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October 29, 2020

Credit Suisse Q3 profit plunges on wealth management slowdown

Credit Suisse has reported a 38% slump in net profit in Q3 2020, missing analyst expectations, with the exclusion of a one-off gain that lifted last year’s performance.

The performance was also hit by lacklustre performance in wealth management, that outweighed strong investment banking performance.

How the bank fared in Q3 2020

The Swiss wealth manager’s net income attributable to shareholders was CHF546m (around $600m) in the three months to September 2020, versus CHF881m a year ago and CHF1.16bn in the previous quarter.

Last year’s performance included a CHF327m gain on the sale of its InvestLab business-to-business investment fund platform to Allfunds.

Pre-tax income decreased 30% to CHF803m in the July-September quarter from CHF1.14bn in the prior year.

Net revenues dropped 2% CHF5.2bn to CHF5.32bn. Total operating expenses rose 5% year-on-year to CHF4.3bn though it was less than the preceding quarter.

Loan loss provisions dropped to CHF94 from CHF296m in the previous quarter though it was still higher than previous year’s figure of CHF72m.

The firm’s CET1 ratio – a key measure of strength – improved to 13% in Q3 20 from 12.5% in Q2 20 while tier 1 leverage ratio rose to 6.3% from 6.2% over the period.

Assets under management totalled CHF1.5trn at the end of September 2020.

Total net new assets reached CHF18bn, with Swiss Universal Bank (SUB) contributing CHF5.5bn, International Wealth Management (IWM) CHF11.9bn, and Asia Pacific (APAC) ion accounting for CHF2.2bn.

In Q3 2020, wealth management businesses reported a 10% decrease in net revenues to CHF2.3bn. Global investment banking revenues increased 12% to $2.4bn, led by Capital Markets & Advisory.

Divisional performance

On a reported basis, SUB’s Pre-tax income dropped 24% to CHF430 from CHF569m while net revenues fell 6% year-on-year to CHF1.29bn.

IWM’s pre-tax income plunged 58% to CHF215m from CHF515m and net revenues declined 20% to CHF1.14bn.

In APAC, pre-tax income of CHF177m was down 34% from the prior year while net revenues fell 7% to CHF728m.

Credit Suisse Group CEO Thomas Gottstein said: “Despite the COVID-19 pandemic and significant foreign exchange headwinds due to the strong Swiss franc, our performance in the first nine months of this year has been strong, delivering a 5% growth in net revenues year on year, and a pre-tax income of CHF 3.6 billion, up 1%.

“On an adjusted basis and excluding significant items, pre-tax income was up 10% year on year. Net income attributable to shareholders for the first nine months was CHF 3.0 billion, resulting in an RoTE of 9.8%.”

The board has also expressed interest in distributing the second tranche of its dividend and also plans to resume share buybacks in January next year.

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