In­vest­ment bank loss mars CEO's fi­nal act at Credit Suisse

The Pak Banker - - FRONT PAGE -

Credit Suisse posted its best an­nual profit in nearly a decade on Thurs­day but volatile earn­ings at its in­vest­ment bank and trad­ing di­vi­sions took some of the shine off out­go­ing CEO Tidjane Thiam's swan song.

Thiam quit af­ter a spy­ing scan­dal at the bank sparked a board­room re­volt and will leave for­mally on Fri­day. He will be re­placed by com­pany vet­eran Thomas Gottstein.

Hail­ing a turn­around ini­ti­ated shortly af­ter his ar­rival, Thiam told an­a­lysts Switzer­land's sec­ond-big­gest bank would con­tinue to ben­e­fit from its strat­egy fo­cus­ing on wealth man­age­ment, while main­tain­ing in­vest­ment bank­ing ac­tiv­i­ties to sup­port its business with the world's rich.

"My job de­scrip­tion is not to make my­self in­dis­pens­able, it's to build a suc­cess­ful com­pany. And we're in a good place," he told an­a­lysts on a call. Gottstein, a long­time deal­maker pro­moted un­der Thiam to run the lender's newly cre­ated do­mes­tic unit in 2015, con­firmed the group's com­mit­ment to the strat­egy and tar­gets an­nounced un­der Thiam.

At 3.419 bil­lion Swiss francs ($3.50 bil­lion), the bank's 2019 profit was the best in nearly a decade, but a steeper-than-ex­pected loss in its in­vest­ment bank­ing business and volatil­ity in its mar­kets unit di­vi­sions, where profits re­bounded, un­der­score the chal­lenges facing Gottstein.

Its share price was down 0.4% at 1020 GMT, eas­ing ear­lier losses.

Thiam spent much of his four and a half years at Credit Suisse try­ing to put the lender on a more sta­ble foot­ing, slash­ing costs and ex­it­ing riskier and more cap­i­tal­in­ten­sive in­vest­ment bank­ing ac­tiv­i­ties.

But his le­gacy will be de­fined by the spy­ing con­tro­versy which saw Credit Suisse, one of the high­est­pro­file names in Euro­pean bank­ing, ad­mit to snoop­ing on two for­mer ex­ec­u­tives.

The bank blamed the es­pi­onage on a rogue op­er­a­tion run by one of Thiam's clos­est lieu­tenants. Credit Suisse and Thiam have said the CEO knew noth­ing of the ac­tiv­i­ties.

Facing the press for the last time as CEO, Thiam said he was leav­ing with a "clear con­science", though was apolo­getic for the scan­dal.

"When you lead such a com­plex or­gan­i­sa­tion there are al­ways things one could do bet­ter. I've ex­pressed re­grets in writ­ing over re­cent in­ci­dents. I am very sorry."

Even with the re­struc­tur­ing un­der­taken by Thiam, Credit Suisse is facing a tough op­er­at­ing en­vi­ron­ment with more com­peti­tors now fo­cus­ing on wealth man­age­ment, ul­tra-low in­ter­est rates and the threat from pas­sive in­vest­ing.

The bank low­ered its 2019 and 2020 prof­itabil­ity tar­gets in De­cem­ber, blam­ing a drop in deal­mak­ing, neg­a­tive in­ter­est rates and global trade ten­sions for the climb­down.

At 9%, the bank's re­turn on tan­gi­ble eq­uity (RoTE) for 2019 matched the low­ered ex­pec­ta­tion of above 8% it flagged in De­cem­ber. It had pre­vi­ously tar­geted 10-11%.

Over Thiam's ten­ure, op­er­at­ing costs have fallen by more than 20% while net rev­enue has shrunk nearly 13% since 2014, the last full year be­fore Thiam's ar­rival in July 2015.

For 2019, the group reached a cost/in­come ra­tio of 77.6%, its best since 2010.

The only di­vi­sions to have grown rev­enue since the for­mer Pru­den­tial boss an­nounced an over­haul in late 2015 have been In­ter­na­tional Wealth Man­age­ment (IWM), a stand­alone unit manag­ing money for the rich out­side Asia and Switzer­land, and the Swiss business pre­vi­ously un­der Gottstein.

Fol­low­ing a tough start to 2019, In­ter­na­tional Wealth Man­age­ment saw pri­vate bank­ing rev­enues pick up in the fi­nal quar­ter.

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