Credit Suisse defends its division

Credit Suisse defended its global markets trading arm on Thursday, even as losses at the division took the shine off a jump in quarterly profit as the bank wraps up a three-year revamp under CEO Tidjane Thiam.

The unit, the focus of Thiam’s cuts and a source of billions of dollars of losses over years, still has an important role to play after the restructuring to focus on managing billionaires’ wealth and scale back investment banking, Thiam said.

“GM (global markets) is the lowest returning division in the company. In every portfolio, you will have a lowest-returning division,” he said, as analysts probed him over plans for the unit. “The question is really: does the whole work and does the whole generate good returns?”

Switzerland’s second-biggest bank has become more able to absorb trading volatility as it grows wealth management, he said, and further cuts in the global markets business could make it too small to be viable.

Third-quarter group net income jumped 74% to 424-million Swiss francs ($422m), helped by the wind-down of its so-called strategic resolution unit, a home for assets that have been a drag on the bank’s past performance. But that missed analysts’ average estimate of 449-million francs ($446m) in a Reuters poll.

The bank will post a full-year profit for 2018, it said, the first since Thiam took over in 2015.

However, it ditched a 2018 net revenue target of $6bn for its trading division as challenging market conditions — particularly tighter spreads and muted client activity in its credit business — and a restructuring charge pushed the unit to a 96-million franc pretax loss in the quarter.

Revenues of 4.02-billion francs ($4bn) until September lagged what the bank had hoped for, Thiam acknowledged.

Credit Suisse said a $250m cut to funding costs coupled with investments into its equities business should help the division raise returns in 2019.

The company’s shares were down 1.8% late on Thursday morning.