Credit Suisse Trims Targets But Says Revamp is Working -- Update
December 07 2016 - 4:08AM
Dow Jones News
By John Letzing
ZURICH-- Credit Suisse Group AG sought on Wednesday to reassure
skeptics that the Swiss bank's overhaul is on track thanks in part
to deeper cost cuts, even as it lowered profit targets issued last
year.
Zurich-based Credit Suisse said that "challenging market
conditions" mean the bank is cutting some profit targets due to
weaker-than-expected performance at investment banking and asset
management businesses. However, goals set for wealth management
units remain unchanged.
"Our strategy is working," said Chief Executive Tidjane Thiam,
while disclosing that Credit Suisse has now eliminated more jobs
than anticipated as part of his strategic shift, and aims to
further slash costs over the next couple of years.
Credit Suisse is in the midst of a dramatic overhaul plotted by
Mr. Thiam, who took office in July 2015. The restructuring, which
has involved focusing on markets in Switzerland and Asia while
emphasizing wealth management at the expense of investment banking,
has been hindered by swooning markets and a loss of confidence
among many investors.
Shares of Credit Suisse rose more than 3% on Wednesday. The
shares have declined about 40% since Mr. Thiam outlined his plans
for a turnaround in October of last year.
Targets set at that time for 2018 included increasing pretax
profit at the International Wealth Management unit to 2.1 billion
Swiss francs ($2.1 billion). That target, due to
lower-than-anticipated performance fees at the unit's asset
management business, has been lowered to 1.8 billion francs, Credit
Suisse said.
While targets for its wealth management business in Asia remain
unchanged, Credit Suisse said a worse-than-anticipated investment
banking result in the region--particularly in equities
trading--means that instead of more than doubling pretax profit at
that unit to 2.1 billion francs by 2018 (compared with 2014), as
had been anticipated, the bank now expects to reach 1.6 billion
francs in pretax profit.
The target of increasing pretax profit at Credit Suisse's
Switzerland-based operation to 2.3 billion francs by 2018, from 1.6
billion francs in 2014, remains unchanged. The bank said on
Wednesday that plans for a partial, initial public offering of
shares in its Swiss unit by next year remain on track. The bank
hopes the offering will raise about 4 billion francs and further
add to its capital cushion.
Credit Suisse said it is ramping up efforts to cut costs, and
now expects the cost of running the bank to be less than 17 billion
francs by 2018, compared with the previous target of less than 18
billion francs. Part of the bank's restructuring has involved plans
for 6,000 job cuts, though the bank said it had actually cut 6,050
positions as of earlier this month. The cuts include thousands of
jobs in Switzerland, where the bank has deep roots going back to
the 19th century and sprawling retail and wealth management
businesses.
Mr. Thiam declined to comment on plans for further job cuts. He
said seeking out "productivity gains" must "become a way of life
for the bank, " and noted that the heads of each business will
introduce a so-called efficiency program as part of investor day
presentations scheduled for Wednesday.
The CEO also indicated that some Credit Suisse investment bank
results may improve in the current quarter, compared with the third
quarter, in both fixed income and equities businesses.
Since the bank set its profit goals last year, Credit Suisse
executives have been forced to concede that hitting them would be
challenging due to worsened market conditions.
Last March, Credit Suisse had to update its restructuring plans
after executives discovered nearly $1 billion in losses that had
piled up at the investment bank's trading business amid a
transition in the unit's leadership.
At that time, Credit Suisse said it would further slash the
amount of risk-weighted assets held at the investment bank, and
would sell about 1 billion francs in assets, including real estate,
to bolster its capital position.
On Wednesday, Credit Suisse said the trading unit, dubbed the
global markets business, is on track to hit its cost goals, and its
"accelerated restructuring" is mostly complete.
Write to John Letzing at john.letzing@wsj.com
(END) Dow Jones Newswires
December 07, 2016 03:53 ET (08:53 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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