Credit Suisse Pegging Growth Hopes on Leverage Finance Space

The bank is strengthening its US and EMEA leveraged finance operations as it moves forward in its restructuring plan.

As the banking industry continues to contract and face lingering headwinds, Credit Suisse has been soldiering forth as it enters the second phase of its multi-year restructuring plan. To date, Switzerland’s second largest lender has managed to weather the storm, opting for less aggressive cost-cutting strategies than its rivals. However, the bank sees grounds for a renewed push in the leveraged finance space as part of a bid to strengthen its global business.

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Credit Suisse, like many lenders, has faced some dire situations over the past few years. Indeed, many banks are facing profitability woes, operational challenges, and mounting labor costs – a trifecta of issues that Credit Suisse has not been entirely immune from. The past few lean years have also followed on the heels of multiple industry-wide scandals, collectively racking up billions in fines for perennial leaders such as Deutsche Bank and others.

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Fast-forwarding to 2017, Credit Suisse has been given a boost with a $4 billion capital raise and upbeat earnings report for Q1 2017. Despite seeing a $2.4 billion loss in the 2016 fiscal year, Credit Suisse allayed these losses, reporting its net revenues at CHF 5.5 billion ($5.5 billion) in Q1 2017, up 19.0 percent year-over-year from Q1 2016.

Leverage finance unit primed for strong performance?

With renewed momentum, the bank has decided to return to its familiar strong suit, leveraged finance. With investors finally calming after a rocky start to the year that saw CEO Tidjane Thiam face blowback over the group’s handling of its bonus structure, the bank has now looked to foster a business as usual strategy. As a means to accomplish this, Credit Suisse sees a competitive advantage in this segment, relative to its rivals.

Nowhere is this truer than in the United States, where Credit Suisse currently ranks in the top four for leveraged-loan origination, and third in the Europe, the Middle East and Africa (EMEA) region. Moving forward, the scaling back of regulations in the US could also kindle growth in the group’s business. Much of the cuts and operational shifts were done with regulations in mind – the prospect of loosened measures could be a panacea for global banks looking to shift their focus in the aftermath of a Brexit with continental Europe.

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