Credit Suisse Announces Third Quarter 2015 Results

For Credit Suisse the third quarter of 2015 saw a continuation of both the positive trends seen in 2Q15 – strength in Asia and in equities and strong net new assets – and the negative trends with results impacted adversely by challenging market conditions and low levels of client activity, mainly in the fixed income sales and trading businesses.

The main highlights include:

  • Reported Core pre-tax income of CHF 861 million
  • Reported net income of CHF 779 million
  • Both Private Banking & Wealth Management and Investment Banking results were impacted by low levels of client activity and adverse market conditions
  • Continued strong net new assets of CHF 16.4 billion
  • Substantial leverage reduction in Investment Banking: Year-end target achieved ahead of schedule
Tidjane Thiam, Chief Executive Officer, said: “In the third quarter, difficult market conditions led to low client activity in both our Investment Banking and Private Banking & Wealth Management divisions. This translated into lower profits and was particularly visible in our fixed income sales and trading performance.

The reduction of the capital allocation to the Investment Bank continued, with USD 615.4 billion of leverage exposure at the end of 3Q, thus achieving the year-end 2015 target that was announced in February 2015. We made good progress in our Private Banking & Wealth Management division with strong net new asset inflows across all regions. This is encouraging in an environment in which private clients tend to be cautious about their portfolios.

Mandates penetration continued to increase. The quarter-on-quarter increase in our share of wallet in our Investment Banking advisory business as well as the revenue growth we achieved in our Corporate & Institutional Clients business are a testament to Credit Suisse’s strong relationships with corporate clients and entrepreneurs.”

On the outlook, he said: “The adverse impact of difficult market conditions in the third quarter on client issuance and trading activity has continued so far in October, offsetting a resilient performance by our Asian business and sustained higher net interest income. In the coming months, we will focus on the implementation of our strategy, announced today. Our third-quarter results reinforce the need for a restructuring of the bank aimed at reducing the volatility of our earnings and better aligning the activities of our Investment Bank behind the needs of the clients of our Private Banking & Wealth Management division. Our aim remains to generate long-term, profitable and capital generative growth through the implementation of the strategy and organizational structure announced later today.”

Private Banking & Wealth Management: Strong net asset inflows across all regions

  • Private Banking & Wealth Management with stable net revenues in the strategic businesses compared to 3Q14, with solid contributions from Wealth Management Clients and Corporate & Institutional Clients
  • Total net new assets of CHF 16.4 billion
In 3Q15, Private Banking & Wealth Management reported net revenues of CHF 2,935 million and pre-tax income of CHF 647 million. The strategic businesses of Private Banking & Wealth Management generated pre-tax income of CHF 753 million with stable net revenues of CHF 2,911 million, slightly higher expenses and an increase in provision for credit losses mainly in Corporate & Institutional Clients compared to the third quarter of 2014. Strategic net revenues were stable as higher net interest income offset lower recurring commissions and fees mainly reflecting the deconsolidation of the cards issuing business, and lower transaction- and performance-based revenues. The return on regulatory capital for the strategic businesses was 20% and the cost/income ratio increased to 72%.

Private Banking & Wealth Management recorded strategic net new assets of CHF 17.3 billion and reported net new assets of CHF 16.4 billion in 3Q15. Wealth Management Clients contributed net new assets of CHF 10.5 billion with growth in all regions and balanced contributions from all client segments. In addition, mandates penetration within Wealth Management Clients increased from 17% at the end of 2014 to 21% at the end of 3Q15, reflecting the Credit Suisse Invest sales momentum. Assets under management for Private Banking & Wealth Management decreased by CHF 61.8 billion from the end of 2Q15 to CHF 1,293.9 billion at the end of 3Q15, mainly due to unfavorable market conditions and the introduction of an updated assets under management policy.

Effective July 1, 2015, the Group updated its assets under management policy primarily to introduce more specific criteria and indicators to evaluate whether client assets qualify as assets under management. The introduction of this updated policy resulted in a reclassification of CHF 46.4 billion of assets under management to client assets, which has been reflected as a structural effect in 3Q15. Of the CHF 46.4 billion reclassification, CHF 38.1 billion was in Wealth Management Clients and CHF 8.3 billion was in Corporate & Institutional Clients.

Wealth Management Clients reported a net margin of 23 basis points, 2 basis points lower than in 3Q14, as both quarters were impacted by litigation provisions. Compared to 2Q15, the net margin was down 8 basis points, reflecting lower transaction- and performance-based revenues, the increased litigation provisions and lower recurring commissions and fees, partially offset by a decrease in assets under management and higher net interest income.

Private Banking & Wealth Management’s risk-weighted assets increased by CHF 2.6 billion during the quarter to CHF 108.3 billion, mainly driven by positive foreign exchange movements, model updates and methodology changes, and its leverage exposure decreased by CHF 7.2 billion to CHF 373.0 billion. As of the end of 3Q15, the non-strategic businesses of Private Banking & Wealth Management reported risk-weighted assets of CHF 4.4 billion and leverage exposure of CHF 3.9 billion, both stable compared to the end of 2Q15.

The non-strategic businesses reported a pre-tax loss of CHF 106 million, compared to pre-tax income of CHF 71 million in 3Q14, which included a gain on the sale of Credit Suisse’s domestic private banking business booked in Germany. Operating expenses were CHF 126 million, including costs of CHF 68 million to meet requirements related to the settlements with US authorities regarding US cross-border matters.

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