By John Letzing
ZURICH-- Credit Suisse Group AG said its net profit rose 23% in
the first quarter of the year, as the Swiss lender saw a pickup at
its investment bank and continued to rein in costs.
Overall net revenue increased by just 3%, the bank said, as its
Private Banking & Wealth Management business saw declines in
the period.
And Zurich-based Credit Suisse also saw its capital cushion
slightly depleted in the quarter, thanks to the recent, abrupt rise
in value of the Swiss franc.
Net profit rose to 1.05 billion Swiss francs ($1.1 billion) in
the quarter, compared with 859 million francs in the same period
last year, Credit Suisse said. Analysts had expected the bank to
report a net profit of 970 million francs.
Credit Suisse's results reflect a quarter in which the bank has
had to grapple with an abruptly strengthened Swiss franc following
the decision in January by the Swiss central bank to remove a cap
on the currency. The currency swing has been expected to have a
significant impact on Credit Suisse and other Swiss banks, which
account for much of their costs in francs while deriving revenue in
dollars and euros.
On Tuesday, Credit Suisse said that because much of its capital
buffer is denominated in now relatively weaker currencies such as
euros and other factors, its key capital ratio fell to 10% compared
with 10.1% in the fourth quarter of last year. The metric is
closely watched by regulators and Credit Suisse shareholders as a
measure of the bank's financial health and stability.
Credit Suisse has sought recently to bolster the margins at its
Private Banking & Wealth Management business, as European
clients have continued to pull funds from the bank as they declare
their Swiss accounts to tax authorities at home. On Tuesday, Credit
Suisse said pretax income at its Private Banking & Wealth
Management unit fell 18% from the same period last year, as net
revenue declined 8%. However, the business saw 17 billion francs in
net new assets in the period, compared with 13.7 billion francs in
the first quarter of last year.
While private banking for well-heeled clients remains key for
Credit Suisse, in keeping with its Swiss roots, it still maintains
an investment bank roughly three times the size of that at Swiss
rival UBS AG.
Credit Suisse said pretax income at its investment bank rose 14%
from a year earlier, to 945 million francs. Net revenue at the unit
rose 5%. While Credit Suisse has eliminated marginal parts of its
investment bank lately, it has retained a significant presence in
debt and equities trading. Credit Suisse said Tuesday that revenue
from its debt--or fixed-income--sales and trading rose 9% compared
with the period last year. Equity sales and trading revenue rose
11%.
The first quarter of the year is generally a relatively strong
one for investment banks. Credit Suisse's results were preceded by
strong investment banking performances reported recently by peers
including Goldman Sachs Group Inc.
Credit Suisse Chief Executive Brady Dougan will be replaced by
Prudential PLC CEO Tidjane Thiam at the end of June, as part of a
transition announced last month. The move has generally been
well-received, and analysts have suggested it could lead to a more
significant reduction of Credit Suisse's relatively high-risk
investment banking unit.
Credit Suisse has also been in the midst of a cost-cutting
initiative began in 2011. That initiative is expected to see as
much as 4.25 billion francs in cost savings by the end of this
year, the bank said, even as compliance and regulatory costs
continue to rise.
Write to John Letzing at john.letzing@wsj.com
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