Wednesday 11 December 2019 4:32 pm

Credit Suisse cuts profit targets and pivots away from coal

Credit Suisse faces missed targets and losses next year, after the bank cut its profitability target for 2020. 

The Swiss bank expects return on tangible equity – a profitability metric – to be over eight per cent, a drop from previous expectations of 10-11 per cent. 

Read more: Credit Suisse profit doubles amid rise in wealth management

Credit Suisse also expects to post losses at its investment banking and capital markets businesses. Shares were flat after the bank announced lower targets.

The prediction of missed targets comes after CEO Tidjane Thiam restructured the bank to move away from trading, cutting risk by focusing on less volatile wealth management. 

European banks have struggled with negative interest rates, global trade tensions and slow economic growth in Europe.

Deutsche Bank announced on Tuesday that its profit goals were “more ambitious”, while Italian bank, UniCredit SpA is cutting 8,000 jobs to boost returns. 

Credit Suisse withdraws from coal financing

Switzerland’s second largest bank also announced today that it will stop financing the development of new coal-fired power plants, after pressure from environmental campaigners.

In a statement ahead of an investor conference, the bank said it recognises its “share of responsibilities in addressing the challenges of climate change”.

Last week, European climate NGOs published research criticising 307 banks, including Credit Suisse, for providing $159bn in direct loans to coal plant developers.

Credit Suisse provided $370m in loans and $2,300m in underwriting services to companies involved in coal expansion.

Greig Aitken, a coal campaigner at BankTrack, called for Credit Suisse to withdraw completely from coal financing, rather than simply withdrawing financing for new plants.

He told City A.M.: “Credit Suisse’s financial involvement in coal is low compared to many other banks. 

“Given its well-placed position, the bank shouldn’t be hesitating to completely freeze all forms of finance.

“That includes underwriting services for companies planning coal power expansion, as Credit Agricole committed to in June with a far bigger exposure to these kinds of clients.” 

Read more: Only 10 per cent of UK chief executives have financial incentives to tackle climate change

At the UN climate change conference in Madrid this week, Mark Carney, former governor of the Bank of England, said that companies need to prepare for the “transition of the whole economy” to address the climate emergency. 

Carney, who was recently appointed as the UN’s special envoy for climate change and finance, said companies  “need to be rewarded or penalised if they are on the right or wrong side of the transition history”.