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 programme to buy back as much as two 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 Mr 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 7 per cent at the unit with equity revenues flat and fixed income down slightly. BLOOMBERG