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Credit Suisse trading losses eclipse wealth management gains

Zurich

TIDJANE Thiam's three-year restructuring at Credit Suisse Group ended with the bank still confronting an old issue: trading losses dragging down gains in wealth management.

Global markets posted a larger-than-expected loss of 193 million Swiss francs (S$260 million) in the fourth quarter, offsetting wealth management and investment banking results that beat estimates.

The bank added about half a billion Swiss francs of net new money in the final stretch of the year - bucking a trend that had seen competitors post large outflows - and said that it has seen a recovery of assets under management in January after sharp declines in December.

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The results demonstrate continued challenges for Mr Thiam as he seeks to iron out losses at the global markets business. The unit has steadily become less important since he sought to cut volatile trading activities in the past three years and pivot more to managing money.

The bank exited distressed-debt trading after heavy losses at the beginning of his tenure in 2015 and has also slashed other areas such as trading of securitised products in Europe.

The stock was trading 0.9 per cent higher as at 9.08 am in Zurich.

Credit Suisse lost about US$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 US$80 million loss at BNP Paribas SA, which occurred on positions the bank took on the S&P 500.

Mr 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 Swiss francs of costs.

The former insurance executive raised more than 10 billion Swiss francs in fresh equity, exited businesses such as distressed-debt trading after heavy losses 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.

While the trading business was buffeted by market volatility and lower client activity in the fourth quarter, earnings held up at the wealth management business, with better than expected results for both revenue and income.

Mr 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-Swiss-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," Mr 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." BLOOMBERG