Commerce

Credit Suisse plans to lend after lower-than-expected Q4 loss

By Brenna Hughes Neghaiwi

ZURICH (Reuters) – Credit Suisse said on Thursday it plans to boost lending volumes and capitalize on the boom in equity listings to shore up its earnings, after low interest rates and legal fees took a hit. pushed the bank into the red in the fourth quarter.

Switzerland’s second-largest lender posted a net loss of 353 million Swiss francs ($392.8 million) last quarter after booking 757 million francs in legal fees, beating analysts’ forecasts for a loss of 566 million Swiss francs. francs but leaving an annual profit down 22%.

The bank is now looking to boost its wealth management business by strengthening its onshore presence in China and expanding elsewhere in Asia-Pacific, chief financial officer David Mathers told Reuters in an interview.

It is also looking to allocate more capital to its international wealth management division outside of Asia to increase lending, and said it saw net interest income begin to stabilize after interest rates fell. put pressure on the company last year.

The bank’s shares were down 0.8% at 1045 GMT, with analysts reporting mixed results.

Earnings cap a tumultuous year for Credit Suisse, which began with the ousting of Tidjane Thiam as chief executive following a spy scandal, then the onset of the pandemic just as his replacement Thomas Gottstein took over. bar.

Wealth managers have largely benefited from bumper deals and client demand for more advice during the COVID-19 pandemic, helping rivals UBS Group AG and Julius Baer Gruppe AG make bumper gains.

Credit Suisse, however, faced setbacks in its core business last year everywhere but Asia.

Outside of Asia, only investment bank Credit Suisse managed to boost earnings in 2020 as higher loan losses, negative interest rate headwinds and a strong Swiss franc weighed on profits.

In the fourth quarter, fixed income trading revenue fell 8% year-on-year to 713 million Swiss francs, while equity sales and trading profits fell 5% to 498 million Swiss francs , underperforming strong gains from some other investment banks. .

Barclays reported a strong year for investment banking on Thursday, with strong earnings from its equity and fixed income businesses in line with its US peers.

Credit Suisse said it started 2021 with its strongest January in a decade, with pre-tax profit up across all divisions and investment banking and trading businesses showing particular strength.

Factoring in the one-time gains that boosted results in 2019 and pulled them back in 2020, he said he would have recorded a 6% pretax profit gain for the last year.

The Zurich-based bank is aiming for 10% annual profit growth in its wealth management business over the next three years.

REVERSAL OF FORTUNES

Gottstein, who became chief executive last February as the novel coronavirus surged in China, is reconfiguring Credit Suisse’s investment banking business and is targeting branch closures and a digital overhaul of its home business to cut costs.

Its standalone international wealth management unit, which covers wealthy clients outside of Asia and Switzerland, saw net income fall 17% in 2020 as one-off trades failed to offset the impact of lower rates interest rates and the decline of the US dollar.

The division was also hit by a 414 million franc writedown in the fourth quarter on a stake in a hedge fund, which impacted its troubled asset management business.

Its private client business in Switzerland, covering both high net worth customers in the home market and the bank’s only retail accounts, saw its pre-tax profit fall 16% due to lower income and higher provisions for loan losses.

At the same time, its Asia-Pacific business saw revenue rise 4% on higher transaction fees and the region’s strongest post-pandemic recovery. This, however, did not offset a jump in loan provisions, resulting in a 10% drop in profits.

In a reversal of fortunes, investment bank Credit Suisse, which has been the subject of overhaul efforts over the past five years, saw its revenue increase in 2020, helping the company achieve its second year. consecutive profit gain.

The bank offered a dividend of 0.2926 francs per share, up 5.4%, and said it began a buyback in January as part of a total of 1.0 to 1.5 billion francs of takeovers it is aiming for this year.

($1 = 0.8987 Swiss francs)

(Reporting by Brenna Hughes Neghaiwi; Editing by Christopher Cushing and Jan Harvey)