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Trading strength boosts Credit Suisse Q3 results, bringing relief to CEO
CREDIT Suisse Group AG's third-quarter results were boosted by gains at the key trading unit, bringing relief to chief executive officer Tidjane Thiam as he seeks to emerge from a spying scandal that dented the bank's reputation and cost him a key lieutenant.
The Zurich-based bank posted better-than-expected topline growth and profit, while the recovery also continued at the global markets trading unit - once a perennial source of concern for Mr Thiam. The bank struck a more downbeat note for the remainder of the year, saying the US-China trade dispute will lead to more cautious capital expenditure and investment decisions.
Mr Thiam is seeking to move beyond one of the bank's biggest scandals in recent years after the botched surveillance of a former executive sparked an internal investigation and probes by Swiss prosecutors. Chief operating officer Pierre-Olivier Bouee, the CEO's chief lieutenant at three companies, stepped down this month after ordering detectives to shadow former wealth-management head Iqbal Khan to ensure he didn't poach clients and brokers for his new team at UBS Group AG.
"Shareholders have been very much backing the company and it's leadership," Mr Thiam said in an interview with Francine Lacqua on Bloomberg TV. "The action taken was inappropriate, no question about that, and disproportionate," he said of the spying operation, his first public comments since the scandal broke. He said he did not order the action and it hasn't had a discernible impact on the business.
Chairman Urs Rohner said Mr Thiam retains his personal backing and that of the board after the spying affair. The matter had escalated after a personal dispute between Mr Thiam and Mr Khan, with media reports saying the two men had fallen out over the latter's ambition and personal insults at a party earlier this year.
Credit Suisse shares rose slightly in early Zurich trading.
The global markets trading unit, a source of surprise losses in recent years, saw revenue soar and pre-tax profit rise to 269 million francs (S$369 million), almost double what analysts were expecting. The gains were driven by a 63 per cent increase in fixed income trading, while equity trading rose 3 per cent, beating the average gain at US peers.
Inflows at wealth management of 5.6 billion francs missed analyst estimates for almost 7 billion francs, though pre-tax profit of 539 million francs at the international wealth management unit was better than expected. Philipp Wehle, who replaced Mr Khan as head of that business, plans to boost number of private bankers that serve its richest clients.
As part of the emphasis on private banking, Credit Suisse is considering a return to US wealth management after a four-year absence, people familiar with the matter said earlier this month. Talks have focused on adding US$15 billion of assets under management at a new base in Miami, mostly catering to wealthy Latin Americans, the people said.
While Mr Thiam has held off on job cuts like those announced by Deutsche Bank AG and Societe Generale SA, an industry-wide slump in trading and initial public offerings and the prospect of low interest rates for longer may test his resilience.
The bank plans to impose charges on more wealthy clients to spread the pain of negative interest rates and expects to start charging for Swiss franc deposits after imposing a 0.4 per cent fee on euro accounts of more than 1 million euros (S$1.5 million), according to a person with knowledge of the matter.
Mr Thiam has also been devoting more face time to top private bankers in recent months and holding talks on boosting pay as he seeks to prevent defections after Mr Khan's exit, according to people familiar with the matter.
The CEO has been reaching out to the best revenue generators at the international wealth business to discuss compensation and career prospects, paying particular attention to emerging markets such as Brazil, the Middle East and emerging Europe, the people said.
The earnings add to momentum last quarter after the bank had brushed off the gloom in European banking as wealthy clients added new money and revenue from securities trading rose in a quarter in which peers posted declines. Mr Thiam emerged from a painful three-year turnaround six months ago. BLOOMBERG