March 19, 2020 / 6:38 AM / 21 days ago

UPDATE 2-Credit Suisse to preserve liquidity as crisis impact unclear

(Adds comments from conference; share price)

By Brenna Hughes Neghaiwi and Silke Koltrowitz

ZURICH, March 19 (Reuters) - Credit Suisse executives were cautiously optimistic about the bank’s long-term outlook on Thursday, but said the uncertainties surrounding the coronavirus crisis meant it was a good time to preserve liquidity.

Switzerland’s second-biggest bank said it had continued to see profitability grow during the first two months of 2020, although it was difficult to assess the impact of the coronavirus outbreak on its future financial results and it was monitoring its credit exposures.

“Notwithstanding the problems we are seeing currently in the market surrounding COVID-19, the long-term structural growth story around the wealth management industry is still true,” new Credit Suisse Chief Executive Thomas Gottstein said.

Gottstein was addressing the Morgan Stanley European Financials Conference, which was held virtually, after the bank provided a trading update which showed a rise in pre-tax income and profitability in January and February.

“The crisis might actually even provide some opportunities going forward, as we look to the next 6-12 months.”

Pre-tax income for the first two months had already exceeded the 1.06 billion Swiss francs ($1.10 billion) Credit Suisse reported for the first quarter of 2019, the bank said, echoing upbeat comments by larger Swiss rival UBS on Wednesday.

Shares in Credit Suisse were up 1.4% by 1200 GMT after presentations by Gottstein and CFO David Mathers, while cross-town Zurich rival UBS saw 0.7% gains.

The executives said Credit Suisse expected to see draw-downs across its corporate bank over the coming weeks and that now was a prudent time to “preserve liquidity”.

Credit Suisse said restructuring efforts in recent years had strengthened its capital base and its stronger focus on wealth management and lower exposure to leveraged finance and the oil and gas sector, which its CFO said was down 20% to roughly $7.5 billion at the end of February, had put it on a resilient footing amid economic disruption and volatile financial markets.

Higher trading revenues had thus far helped offset the impact of a market rout, Credit Suisse said, which has brought a slowdown in dealmaking and which is expected to hit the fees that banks charge clients for managing their assets.

Credit Suisse, however, cautioned it was difficult at this point to assess the impact of the pandemic, and analysts expect the it could hit banks harder in the second quarter if markets and economies do not recover.

Swiss financial supervisor FINMA on Thursday said the country’s lenders were solidly capitalised and well equipped to deal with extreme stress scenarios, but cautioned them to consider their capital distribution policies.

Echoing comments by the UBS finance chief, Mathers said Credit Suisse had seen a number of margin calls, but no significant loan losses on its loans. ($1 = 0.9672 Swiss francs) (Reporting by Brenna Hughes Neghaiwi and Silke Koltrowitz; Editing by Michael Shields and Alexander Smith)

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