Credit Suisse Surprises on Q2 Profit

credit suisse, results, surprising profits

Credit Suisse's businesses bounced back to profits in the second quarter, defying investor expectations of another loss. The Swiss bank is within striking distance of its year-end target to bolster capital.

The Zurich-based bank reported a net profit of 170 million Swiss francs in the second quarter, which is a sharp drop from the 1.05 billion a year-ago. It's an improvement on the first quarter, when Credit Suisse recorded a net loss of 302 million.

All of Credit Suisse's businesses, which now report Asia and Switzerland as separate units following a restructuring under Chief Executive Tidjane Thiam, contributed profits, though not in equal measure.

 The most recent quarter was also absent of the sizable restructuring costs that marred last quarter.

Winding Down

A unit of the bank that is tasked with disposing of undesirable and no longer strategic assets posted a milder loss – 759 million francs – than in the first quarter, when it suffered a loss of 1.25 billion francs.

The bank said it had made strides in lowering risk as part of capital-bolstering efforts after the sale of a U.S. distressed trading portfolio to an undisclosed buyer as well as by reducing its stock of illiquid assets.

Drop in Tax Rate

The results appear to have been smoothed by a far more favorable tax rate than the past quarters: Credit Suisse paid an effective 10.6 percent tax rate in the current quarter, compared with 37 percent in the first quarter and 35.6 percent year-ago.

Credit Suisse's capital, a key metric for investors who want to see evidence that the bank is improving its solidity, rose by 40 basis points to 11.8 percent. This is within striking distance of the upper end of its full-year target of 11 to 12 percent.

Private Bank Lackluster

«Our cost cutting program is progressing at pace, and we are working hard to build a more flexible, more resilient and more efficient bank that is fit for the new post-crisis regulatory and economic environment,» CEO Thiam said in a statement.

Credit Suisse's Swiss bank unit, set for disposal as soon as late next year, posted a nearly 5 percent rise in profit to 453 million francs from the first quarter.

Its private bank was more lackluster, with pretax profit dropping more than 18 percent on the quarter to 245 million francs.

Asia Softer

Business in Asia was also softer: the unit posted a nearly 22 percent drop in pretax profits to 206 million francs. Both of Credit Suisse's securities and investment banking units bounced back to a modest profit from a first-quarter loss.

Its private bank in Asia won 5 billion francs in fresh assets from clients, and Credit Suisse said it has added 100 relationship managers in the last 12 months in the region, bringing the total to 650 private bankers.

More to follow 

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