Credit Suisse shares fall after Miss Mark results

In the third quarter, Credit Suisse's net profit rose 74 percent to 424 million Swiss francs ($ 421.3 million), the second-largest bank in Switzerland. Revenues amounted to 4.89 billion Swiss francs, compared to 4.97 billion Swiss francs the previous year.

Combined with first-half profits, the latest results allow Credit Suisse to move closer to its first annual profit in four years. Some analysts have nevertheless judged the results disappointing: their profits were below expectations of 447 million Swiss francs and their turnover lower than their forecast of 5.02 billion Swiss francs.

The results "are irrelevant, worse compared to their peers," said Vontobel Research analysts. "Global markets are again disappointed and continue to underperform their peers."

Credit Suisse shares lost more than 4% early in the session but recovered some of these losses. Citi analysts called the stock price plunge "gifted" and pointed to the strengths of companies other than global markets, including an increase in new capital in wealth management.

"The environment was tough this summer," said Credit Suisse Managing Director Tidjane Thiam, citing emerging market volatility, rising US interest rates, trade tensions and "significant political uncertainties".

"This has resulted in a decline in customer activity that has aggravated the expected slowdown in the summer as usual," he said, which allowed the bank to "demonstrate the resilience of our new business model".

Credit Suisse is in the final stages of a three-year restructuring initiated by Mr. Thiam shortly after his entry into the bank, strengthening his wealth management business while streamlining his operations. investment bank. However, the process was chaotic as Credit Suisse liquidated its toxic assets and paid billions of dollars in settlements to the US authorities for mortgage-backed securities in times of crisis.

The great rival of Credit Suisse

UBS Group
AG

Switzerland's largest bank has also struggled to convince investors that it is growing steadily. Its own restructuring in wealth management took place many years before Credit Suisse. Although its profitability and share price have performed better in recent years, its share price has been down 25% over the last three years.

Last week, UBS CEO, Sergio Ermotti, bought a million UBS shares for about 13 million Swiss francs a day after the publication of the results of the bank and investors.

In the case of Credit Suisse, the cascade of restructuring charges, legal settlements and, last year, changes in US taxation that forced many banks to write down the value of deferred tax assets pushed the lender Switzerland at a consecutive annual loss of three years. Unless unforeseen shock this quarter, Credit Suisse is expected to break this series this year.

However, doubts remain in the market if the restructuring process has put Credit Suisse on the path to strong growth. Although the share price has risen compared to the summer of 2016, while it was less than 10 francs per share, it remains about 40% lower than its current level. three years ago.

The pre-tax income of the bank's international wealth management business grew about 6%, while the investment banking division doubled pre-tax revenues to 70 million Swiss francs. However, the bank's Global Markets unit recorded a pre-tax loss of 96 million Swiss francs.

Part of this was due to new equity issues in 2017 when the bank raised its capital. The bank's chief financial officer, David Mathers, pointed to another problem: the great weakness of the neighboring European Union has had repercussions on Switzerland.

"The trends observed in Switzerland are much more positive than in the EU," he said. "Nevertheless, we are billed and valued as a European bank despite the strength of our business elsewhere."

Write to Brian Blackstone at [email protected] and Pietro Lombardi at [email protected]