ZURICH: Credit Suisse Group AG’s turnaround is running out of steam just as the bank enters the final stretch of its overhaul.
Revenue and net income missed estimates in the third quarter, and the global markets business – one of the most difficult challenges of chief executive officer Tidjane Thiam’s three-year tenure -- posted an unexpected loss.
Thiam has promised to return half the bank’s profit, mainly through buy-backs or special dividends, once the lender strengthens capital generation from next year. Scaling down Global Markets – once one of the strongest trading units on Wall Street – and restoring profitability has been a key project of Thiam’s.
The loss is likely to add to fresh questions about the future of the business.
Credit Suisse has focused on boosting the wealth management business and dealing with legacy issues – including a settlement with the Department of Justice over the sale of faulty securities - and the buyback of expensive capital instruments from key shareholders.
Thiam, though, still needs to reassure investors on how the bank will boost growth.
Since Thiam joined from insurer Prudential Plc he’s exited multiple business lines in global markets from distressed-debt trading to securitized product trading in Europe.
The unit is targeting revenue of US$6bil this year and has a return target of 10% to 15%.
Credit Suisse is buying back about 5.9 billion francs (US$6bil) of debt issued after the financial crisis to the Qatar Investment Authority and Saudi Arabia’s Olayan family to cut funding costs.
It’s another sign of Credit Suisse’s emergence from the restructuring that’s cut its reliance on investment banking in favor of a pivot to wealth management.
Thiam is refocusing the bank as new regulations after the financial crisis - including higher capital requirements - forced it to abandon the investment bank-led strategy.
Credit Suisse, in the final quarter of a sweeping three-year restructuring, has been allocating more capital toward its wealth-management divisions that cater to the rich across the world at the expense of trading operations in New York and London. — Bloomberg