The chief executive of Credit Suisse Brady Dougan has spread out a vision for a banking industry with lower but more sustainable returns and has assured to never again make losses, according to Financial Times.
Dougan said the firm’s target of an average 15% after-tax return on equity was a much more dependable promise over the long term compared to the sector’s pre-crisis 20 to 30% targets.
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"Our hope is that we will be in the high teens or 20% in the good times and we will still be at above 10% or around the low double-digits in the more difficult times," Dougan told the Financial Times.
Dougan’s words follows as John Reed, the architect of Citicorp’s merger with Travelers Group 15 years ago, who said that banks should stop using return on equity as a yardstick for success.
Reed said: "I think the industry would be healthier if instead of looking at returns they look at p/e ratios."
"The problem with the pre-2007 numbers is that this was not over the cycle, it was just for a bull market period," Dougan said:
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By GlobalData"And when you incorporate 2008, a lot of people had negative returns on equity, obviously the over-the-cycle returns for these business models were significantly impacted by those negative market periods," he added.
Dougan feels secure by the bank’s reported return on equity of 12% in the first half. He added that the bank has adapted to the regulatory environment by focusing on wealth management and creating a more capital efficient and client-focused investment bank.
