Credit Suisse on Thursday said it plans to up lending volumes and capitalise on a boom in share listings to shore up revenue, after low interest rates and legal charges tipped the bank into the red in the fourth quarter.
Switzerland’s second-largest lender posted a 353 million Swiss franc ($392.8 million) net loss for the last quarter after booking 757 million francs in legal charges, beating analysts’ forecasts for a 566 million franc loss but leaving annual profit down 22%.
The bank is now looking to boost its wealth management business by building up its China onshore presence and expanding elsewhere in Asia-Pacific, Chief Financial Officer David Mathers said.
It is also looking to allocate more capital to its international wealth management division outside Asia to ramp up lending, and said it saw net interest income beginning to steady after interest rates put pressure on the business last year.
The bank’s shares were down 0.8% by 1045 GMT, as analysts pointed to mixed results.
The earnings cap a tumultuous year for Credit Suisse, which began with the ousting of Tidjane Thiam as chief executive over a spying scandal, and then the onset of the pandemic just as his replacement Thomas Gottstein took the helm.
Wealth managers have profited richly from bumper trading and client demand for greater counsel during the COVID-19 pandemic, helping rivals UBS Group AG and Julius Baer Gruppe AG post windfall gains.
Credit Suisse however faced setbacks in its core business last year everywhere except Asia.
Outside Asia, only Credit Suisse’s investment bank managed to increase profits in 2020, as higher expected lending losses, headwinds from negative interest rates and a strong Swiss franc bit into earnings.
In the fourth quarter, revenue from fixed-income trading was down 8% year-on-year at 713 million Swiss francs, while equity sales and trading earnings were 5% lower at 498 million Swiss francs, underpeforming strong gains at some other investment banks.
Barclays on Thursday reported a stellar investment banking year, with strong revenues from its equities and fixed income businesses in line with U.S. peers.
Credit Suisse said it had started 2021 with its strongest January in a decade, with pre-tax income up across all divisions and investment bank and trading activities showing particular strength.
Factoring out one-off gains that boosted results in 2019 and set it back in 2020, it said it would have seen a 6% pre-tax profit gain for last year.
The Zurich-based bank is targeting 10% annual earnings 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 was surging in China, is reconfiguring Credit Suisse’s investment banking business and targets branch closures and a digital overhaul of its home business to cut costs.
Its standalone international wealth management unit, which covers rich clients outside Asia and Switzerland, saw net revenue fall 17% in 2020 as bumper trading failed to offset the impact of lower interest rates and a depressed U.S. dollar.
The division was also hit by a 414 million franc fourth-quarter impairment on a hedge fund equity stake, which impacted its struggling asset management business.
Its Swiss private client business, covering both wealthy home-market customers and the bank’s only retail accounts, saw pre-tax profit dip 16% on weaker revenue and higher provisions for loan losses.
Its Asia-Pacific business meanwhile saw revenue rise 4% on higher transaction fees and the region’s stronger recovery from the pandemic. That however failed to offset a jump in lending provisions, resulting in a 10% profit decline.
In a reversal of fortunes, Credit Suisse’s investment bank, which has been the focus of overhaul efforts over the past five years, saw a surge in 2020 revenue, helping the business to its second consecutive year of profit gain.
The bank proposed a dividend of 0.2926 francs per share, up 5.4%, and said it had started a buyback in January as part of a total 1.0 billion-1.5 billion francs in buybacks it is targeting for this year.
($1 = 0.8987 Swiss francs)