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Zurich - Credit Suisse chief executive officer (CEO) Tidjane Thiam said the bank is mulling further cost reductions at the global markets unit that blindsided him with losses earlier this year.
“In global markets, having completed the right-sizing of a division in terms of capital consumption, we’re working” with Brian Chin, who runs the division, “to identify further structural cost savings that will increase further profitability,” Thiam said at a conference in London on Tuesday. The unit, housing securities trading, will probably post a third-quarter profit, he said.
Thiam, 54, accelerated cuts to the trading unit in March, announcing plans to eliminate some 6 000 jobs across the bank, after volatile markets prompted the company to write off about $1bn on risky securities over six months.
With regulators toughening scrutiny of riskier activities and negative interest rates eroding earnings across Europe, the CEO is seeking to boost profitability by focusing on Asia-led wealth management.
“I’m not surprised that they’re cutting back in the global markets unit,” said Chirantan Barua, an analyst at Sanford C. Bernstein with an underperform rating on the shares. “Securities units will be a permanent restructuring fixture among European banks. It’s not a good environment to deleverage - it’s a tough market.”
The shares fell 3.9% to 12.30 Swiss francs at 14:12, making it the worst performer on the 38-member Bloomberg Europe Banks and Financial Services Index, which slipped 0.9%.
Europe’s largest lenders have been under pressure to restructure their trading units as volatile markets erode revenue. At Deutsche Bank AG, CEO John Cryan has been eliminating jobs, suspending dividend payments and cutting risky assets, while Barclays CEO Jes Staley has pledged to focus on more profitable parts of the business such as consumer banking.
Chin was promoted to replace Timothy O’Hara as head of global markets, the company’s largest division, earlier this month.
The global markets unit posted a pretax profit of 154 million francs in the second quarter after a loss in the previous three months, with Thiam signaling on Tuesday that he’s confident that the business will be able to beat a 2016 target of lowering operating costs by 6 billion francs.
‘Notoriously Volatile’
The CEO said he’s “pleased” with the performance of the investment banking and capital markets division, led by Jim Amine.
“Given the more lumpy nature of mergers and acquisitions fees, of course, the third quarter will see some timing disparity between these announced transactions and revenue recognition,” he said. “And I don’t want to read too much into quarterly results in an activity that is notoriously volatile.”
The CEO also said that the bank suffered some outflows in Switzerland in the third quarter as it exits partnerships with external asset managers that are considered too risky or too small.
“This is because we are looking for - a polite word - we are going through our relationships with the external asset managers and, let’s say, pruning them to make sure that we only keep the desirable ones,” he said. “Our ambition is to be a wealth manager for very successful wealthy people, to be in Switzerland as a safe haven, but not to offer opacity.”
Since taking over in July 2015, Thiam has been seeking to reverse a slide in the shares that has erased about 43% of the bank’s market value this year. The bank is “on track” to meet a target of reducing net costs by 1.4 billion francs in 2016, with Thiam saying he’s confident of Credit Suisse achieving another 1 200 job cuts to meet its full-year goal.
The Zurich-based bank is scheduled to release third-quarter earnings on November 3, followed by an investor day on December 7.
