Credit Suisse posts loss for first quarter as it restructures

Mr Thiam in March unveiled a second restructuring round at Credit Suisse.
Mr Thiam in March unveiled a second restructuring round at Credit Suisse.

ZURICH • Credit Suisse CEO Tidjane Thiam says he is confident of delivering planned cost cuts this year after a tumultuous first quarter sparked a second quarterly loss.

The bank yesterday reported a loss of 302 million Swiss francs (S$426 million) in the first quarter, against a profit of 1.05 billion francs in the year-earlier period.

Mr Thiam, 53, in March unveiled a second restructuring round, deepening cost cuts and eliminating thousands of jobs to focus on wealth management. While the securities unit reported a loss in the first quarter, hurt by writedowns on high-risk securities, Credit Suisse maintained its key capital ratio, with the CEO signalling it may exceed targets for gross cost savings this year.

Mr Otto Dichtl, an analyst at Stifel Nicolaus Europe, told Bloomberg Television: "Maybe the results are not as bad as some had feared. The CEO is still in the early stages of a restructuring phase and that's usually the time when results are the poorest."

The bank has been hurt by a selloff that eroded about 35 per cent of its market capitalisation this year. Deutsche Bank and Barclays, both also in the midst of restructuring programmes, have declined 33 per cent and 26 per cent, respectively.

The lender's common equity tier 1 ratio, a measure of financial strength, held at 11.4 per cent from the end of last year. Analysts had said the ratio would be a focus for investors, with Morgan Stanley estimating a drop to 11.1 per cent.

Credit Suisse said it achieved more than half of its 1.4 billion francs in net cost cuts targeted for this year in the first quarter, and is looking to meet or exceed 1.7 billion francs in gross savings by the year end. As of yesterday, it had eliminated 3,500 jobs as part of efforts to cut 6,000 positions by the year end, according to a presentation.

Mr Thiam also said in March that traders had taken large, risky positions, catching himself and other top executives off-guard. While he found out about it only in January, the CEO has since taken steps to address losses and shrink the securities unit.

Credit Suisse plans to exit most of the distressed credit, European securitised product trading and long- term illiquid funding. The bank said it is on track to meet its target of cutting risk-weighted assets at the global markets unit to US$60 billion (S$82 billion) by the year end.

Over at the bank's investment banking and capital markets business, led by Mr Jim Amine, the loss widened to 103 million francs from 47 million francs a year ago. The unit saw "muted client activity" in debt and equity underwriting, especially in the first two months, with the market experiencing some of the lowest quarterly issuance volumes since 2009.

The private banking unit of Credit Suisse's international wealth management business had net new asset inflows of 5.4 billion francs in the first quarter, while the strategic resolution unit, which includes businesses the bank is looking to exit, shrank by 13 per cent.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on May 11, 2016, with the headline 'Credit Suisse posts loss for first quarter as it restructures'. Print Edition | Subscribe