By Brenna Hughes Neghaiwi
ZURICH (Reuters) - Credit Suisse Group AG (S:CSGN) on Thursday posted a 38% fall in third-quarter net profit, as a surge in investment banking failed to offset a slowdown in wealth management, while a one-off boost last year left this year's figure looking flat.
Profit reached 546 million Swiss francs (462 million pounds) in July-September. That compared with the 572 million franc median of 17 analyst estimates compiled by the Swiss bank.
A year earlier, Credit Suisse received a 327 million franc revenue boost from the sale of its InvestLab fund platform.
The bank on Thursday also said it planned to restart its share buyback plan next year, spending up to 1.5 billion Swiss francs to repurchase stock, and forecasting a 2020 dividend 5% higher than a year earlier.
In a statement, Credit Suisse said it is focused on supporting clients "through the persisting COVID-19 pandemic and the resultant economic challenges. We would expect this environment to continue to result in elevated levels of transactional and trading activity."
Chief Executive Thomas Gottstein in July announced a broad round of cost cuts, including merging the global markets trading division and advisory-focused investment banking and capital markets unit, as his first major strategic stamp on the bank.
The newly merged investment banking unit saw pre-tax profit rise to 370 million Swiss francs, with increased trading helping equity and fixed income sales and trading surge 5% and 10%, while capital markets and advisory revenue rose 33%.
A drop in revenue at its international wealth management unit, a sore point in the second quarter, was more pronounced than analysts had anticipated.
SORE SPOT
Bigger local rival UBS Group AG (S:UBSG) last week posted a doubling of third-quarter profit as ultra-rich clients scrambled to trade and seal deals amid a boom in markets. Smaller peer Julius Baer (S:BAER) reported strong client inflows.
Unlike Credit Suisse, UBS derives a large portion of revenue from private banking in the United States, a major market which has seen solid growth yet is absent from Credit Suisse's otherwise largely global presence.
At Credit Suisse, wealth management suffered from foreign currency moves as well as one-off items such as the prior year's InvestLab sale, without which revenue would have risen 5%.
Its international wealth management division, covering wealthy clients outside Switzerland and Asia, was also hit by lower recurring commission and fees as well as falling net interest income, with private banking revenue down 8% on year even after adjustments.
The bank aims to grow profit by 10% annually in its international wealth division from next year, particularly through tighter collaboration with its investment bank and greater lending efforts. It earlier this month announced the hiring of former Bank of America Corp (N:BAC) investment bank chief Christian Meissner to co-lead the unit's advisory efforts.
In its home market, where it is closing roughly a quarter of its branches, Credit Suisse saw adjusted revenue rise 1% during the quarter, recording similar gains in both its corporate business as with retail and private banking clients due to strong transaction activity.
It hopes the introduction of a digital banking app challenging fintechs like Revolut will help grow its retail market share while saving on costs.
Shares in Credit Suisse so far this year have lost more than a quarter of their value, falling twice as much as those of UBS, but staying ahead of the European banking index (SX7P).
