Credit Suisse Plans for Swiss Unit Seen Too Ambitious by Rivals

  • Swiss universal bank earmarked for partial IPO in 2017
  • Unit’s head Gottstein remains “very optimistic’ on targets

Credit Suisse Group AG’s profitability targets for the Swiss unit, earmarked for a partial initial public offering in 2017, may be too ambitious, according to the heads of some of Switzerland’s largest consumer banks.

The chief executive officers of Valiant Holding AG, Zuercher Kantonalbank, Raiffeisen Switzerland and Postfinance AG signaled skepticism about Credit Suisse’s ability to reach its profitability goals at the so-called Swiss Universal Bank that was carved out as part of CEO Tidjane Thiam’s wider overhaul last year. The Zurich-based bank targets a pretax profit of 2.3 billion Swiss francs ($2.4 billion) by 2018 at the unit, up from 1.7 billion francs in 2015.

Swiss lenders have been hurt by negative interest rates squeezing profit margins, compounded by volatile global markets, tougher regulatory demands and a loss in banking-secrecy laws. While Thiam returned Credit Suisse to profit in the second quarter after stepping up the pace of restructuring and shutting businesses, the shares have dropped about 45 percent this year.

“You either achieve growth or profitability, but not both” Markus Gygax, CEO of Bern-based Valiant, which focuses on consumer lending and small- and medium-sized businesses, said in an interview on Tuesday when asked about Credit Suisse’s plans for the Swiss business. In a competitive market, it’s difficult to significantly boost profitability, he added.

‘Very Optimistic’

Thiam, 54, is seeking to sell 20 percent to 30 percent of the Swiss Universal Bank, raising as much as 4 billion francs, to help bolster capital buffers as he restructures businesses to focus on wealth management. As part of his plan presented in October, the CEO is targeting annual revenue growth of 2 percent as he drives down costs at the business.

Credit Suisse’s Swiss unit will consider acquisitions once the partial IPO is complete, the unit’s head Thomas Gottstein told Blick earlier this month. The unit contains a consumer business as well as private banking for wealthier clients and some trading operations, with only a part carved out in the legal entity that’s up for sale.

“The Swiss business is very robust and profitable,” Gottstein told the Swiss newspaper. “I’m very optimistic that we’ll be able to reach our targets.”

For now, analysts remain unconvinced. The average estimate for the Swiss unit’s 2018 pretax profit is 2.03 billion francs, according to a survey compiled by the bank. Patrik Gisel, head of Raiffeisen Switzerland, the country’s third-largest bank, and Hansruedi Koeng, CEO of Postfinance, also expressed skepticism in separate interviews on Tuesday.

“I don’t know what to think when I see those plans,” said Martin Scholl, CEO of ZKB, the largest Swiss regional lender. “The reference that was communicated in terms of profit amounts to the full annual profit of Raiffeisen or ZKB. It’s taken us 150 years to achieve that.”

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