MORE than ever before, banks must be wishing they could simply play their first-quarter performances on repeat.
Judging by business activity so far this year, Credit Suisse is now delivering returns comfortably within its target range, having booked a return on equity of 15.9 per cent during the first quarter of this year – once you strip out a theoretical accounting loss.
That is well above most banks’ cost of capital (which is generally around 10 or 11 per cent), even in these febrile times. Many British banks have, by contrast, been forced to slash their returns targets from 12-15 per cent to a break-even level.
But it is just as well that Credit Suisse chief executive Brady Dougan is using the relatively fat times to get ahead on cost-cutting – annualised savings are now SFr1.5bn, more than the slated SFr1.2bn.
Like his American rivals, Dougan admitted this quarter’s performance is not sustainable. Already, activity levels are falling off, he told investors, as the confidence bought by the European Central Bank’s €1 trillion cash injection in December starts to wane.
And even the bumper first quarter has delivered revenues below levels seen in 2011: they have fallen by 26 per cent compared to the first quarter of last year.
With the post-2008 trend very clear, it is little wonder that investors showed little enthusiasm for the bank’s stock yesterday. A widely expected new cull of investment bankers failed to materialise. Instead the bank has bought back some of its debt and said its overhaul is on target.
The debt buyback follows several other clever schemes, like issuing new convertible bonds and transferring bankers’ bonus pots into a new-fangled fund. But the truth is that jiggery pokery will only get you so far in a post-2008 world.