Credit Suisse beats forecasts for first quarter

Swiss banking giant Credit Suisse says a strong performance by its investment banking unit helped first quarter net profit rise by 23 percent to 1.05 billion francs ($1.1 billion), outstripping forecasts by analysts.

Credit Suisse beats forecasts for first quarter
Credit Suisse's private banking unit boosted the bottom line. Photo: AFP

Its investment bank on Tuesday announced a 14 percent rise in pre-tax profits to 945 million francs.
CEO Brady Dougan said that while trading revenue was higher than last year, the bank had a "difficult start to the year" due to a slowdown in underwriting only to benefit from later volatility in the markets.
The Swiss central bank shocked domestic and global markets with its decision on January 15th to end three years of efforts to hold down the value of the Swiss franc against the euro, sending the currency soaring.
"Our swift and proactive response to the changed currency and interest rate environment post the Swiss National Bank's announcement, combined with an improvement in market activity, mitigated the impact on our results and led to higher revenues in our Wealth Management Clients business," said Dougan.
"In our well-diversified Investment Banking franchise, we achieved consistent strategic results and reported a return on regulatory capital of 19 percent, despite further significant deleveraging."
Dougan, who was presenting his last quarterly results, sounded an optimistic note on the coming three months and the rest of the year.
"Looking at the second quarter to date, the momentum in the businesses has carried over from the first quarter, with an improving trend in underwriting and advisory," he said.
"We remain committed to our capital and leverage goals and expect to make further progress in executing our strategic initiatives over the balance of 2015."
Dougan will make way for the Franco-Ivorian Tidjane Thiam, now head of the British insurer Prudential, in June.

Restructuring expected 

Investors are betting that Thiam will downsize the bank, Switzerland's second largest, more decisively to focus on wealth management.
"Following the appointment of the new CEO Tidjane Thiam, we've been hearing some rumours that, in June, he could cut up to 3,000 jobs in the Investment Banking department, which would be in line with the deleveraging strategy," said Laurent Bakhtiari, a market analyst at IG.
But he said the bank's CET1 ratio — a measurement of a bank's core equity capital compared with its total risk-weighted assets — came out lower than expected in the first quarter.
"The deleveraging measures should have been stronger," he said.
"The new ones, which will have to be implemented by Brady Dougan and then by the new CEO, will be closely scrutinized, so there is still more to come on that front until the end of the year."
American banks have recently reported solid first quarters thanks to a rise in their brokerage activities, with Morgan Stanley reporting a 59 rise in profits for the first quarter, the highest since the financial crisis of 2008.

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Probe unearths second spying case at Credit Suisse

An internal Credit Suisse probe confirmed Monday that a second executive had been spied on, following earlier revelations that the bank's former head of wealth management was tailed by private investigators.

Probe unearths second spying case at Credit Suisse
Photo: Depositphotos

But Switzerland's number two bank maintained that just one senior leader, who has since been forced out, was entirely to blame for both incidents and that rest of the top brass had not been aware of the activities. 

Releasing the investigation conducted by the Homburger law firm, Credit Suisse said that “it has been confirmed that Peter Goerke, who was a Member of the Executive Board at the time, was placed under observation by a third-party firm on behalf of Credit Suisse for a period of several days in February 2019.”

The probe was launched following media reports last week that spying at Credit Suisse ran deeper than one case.

The banking giant was shaken by the discovery last September that surveillance had been ordered on star banker and former wealth management chief Iqbal Khan.

READ: Credit Suisse boss resigns following spying scandal

Kahn was tailed after he jumped ship to competitor UBS, sparking fears he was preparing to poach employees and clients.

That revelation came after Khan confronted the private investigators tailing him, leading to a fight in the heart of Zurich. Khan pressed charges.

An initial investigation by Homburger blamed former chief operating officer Pierre-Olivier Bouee, who stepped down, but found no indication chief executive Tidjane Thiam was involved.

The probe results released Monday echoed those findings, concluding that Bouee “issued the mandate to have Peter Goerke put under observation.”

“As was the case with Iqbal Khan, this observation was carried out via an intermediary,” it said, stressing that Bouee “did not respond truthfully” during the initial investigation “when asked about any additional observations and did not disclose the observation of Peter Goerke.”

The new investigation also did not find indications that Thiam or others in the board or management “had any knowledge of the observation of Peter Goerke until media reported on it,” the statement said.

“The Board of Directors considers the observation of Peter Goerke to be unacceptable and completely inappropriate” it said, adding that it had issued an apology to Goerke.

It added that “safeguards” were already in place to avoid future similar misconduct. Switzerland's market watchdog FINMA meanwhile said last week that it was “appointing an independent auditor to investigate Credit Suisse in the context of observation activities.”

“This investigator will clarify the relevant corporate governance questions, particularly in relation to the observation activities,” a statement said Friday.