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Credit Suisse to buy back stock, raise dividend

Zurich

A YEAR ago, Tidjane Thiam asked Credit Suisse Group AG shareholders to stay with the bank through its restructuring. Those that did may still be left wanting more.

Switzerland's second-largest bank plans to buy back as much as three billion francs (S$4.14 billion) of shares in the next two years, while increasing the dividend by at least 5 per cent a year, it said in a statement ahead of its investor day. While it's on track to deliver on a pledge to boost payouts to investors, that hasn't stopped a 37 per cent slump in the stock this year.

Mr Thiam has pivoted the bank from more volatile trading in favour of wealth management, slashing thousands of jobs and tapping shareholders for billions of francs of funding.

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With his restructuring almost over, he can point to private banking gains even as it grapples with surprise losses and falling trading revenue.

Mr Thiam, in a Bloomberg Television interview, said that the decline in the stock represents a buying opportunity and that 2019 will be the bank's first "clean" year after concluding its restructuring.

While Credit Suisse is far from the only European lender to suffer this year, it is one of the worst performers. The bank has abandoned some targets and continues to suffer from surprise trading losses. Still, there are signs the revamp will bear fruit. Funding costs are set to decline after the bank bought back expensive funding instruments held by Saudi

Arabia and Qatar, while it is also set to complete the wind-down of its bad bank.

Credit Suisse is pledging to pay out at least 50 per cent of earnings to shareholders in 2019 and 2020. The bank paid out a dividend of 0.25 francs per share for 2017 and 0.70 francs the year before. It warned on Wednesday that revenue from its Asia-Pacific markets business may be 8 to 10 per cent lower in 2018 than a year earlier. "Persistent challenging market conditions have not changed our positive long-term outlook; however, we are mindful of the short-term headwinds," it said.

The bank continues to attract inflows at a healthy clip in wealth management, adding about 100 billion francs since the beginning of the restructuring, according to its presentation on Wednesday. It now manages about 785 billion francs, profiting from global wealth which has nearly doubled in the past decade. BLOOMBERG