By John Letzing
ZURICH--Credit Suisse posted an improved profit due in part to a
pick-up at its investment bank, just as the Swiss lender gears up
for the departure of the investment banker-turned-chief executive
at its helm.
Zurich-based Credit Suisse said first-quarter net profit rose
23% from the same period last year. Net revenue rose only 3% and
the bank's capital cushion was slightly depleted following the
recent abrupt rise in value of the Swiss franc.
The quarterly results are the last to be delivered at the bank
by CEO Brady Dougan, who is expected to step aside at the end of
June.
Overall net profit rose to 1.05 billion Swiss francs ($1.1
billion) in the quarter from 859 million francs a year earlier and
against analysts' expectations of 970 million francs.
Nomura analyst Jon Peace said the results were generally
positive, in particular the improved profitability at Credit
Suisse's Private Banking & Wealth Management business, "which
has been sluggish for a while."
"The shares tend to be sensitive to that side of the business,"
Mr. Peace said.
The results reflect a quarter in which the bank has had to
grapple with an abruptly-strengthened franc following a decision in
January by the Swiss central bank to remove a cap on the currency.
Credit Suisse said 29% of its total expenses in the first quarter
were denominated in francs, while only 17% of its net revenue in
the period was denominated in the Swiss currency.
However, Chief Financial Officer David Mathers said the effect
of the currency swing was "limited," because of "proactive actions"
taken by the bank. Credit Suisse said earlier this year it would
cut 200 million francs in costs in response to the central bank's
move, mostly focused on its private banking unit in
Switzerland.
However, there was some impact from the stronger franc.
Credit Suisse said that partly because much of its capital
buffer is denominated in now relatively weaker currencies, its key
capital ratio fell to 10% from 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 health and stability.
The dip prompted Mr. Peace to suggest that incoming CEO Tidjane
Thiam, who is slated to replace Mr. Dougan later this year, may
move to raise fresh capital. A longtime investment banker, Mr.
Dougan has led Credit Suisse as CEO since 2007.
Mr. Thiam's appointment, announced in March, has also stirred
speculation that Credit Suisse may sharply reduce its presence in
investment banking. Credit Suisse maintains an investment bank
roughly three times the size of that at Swiss rival UBS AG.
On Tuesday, Credit Suisse reported that its investment bank
turned in a relatively strong performance, particularly in terms of
trading.
Pretax income at the investment bank rose 14% from a year
earlier to 945 million francs. Net revenue at the unit increased
5%. Revenue from its debt--or fixed-income--sales and trading grew
9%, while equity sales and trading revenue was up 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.
In keeping with its Swiss roots, private banking for wealthy
clients remains key for Credit Suisse. But analysts have complained
in recent quarters about margins reported by the business.
The bank reported on Tuesday that margins in Private Banking
& Wealth Management improved and that its expenses in the
period were the lowest of any first quarter since 2011. While
European clients have continued to pull funds from the bank as they
declare their Swiss accounts to tax authorities at home, business
with clients in Asia helped to offset that trend.
Net new assets among wealth management clients were 7 billion
francs in the period, an improvement from the fourth quarter of
last year but a 34% decline from the figure reported a year
earlier.
Pretax income at the Private Banking & Wealth Management
unit fell 18% from the same period last year, as net revenue
declined 8%. The business's so-called strategic unit, which
includes operations the bank wants to maintain and excludes
litigation costs, saw pretax income fall 3% compared with the same
period last year.
Write to John Letzing at john.letzing@wsj.com
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