Credit Suisse Q1 profit rises 23% on healthy trading

Credit Suisse’s first-quarter net profit rose 23 per cent, exceeding analysts’ expectations, after market volatility boosted securities trading and on gains at its private bank for wealthy clients.

Zurich-based Credit Suisse, the first European investment bank to report quarterly earnings, said net profit stood at 1.054 billion Swiss francs (€1.02 billion) from 859 million francs last year, beating the average 1.034 billion francs estimate in a Reuters poll of analysts.

A gain on the accounting value of the Swiss bank’s own debt of 117 million francs also contributed to the result.

The resurgence in dealing revenues echoes a similar trend on Wall Street and comes weeks before Tidjane Thiam, currently head of British insurer Prudential, takes over as chief executive of the bank from company veteran Brady Dougan.

The CEO changeover has prompted speculation that the Swiss bank, which has already scaled back its investment banking division, mainly in fixed income, could cut the unit again to try to balance it more evenly with its private banking arm.

New capital rules and more electronic trading have squeezed revenue from fixed income, currencies and commodities trading, or FICC, putting banks like Credit Suisse under pressure to carefully scrutinise which activities can turn an adequate profit to justify their capital requirements.

Shares in Credit Suisse have risen 16 per cent since Thiam was announced as Dougan's successor, though year-to-date the stock's nearly 7 per cent rise still lags that of crosstown rival UBS, which has climbed more than 11 percent.

US investment banking rivals such as Goldman Sachs reported healthy results for the quarter after notching up big trading gains.

The first quarter is traditionally a strong one for most investment banks, and this year the Swiss National Bank's abandonment of a currency cap, a flood of European Central Bank money, and expectations for a US rate hike were a boon for volatility.

Credit Suisse’s private bank, which caters to the financial needs of the wealthy, is the fourth-largest in the world, according to an annual benchmark compiled by Scorpio Partnership, but it is far smaller than UBS’s. The unit won 7 billion francs in net new money from clients in the quarter, which is a key bellwether for future revenue.

Credit Suisse, which last year became the largest bank in decades to plead guilty to a US criminal charge and will pay more than $2.5 billion in penalties for helping Americans evade taxes, said on Tuesday future legal problems not covered by provisions could cost it up to 1.8 billion francs.

Reuters