ZURICH (Reuters) – Credit Suisse (S:CSGN) on Thursday posted a steeper-than-expected slide in third-quarter profit, as a surge in investment banking failed to offset a slowdown in wealth management and other headwinds it chalked up to exceptional circumstances.
Profit slid 38% during the quarter to 546 million Swiss francs ($602 million) as CS contended with its strongest foreign currency adversities in nearly a decade, along with higher credit loss provisioning and a one-off boost which had flattered last year’s numbers.
That compared with a median forecast of 572 million francs from 17 analysts compiled by the Swiss bank.
A year earlier, Credit Suisse received a 327 million franc revenue boost from the sale of its InvestLab fund platform.
Despite the fall in profits the bank followed rival UBS (S:UBSG) in offering more to shareholders, scheduling up to 1.5 billion francs in share buybacks next year and a 5% rise in the 2020 dividend.
Chief Executive Thomas Gottstein in July announced a round of cost cuts, including merging the global markets trading division and advisory-focused investment banking and capital markets unit, as his first major strategic stamp on the bank.
The newly merged investment banking unit saw pretax profit rise to 370 million francs, with increased trading helping equity and fixed income sales and trading surge 5% and 10%, while capital markets and advisory revenue rose 33%.
A drop in revenue at its international wealth management unit, a sore point in the second quarter, was more pronounced than analysts had anticipated.
Shares fell more than 5% in early trade, hitting a five-month low, as analysts noted disappointing wealth management revenue.
UBS last week posted a doubling of third-quarter profit as ultra-rich clients scrambled to trade and seal deals amid a boom in markets. Smaller peer Julius Baer (S:BAER) also reported strong client inflows.
Unlike Credit Suisse, UBS derives a large portion of revenue from private banking in the United States, a major market which has seen solid growth yet is absent from CS’s otherwise largely global presence.
At Credit Suisse, wealth management suffered from foreign currency moves and lacked one-off items such as the prior year’s InvestLab sale, without which revenue would have risen 5%.
In international wealth management, covering clients outside Switzerland and Asia, bumper trading which has buoyed wealth managers throughout the pandemic failed to offset lower recurring commissions and fees, and falling net interest income.
On conference calls executives conceded lower interest rates and a depressed dollar meant the unit would be more reliant on transaction revenues and higher lending to grow in coming quarters.
The bank aims to grow profit by 10% annually in its international wealth division from next year, particularly through tighter collaboration with its investment bank and greater lending efforts. It earlier this month announced the hiring of former Bank of America Corp (N:BAC) investment bank chief Christian Meissner to co-lead the unit’s advisory efforts.
In its home market, where it is closing roughly a quarter of its branches, Credit Suisse saw adjusted revenue rise 1% during the quarter, recording similar gains in both its corporate business as with retail and private banking clients due to strong transaction activity.
It hopes the introduction of a digital banking app challenging fintechs like Revolut will help grow its retail market share while saving on costs.
Shares in CS have so far this year lost more than a quarter of their value, falling twice as much as those of UBS, but staying ahead of the European banking sector as a whole (SX7P).