Interactive Investor

Profits plunge at Credit Suisse

16th April 2014 14:53

Ceri Jones from interactive investor

First-quarter profit at Credit Suisse fell by more than a third on the year to 859 million Swiss francs (£583million) as revenue from bond-trading plummeted, suggesting the bank needs a radical overhaul of its strategy.

The results echo the decline in fixed income seen recently from US rivals Citigroup and JPMorgan Chase as banks struggle with tighter capital adequacy rules, and set the tone for European rivals such as Barclays and Deutsche which are due to update the market soon.

The bank's bond-trading activities fell by over one fifth and while the phenomenon is almost industry wide, the Swiss bank is not helped by its smaller scale and relatively narrow focus.

Swiss rival UBS, which reorganised its business in 2012 and has just begun outsourcing its fixed income trading platform to two software firms, has a market value over 50% higher than Credit Suisse, even though its earnings are around just 7.5% more.

Credit Suisse CEO Brady Dougan will be fed up with being told he needs to scale back the group's fixed income business, and cut staff in its securities unit where employee compensation and capital requirements are demanding.

On a better note, the firm said it had attracted a meaningful increase in the share of assets under management from ultra-high net worth clients in its wealth management arm.

The bank is also being investigated in two regulatory probes and set aside an additional 107 million francs for legal fees in the quarter - one is for allegedly helping US nationals hide cash from the taxman, and the second is scrutiny from Swiss competition commission, Weko, over alleged collusion to manipulate foreign exchange rates along with seven other banks.

Finance officer David Mathers took the opportunity on Wednesday to say it is convinced of its innocent on this front.

The bank was scheduled to release its first-quarter results in early May, and may have announced them prematurely to be less conspicuous among the raft of US banks reporting at the same time.