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  • Jul 26, 2014
  • Updated: 5:15am
BusinessBanking & Finance
EARNINGS

Credit Suisse misses estimates with 34pc profit fall

PUBLISHED : Thursday, 17 April, 2014, 1:09am
UPDATED : Thursday, 17 April, 2014, 4:59am

Credit Suisse Group, the second-biggest Swiss bank, reported a 34 per cent decline in first-quarter profit, missing analysts' estimates, as earnings at the investment bank dropped.

Net income decreased to 859 million Swiss francs (HK$7.5 billion) from 1.3 billion francs in the year-earlier quarter, the company said.

Credit Suisse tumbled in Swiss trading after earnings missed the 1.09 billion franc estimate of seven analysts surveyed.

Chief executive Brady Dougan last year split up divisions into businesses that he wants to keep and those that he plans to sell or run down. Earnings in the quarter suffered from a decline in revenue from debt trading that also weighed on profit at JP Morgan Chase.

"This was a miss led by fixed-income and equity trading, with a slight beat in wealth management on cost control and in-line performance in retail and asset management," wrote Jon Peace, an analyst at Nomura, in a note to clients.

The bank is valued lower than Zurich neighbour UBS and the gap has widened since the latter's decision in 2012 to exit most debt trading, data shows.

Dougan said the bank intended to deliver cash returns to shareholders "at or above 2013 levels". Credit Suisse plans to pay a dividend of 70 centimes a share for 2013.

The investment bank posted a 36 per cent decline in pre-tax profit to 827 million francs, missing the 1.02 billion franc average estimate of seven analysts. Revenue from debt trading dropped 25 per cent to 1.49 billion francs on a lower contribution from rates and emerging markets businesses, while equities revenue fell 7.4 per cent to 1.2 billion francs.

Dougan said in an interview that the bank focused on results from strategic businesses it wanted to keep and called performance at the investment bank on that level "very strong".

The investment bank's strategic business posted a 27 per cent drop in first-quarter pre-tax profit and a 21 per cent return on capital, compared with 28 per cent in the year-earlier quarter.

"The results [yesterday] are disappointing," JP Morgan analysts Kian Abouhossein and Amit Ranjan said in a note.

"We are more concerned about the long-term investment bank strategy of Credit Suisse," they said, adding that the bank should shrink its fixed-income business further.

Citigroup and JP Morgan, which posted earnings earlier this month, saw the combined revenue from their fixed-income businesses fall 19 per cent from a year earlier.

JP Morgan had the highest revenue from fixed income in 2013, with Citigroup posting the second-highest, in a group of nine investment banks. The two banks' combined revenue from equity trading rose 2.8 per cent from a year earlier.

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