Credit Suisse Group posted a second consecutive quarterly loss after a tumultuous start to the year prompted Chief Executive Officer Tidjane Thiam to deepen cost cuts at the securities business, hurt by writedowns on trading positions.
Switzerland’s second-biggest bank on Tuesday reported a loss of CHF 302 million ($311 million) in the three months through March, compared with a profit of CHF 1.05 billion a year ago. Analysts predicted a loss of CHF 344 million in that period, according to the average of 10 estimates compiled by Bloomberg.
Thiam, 53, is shrinking the investment bank to free up capital for expanding the bank’s wealth-management business, targeting clients across the Asia-Pacific region. The CEO accelerated the overhaul in March after disclosing more markdowns on high-risk securities and Credit Suisse now sees “subdued market conditions” and low activity are likely persisting in the second quarter “and possibly beyond.”
“In the first quarter of 2016 and particularly in January and February, we operated in some of the most difficult markets on record with volumes and client activity drastically reduced,” Thiam said in the statement. “We remain focused on executing our plan –- cutting costs, investing selectively in profitable growth and managing capital.”
Credit Suisse has been hurt by a market selloff that contributed to shares losing about 38 per cent of their value this year. Deutsche Bank and Barclays, both also in the midst of restructuring programs, have declined 35 per cent and 28 per cent, respectively.
The bank said it achieved more than half of its CHF 1.4 billion in net cost cuts targeted for 2016 in the first quarter and is “confident” to meet or exceed CHF 1.7 billion in gross savings by year end. At the global markets unit, housing securities trading, it eliminated about 1,000 of the 3,500 jobs targeted as part of the overhaul this year.
The unit, led by Tim O’Hara, which helped spark a larger-than-expected shortfall in the fourth quarter as a result of $633 million in writedowns on mainly distressed credit and securitized pools of risky loans, slipped into a loss of CHF 635 million in the first quarter after a pretax profit of CHF 842 million a year earlier.
“The market was largely shut down in January and February owing to concerns over global growth, oil and expanding markets implementing negative rates,” analysts at Macquarie led by Piers Brown, who has an outperform on Credit Suisse, said in a note to clients before Tuesday’s results.
International wealth management had a pretax profit of CHF 270 million, up from CHF 263 million a year earlier, while the Swiss Universal Bank, earmarked for a partial initial public offering in 2017, reported a profit of CHF 426 million, little changed in the year.
Thiam, who joined last year from Britain’s Prudential, tapped shareholders for about CHF 6 billion in November to help fund the bank’s restructuring.
© 2016 Bloomberg L.P
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