Credit Suisse falls on weak client activity
CREDIT Suisse shares fell yesterday after the bank disappointed investors with news of ongoing weakness in its private client division and crumbling investment banking income.
Analysts had expected the slump in pre-tax corporate finance earnings, which more than halved quarter-on-quarter to SwFr784m (£492m), but were surprised by the poor performance from Credit Suisse’s traditionally reliable private banking arm.
Pre-tax income slipped two per cent to SwFr874m as flat revenues were eroded by a nine per cent increase in operating expenses. Observers said the institution was throwing resources at client relationships at a time when Switzerland’s reputation for secrecy could no longer be relied upon to attract cash.
Credit Suisse’s margin on assets under management was almost unchanged at 120 basis points.
Christian Stark of stockbroker Chevreux said: “Most people were looking for upside on
the private banking side and that’s probably the main reason the shares went down.
Margins were flat, costs went up and there wasn’t much sign of improvement in terms of client activity.”
Credit Suisse’s group net income came in at SwFr1.6bn, up one per cent year-on-year but down 24 per cent compared to the first three months of the year. Net inflows fell 44 per cent quarter-on-quarter. Shares in Credit Suisse dropped one per cent to close at SwFr43.80 in Zürich.
Chief executive Brady Dougan described the figures as “a resilient performance during a difficult second quarter for the banking sector”.
But sell-side pundits were downbeat, seeing few causes for hope in the second half. Peter Thorne of Helvea said all eyes would be on private client activity, but remarked it was highly geared to broader macroeconomic conditions.