Trading-powered profit rebound prompts Suisse cheers
Credit Suisse enjoyed a Sfr5bn (€3.3bn) swing in third-quarter profitability at its investment bank, as a trading turnaround propelled pre-tax profits to Sfr1.7bn, beating the mark set in the second quarter and marking a return to the black compared with a multi-billion Swiss franc loss in the third quarter last year.
The Swiss bank, which was nursing a Sfr3.2bn loss at the investment bank arm this time last year, this morning opened the third-quarter reporting season for Europe's biggest banks.
Net revenues at the investment banking arm swung from minus Sfr555m a year ago to Sfr5bn in the third quarter this year, albeit 16% or almost Sfr1bn below the level in the second quarter. Credit Suisse said that this was because “consistent with the normal seasonal trend of lower third-quarter business volumes and activity, equity and fixed income trading volumes declined from the second quarter”, as did underwriting volumes.
Credit Suisse group chief executive Brady Dougan said: “In investment banking…our client and flow-based business are performing very well, as are our repositioned businesses. The action we took to reposition investment banking last year in the changed environment is yielding strong benefits.”
Dougan added the group's third-quarter performance "complemented a strong first half of the year".
Financial News takes a look at some of the key figures from Credit Suisse’s third-quarter investment banking results below:
• Trading turnaround
Fixed income revenues bounced back from minus Sfr1.1bn in the third quarter of 2008 to Sfr2.5bn in the same period this year, though the figure was roughly a fifth below the figure earned in the second quarter. Equity trading revenues likewise slipped from the previous quarter, but the third-quarter figure of Sfr1.8bn was several times higher than the Sfr129m earned this time last year.
• Underwriting up
Underwriting revenues climbed 25% from the second quarter to Sfr672m, more than double the level in the same period a year ago. Debt underwriting led the way, posting a more than one-third rise from the second quarter to Sfr322m. Equity underwriting earned Sfr350m, versus Sfr301m in the second quarter and Sfr198m a year ago.
• Advisory adversity
Revenues from advisory work fell more than a third from the second quarter and more than two-thirds compared to a year ago to Sfr106m. That was not enough, though, to offset the underwriting growth, leaving combined revenues from the two non-trading businesses a third higher than last year’s third quarter, at Sfr778m.
• Compensation and benefits
The compensation bill for the third quarter climbed by nearly half from a year ago to Sfr2.1bn as the investment banking unit showed “improved risk-adjusted profitability” compared to last year’s Q3 loss. Despite the fact that the division added a net 500 staff over the quarter, the Q3 figure was more than a fifth lower than the Sfr2.7bn bill incurred in the second quarter, on “lower performance-related compensation”.
--write to vahuja@efinancialnews.com
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