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 francs (US$191mil) in the fourth quarter, offsetting wealth management and investment banking results that beat estimates.
The bank added about half a billion 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.
The results demonstrate continued challenges for Thiam as he seeks to iron out losses at the Global Markets business. The unit has steadily become less important since Thiam 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.
Credit Suisse lost about US$60mil 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 a US$80mil loss at BNP Paribas SA, which occurred on positions the bank took on the S&P 500.
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 (US$9.9bil) 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.