In his first two years running Credit Suisse Group AG, Tidjane Thiam has been putting out fires. Today there’s still smoke. The Swiss lender is expected to report a third straight annual loss, mainly due to a 2.3 billion-franc ($2.45 billion) writedown related to a change in US tax policy at the end of last year. Even without that hit, the company’s earnings are likely to show that there’s still work to be done.
Analysts and investors will scrutinise Credit Suisse’s report tomorrow for evidence that Thiam’s restructuring plan is continuing to deliver rising revenues, lower costs and better risk-management at the bank’s trading units. They will also see whether he’s gathering fresh assets that will boost revenue at the wealth-management businesses.
At the bank’s investor day in November, the CEO promised to return more cash starting in 2019 and said it may beat its cost-savings target, which convinced most investors to stick with Credit Suisse. The stock has risen 16 percent over the last 12 months, beating the Bloomberg European 500 Banks index.
The bank reminded analysts in recent weeks that it intends to beef up the assets it must hold against operational risks, according to people with knowledge of the discussions. Credit Suisse has said it would increase risk-weighted assets by 3.8 billion francs in the final quarter of 2017 to account for legal risks.
The investment bank, led by Jim Amine, may also see capital rise relative to assets because it has to fund a pipeline of securities issues that may come through in the first quarter, Thiam indicated in an interview at the World Economic Forum in Davos last month. Overall, the most-watched capital ratio may come in at 12.9 percent, according to a consensus compiled by the company, which would be lower than the 13.2 percent in the first nine months of 2017.
Thiam is trying to increase revenue even as he lowers costs. Credit Suisse may see a slight rise for the year despite a decline in the fourth-quarter, according to analyst estimates. While the market-dependent businesses may weigh on the top line due to a lack of volatility, quarterly revenue in the wealth businesses is expected to climb.
Investors will seek some guidance for the bank’s markets businesses and how recent hires in equities and a spike in volatility will help trading revenue going forward.