Banking: Credit Suisse profit soars as overhaul pays off

Swiss banking giant Credit Suisse on Wednesday posted a big jump in net profit for the first quarter, as a major overhaul under way since 2015 delivers firm results.

Banking: Credit Suisse profit soars as overhaul pays off
Photo: AFP

The bank, Switzerland's second biggest after UBS, began to refocus its activities on wealth management over merchant banking.

Read also: Bullish UBS posts strong first quarter results

The revamp, launched after French-Ivorian businessman and former politician Tidjane Thiam took the reins as CEO in 2015, has also involved a “relentless focus on efficiency”, Credit Suisse said in a statement.

“We have reshaped Credit Suisse in less than three years,” the statement said.

For the first three months of 2018, the bank announced a year-on-year jump in profits of 16 percent to 694 million Swiss francs ($706 million, €579 million).

“Quarterly costs (were) reduced to (their) lowest level” in five years, the statement said.

Eighty percent of the bank's core profitability is now generated by its wealth management and investment banking activities — up 41 percent from 2015, it added.

“We had planned 2018 to be a year of acceleration in our performance,” Thiam said in the statement.

“With these first quarter results, we got off to a good start in our third and final year of restructuring, and we are looking ahead to the future with confidence in our new business model and in our execution capabilities,” he added.

Investors welcomed the earnings report, as Credit Suisse's shares jumped 4.5 percent in early Wednesday trading on the Zurich stock exchange.

The bank's wealth management activities achieved their highest quarterly results in seven years, at 14.4 billion Swiss francs, up 20 percent from last year, it said.

The wealth management unit for the Asia Pacific region did particularly well, seeings its revenues rise 12 percent to 991 million Swiss francs.

For the future, Credit Suisse struck a positive note.

“The global economy continues to show encouraging growth prospects across Asia, the US and Europe,” it said, adding that it expected its wealth management activities to continue growing.

Nonetheless, it said its client activity levels remained “sensitive” to geopolitical tensions and threats of a US-China trade war.

For members


Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site 

Holders of other, temporary or conditional permits are not accepted.

READ MORE: ‘A feeling of belonging’: What it’s like to become Swiss

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.