Credit Suisse targets buyback and payouts to shareholders despite earnings miss
The bank will buy back at least Sf1bn of shares for 2021 and plans to diverge from most European lenders by distributing the second half of its dividend end-November
Zurich — Credit Suisse is targeting as much as Sf1.5bn ($1.65bn) of stock repurchases from 2021, relying on stronger capital to boost returns after third-quarter profit missed estimates.
Net income dropped to Sf546m, compared with expectations of Sf597m. Results were dragged lower by the bank’s key international wealth management and Swiss businesses, while the newly formed combined investment bank and Asia business offset some of the declines.
The bank will buy back at least Sf1bn of shares for 2021, after its biggest rival UBS in signalling a return to buybacks after pressure from the Swiss regulator to conserve capital during the height of the pandemic.
CEO Thomas Gottstein is simplifying the bank’s complicated structure and partially rolling back initiatives taken under his predecessor Tidjane Thiam to boost efficiency and growth. He’s now asking shareholders to look past third-quarter results with the promise of the resumption of buybacks after strengthening capital. The bank also expects an increase in client activity at the investment banking and wealth businesses.
The newly formed investment bank came in well ahead of expectations as capital markets deal making rose 52% in US dollar terms, extending a rebound at that business. Revenues from fixed-income sales and trading, the biggest contributor to the investment bank, rose 10%, trailing rivals including UBS, Goldman Sachs and JPMorgan.
Credit Suisse declined as much as 3.7% in early Zurich trading.
The issue of dividends and share buybacks has become a heated one in Europe. A few of the stronger banks in the region have started to lobby for a resumption of payouts again, led by the Swiss wealth managers as they seek to help revive flagging share prices.
The European Central Bank — which regulates rivals such as Societe Generale and Deutsche Bank — has still to make a decision on when to allow banks to resume payments.
Here are some other key figures from Credit Suisse’s third quarter:
- Loan loss provisions Sf94m vs Sf243m estimate
- Swiss Universal Bank pretax profit Sf430m vs Sf474m estimate
- Investment Bank pretax profit Sf370m vs Sf222m estimate
- Net revenue Sf5.2bn vs Sf5.3bn estimate
- Common equity tier 1 ratio 13% vs 12.5% estimate
Credit Suisse earlier in October tapped a former top rainmaker at Bank of America as it vies with UBS for ways to get more business out of the richest customers. The Swiss bank hired Christian Meissner to co-run a newly created group connecting entrepreneurs who are clients of its international wealth management unit with the services offered by the investment bank.
Like UBS and Julius Bae, Credit Suisse plans to diverge from most European lenders by distributing the second half of its dividend after an extraordinary general meeting in November. The bank is planning a 5% annual growth in the dividend and is accruing funds for 2021.
Earnings at the key international wealth management division trailed estimates as an increase in transaction-based revenue was more than offset by lower recurring commissions and fees. Across the wealth management businesses the bank attracted Sf11.1bn of net new money.
Credit Suisse said that a successor to chair Urs Rohner will be announced before the end of the year. The bank also plans to name Clare Brady and Blythe Masters
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