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The value of the day in Europe - CREDIT SUISSE flouts the health crisis and reorganizes its investment bank
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(hooly-news.com) – Credit Suisse (-0.42% to 9.574 Swiss francs) this morning unveiled good results and announced the merger of its investment banking and market activities. In the second quarter, UBS competitor’s net profit rose 24% to 1.16 billion Swiss francs (1.08 billion euros) while its adjusted taxable profit rose 19% to 1.55 billion Swiss francs. The Bloomberg consensus stood at 717 million for the former. Revenue rose 11% to 6.194 billion Swiss francs from expectations of 5.6 billion.

Credit Suisse owes its good performance to its investment banking activities, which benefited from favorable market conditions.

The Global Markets division, the bank’s trading arm, posted a 71% jump in taxable profit to $ 615 million. In bond brokerage, income rose 42% to $ 1.53 billion while it was flat at $ 572 million for stocks.

The corporate and investment bank saw its taxable profit drop in one year from $ 8 million to $ 212 million.

In view of the very good performance of the first half, the bank plans to distribute the full dividend amount of 0.2776 francs per share as initially proposed to shareholders for the financial year 2019. European banks regulated by the ECB have not not this possibility.

The Board of Directors also intends to review its 2020 share buyback program following the Extraordinary General Meeting, subject to market and economic conditions.

In parallel with this publication, the banking group announced organizational changes.

The Swiss institution will integrate Global Markets, Investment Banking & Capital Markets and APAC Markets in order to create a globally integrated investment bank and thus reach a critical size. It aims for a return on regulatory capital of at least 10% over the medium term.

The Swiss bank has reaffirmed its willingness to continue allocating around two thirds of the capital deployed to asset management in the medium term.

In this context, Credit Suisse has announced CHF 400 million per year in savings from 2022 which will be reinvested in various growth initiatives. This will lead to total restructuring charges of around 300 to 400 million francs.

In the medium term, Credit Suisse anticipates a tangible return on equity falling from 10% to 12% and a hard equity ratio (CET1) of around 12%. At the end of June, the first stood at 11%, up 1.3 points over one year, and the second at 12.5%, stable over one year. The consensus was only 11.6%.

Finally, it still intends to sustainably increase its ordinary dividend by at least 5% per year.

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Finance – Banks

Life is hard for European banks! The latter are first subject to very strict regulation, which imposes on them capital and liquidity constraints (Basel III). American banks, which do not have these constraints, generate higher margins and dominate the lucrative niche of investment banking. In addition, low or zero interest rates weigh on profitability. In addition, there is competition from Fin Tech and Gafa. Moreover, large establishments are buying fintechs to counter this technological threat. But the fight against Facebook and Google, which offer free services by paying for the use of payment data, promises to be very complex.