Credit Suisse Seen Cutting More Costs as Revenue Growth ElusiveBy
Analysts polled by bank view profit targets as unrealistic
Bank may ‘start digging deeper into costs,’ investor says
Credit Suisse Group AG Chief Executive Officer Tidjane Thiam will have to unveil additional cost savings to make up for the bank’s dire growth prospects when he updates investors Wednesday on his strategy to focus on wealth management.
Thiam has already deepened expense cuts once after surprise losses in the global markets unit, bringing the total headcount reduction across the bank to 6,000 this year. Schweiz am Sonntag reported that as many as 1,300 additional job cuts in Switzerland may be announced this week, without saying how it obtained the information. Inside Paradeplatz, a blog, said last month that 10 percent of the workforce in Asia may be eliminated, citing unnamed sources.
Credit Suisse declined to comment on the reports.
“Thiam announced the targets and later said it had become incredibly difficult and that the world had changed,” said Daniel Haeuselmann, who helps manage 119 billion Swiss francs ($118 billion) at GAM Holding AG in Zurich, including Credit Suisse stock. “That’s when you start digging deeper into costs.”
Since Thiam first outlined a plan in October of last year to reorganize the company along geographical lines and hold an initial public offering of the Swiss business, shares of Credit Suisse have lost 41 percent. Investors have questioned the profit targets for the three regional units, international wealth management, Asia Pacific and the Swiss universal bank.
Credit Suisse “will almost certainly miss the current 2018 targets,” analysts at Citigroup led by Andrew Coombs wrote in a note to clients. They expect the bank to identify ways to cut expenses by more in global markets and shared services, pushing the bank’s cost target by 2018 down to 17 billion francs, from less than 18 billion francs now.
Thiam said last year that Credit Suisse should be able to grow 2 percent to 3 percent annually, and reduce costs. While he did not give targets for revenue, he set a level of pretax income for the three regional units. Most analysts don’t think the units will reach their targets. In a Credit Suisse survey dated Dec. 2, they estimated pretax profit at the Swiss universal bank in 2018 at 2.1 billion francs, compared with the target of 2.3 billion francs.
International wealth management and Asia Pacific won’t even get close, the analysts estimated. Both target 2.1 billion francs in annual pretax profit in 2018, while the analysts predict profit before tax of 1.2 billion francs in Asia and 1.4 billion francs in the international unit.
Investors said they are willing to accept less ambitious targets if the bank gives a more detailed explanation of how to reach them.
“If they do set new targets, they need to put some meat on the bone in terms of how they want to achieve that,” said Thomas Braun, a fund manager with Braun, von Wyss & Mueller, who helps manage about 1.1 billion francs, including about 3.7 million Credit Suisse shares.