Credit Suisse Targets Private Bank Gains as Margins Pressured

Credit Suisse Group AG aims to boost pretax profit at its private bank by 800 million Swiss francs ($900 million) over the next three years as margins come under pressure.

Efficiencies in onshore west European markets account for as much as 250 million francs of that target, the Zurich-based bank said today in a statement. There will also be gains at its offshore unit and its business serving so-called ultra-high-net-worth individuals, Credit Suisse said.

“These combined measures will result in a significant improvement in performance,” Chief Executive Officer Brady Dougan told reporters in Zurich.

Credit Suisse will focus on larger offshore markets and target the wealthy in faster-growing regions such as Brazil and Mexico after third-quarter profit at its private bank slumped following provisions for tax settlements with Germany and the U.S. Dougan said Switzerland’s second-largest bank already has relationships with 35 percent of the world’s billionaires.

“Our ultra-high-net worth business remains one of our key strategic focuses,” said Dougan, describing individuals with more than 50 million francs under management, or with total wealth in excess of 250 million francs.

Those clients have provided the majority of net inflows since 2008, according to an investor presentation today, and accounted for about 35 percent of the 762.1 billion francs of assets at Credit Suisse’s wealth management unit at the end of September.

Credit Suisse reported net new money of 6.6 billion francs from wealthy individuals in the third quarter.

Margin Squeeze

The annualized gross margin, a measure of profitability, declined to 114 basis points in wealth management at the end of the quarter, compared with 131 basis points in 2007. A basis point is one-hundredth of a percentage point.

Profit at the private bank fell 78 percent to 183 million francs in the quarter as Credit Suisse set aside 478 million francs to cover tax matters in the U.S. and Germany.

Credit Suisse in September agreed to pay 150 million euros ($206 million) to settle proceedings in Germany against employees investigated for allegedly helping German clients evade taxes. The bank is a target of a criminal investigation by the U.S. Department of Justice over former cross-border private-banking services to American customers.

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