Credit Suisse
DON’T say you didn’t see it coming. Like just about every investment bank that has reported before it, Credit Suisse found the second quarter tough going. The reasons are well-rehearsed: meeker clients lost their verve and volatility took its toll.
Profit before tax in the investment bank was off from SwFr1.66bn last year to SwFr784m, while net revenues tumbled 32 per cent to SwFr4.1bn.
Make no mistake: there was lots to encourage investors that want to stick by Credit Suisse. Its equities division performed well, advisory fees benefited from a thawing M&A environment and the wealth management arm continues to capitalise on the woes of arch rival UBS.
Still, costs are creeping up quickly, increasing by 10 per cent on the previous quarter, as the bank starts to build out its fixed income, currencies and commodities business. Such a bold play seems a little overzealous in these uncertain times.
Instead, Credit Suisse should hold fire. Investors will find its 11.3 per cent Tier 1 capital ratio and 18 per cent return on equity immensely attractive in today’s climate. Ambitions of building a significantly bigger bank should wait – for now.