LONDON, Nov 2 (IFR) - Tidjane Thiam made a strong defence of his strategy for Credit Suisse when delivering the bank’s first set of quarterly numbers since raising SFr4.25bn (US$4.4bn) through a rights issue in June.
Last month minor shareholder RBR Capital Advisors called for the break-up of the group and a spin-off of its investment bank to unlock value for investors.
“We decided on the strategy after reviewing all options. But I am very happy to listen and explain. I think it is working too,” said Thiam.
He said the capital raise, his second since becoming chief executive two years ago, allowed the bank to focus on his plan to extract synergies between its investment bank and wealth management activities for entrepreneurs.
“This is only half time so it is not wise to declare victory as we have only just started the second half but I believe post 2018 this will be an attractive bank,” he said, setting out why his integrated approach mattered.
“Being a bank for entrepreneurs is a good strategy. They create most of the wealth in a country. We can manage the personal wealth of an entrepreneur as well as his company’s IPO.”
In emerging markets he said the bank wanted to focus on such ultra-high-net-worth individuals, who appreciated such additional services beyond just managing money.
“There may only be 10 people in such countries. These are the people with the most assets and we want to service them. That is why we need global markets and IBCM [investment banking and capital markets].”
He said he would meet RBR founder Rudolf Bohli and listen to his arguments, as he would any shareholder, but rebut them firmly. “We believe in our strategy and believe it is working,” said Thiam.
“When we outlined it in 2015 we looked at a broad range of options. These ideas were discussed ... and looked at in detail. We think we are in a better position to make determinations than those outside the company,” he said.
He admitted for the first time that he was hoping to replicate the success UBS had achieved with its restructuring.
“We are broadly following the same strategy. I have a lot of respect for the leadership of UBS. There is enough growth so that we can both prosper,” he said. “We enjoy healthy competition that is good for us and Switzerland.”
Credit Suisse, like most peers, struggled in fixed income trading over the three months to the end of September. Revenues were down 9% at SFr698m compared with the same period a year ago “due to persistently low levels of volatility”.
That was a better result than many others, some of which reported falls in revenues of as much as 36% in this area. Credit Suisse’s figures however do not include its Asia fixed income trading figures, which plummeted 40% year-on-year to SFr80m.
Equities is a bigger business for the bank in Asia. Here revenues fell 13% to SFr262m. In the markets division outside Asia, equities revenues rose 10% to SFr383m as flow derivatives revenues recovered “from subdued levels”. Structured revenues fell back though.
“There has been a complete market shift in Asia. We have had to take the global consequences from that and had to reshape our business. We had equity derivatives leadership in Asia. That business has collapsed but long term we are preserving it and think it will come back,” said Thiam.
He defended the performance across the markets area, saying its risk exposure had dropped significantly since he outlined his strategy to shrink the division two years ago. Risk-weighted assets were down 47% to US$58bn, leverage down 34% to US$291bn and daily value-at-risk down 53% to SFr25bn.
“This is really important. We are managing half the risk so our returns on this are comparatively much higher. Our earnings are now of higher quality. Increasing our capital across the group means we are in control of our destiny.”
On the primary side, Credit Suisse had a mixed picture. For the first time it amalgamated fees earned across its various business units. These showed that advisory fees rose 13% to US$237m year-on-year but equity underwriting fees fell 8% to US$169m. Debt underwriting revenues were 1% lower at US$544m.
The advisory performance was better than major rivals but offset by the weaker ECM business, put down to “lower revenues from convertible bonds and follow-on offerings”. The bank also saw lower leveraged finance deals and investment-grade debt issuance in the period.
Thiam declined to be drawn on specific plans the bank had to cope with Brexit. Finance director David Mathers said the bank already had a full banking licence in Germany and a full dealer licence in Spain, as well as a branch in Dublin.
“We need to make sure we have the infrastructure in place so we can provide a service for clients in the event of a hard “no transition phase” Brexit in March 2019,” he said. (Reporting by Christopher Spink)