Credit Suisse Sees Strong Q1 Financials as Recovery Plan Accelerates

Credit Suisse's latest financials helped allay a debilitating tax writedown that erased its 2017 profits

Credit Suisse has reported its first-quarter financials, looking to get on track after a US tax writedown effectively erased its entirely yearly gains. In looking at the latest figures, Q1 2018 thus looks to have corroborated CEO Tidjane Thiam’s recovery plan, with several key areas of growth.

The Swiss lender like many other banks has been hard pressed to find positive earnings in recent quarters. Many of them, like Credit Suisse, was hit with a debilitating $2.34 billion (CHF 2.3 billion) US tax write-down that led to a yearly loss. More precisely, Credit Suisse reported its third straight yearly loss in 2017 with a decline of CHF 983 million ($1 billion).

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In the absence of any write-downs or other weights, Credit Suisse’s latest figures were much more upbeat, en route to a pre-tax income of CHF 1.1 billion ($1.12 billion) in Q1 2018, up 57.0 percent year on year. Q1 2018 net income attributable to shareholders came in at CHF 694 million ($707 million), up 16.0 percent relative to 2017. This compares with a CHF 2.1 billion ($2.14 billion) loss in Q4 2017.

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Mr. Thiam commented on the improved financials: “Thanks to the progress made in 2016 and 2017, we are nearing pre-restructuring levels of absolute profit, with a higher- quality, more capital-efficient business mix that can generate growing amounts of capital organically with higher capital velocity and a higher return on capital through the cycle, while consuming less risk capital per unit of income. Our focus on increasing our return on capital, reducing capital consumption and controlling risk should allow us over time to increase the return of capital to shareholders.”

Credit Suisse’s CEO, Tidjane Thiam
(Photo: Bloomberg)

Of note, operating expenses were also on the decline in Q1 2018, falling to CHF 4.5 billion from CHF 4.8 billion a year ago (-6.2 percent year-over-year). The quarter reflected Credit Suisse’s lowest operating costs in the past five years.

The lender continued to see accelerating profit growth in several segments, including its international wealth management (IWM) and Asia-Pacific (APAC) unit. These segments combined for a pre-tax income of CHF 1.3 billion in Q1 2018, up 27.0 percent year-over-year.

Indeed, the restructuring process is well underway, though has not been without its speed bumps. “We have now completed 9 quarters of our 12-quarter restructuring program. 2016, the first year of our program, was a year of deep strategic change and restructuring. 2017 was a year of stabilization and consolidation of the business, and we had planned 2018 to be a year of acceleration in our performance,” noted Thiam.

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