Credit Suisse cuts profit goals as revenue hopes fall short

Zurich, SwitzerlandUpdated: Dec 11, 2019, 08:27 PM IST

File Photo: The logo of Swiss bank Credit Suisse is seen at a branch in Winterthur, Switzerland Photograph:(Reuters)

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Credit Suisse previously aimed to achieve 11-12 per cent RoTE in 2020

Credit Suisse cut a key profitability target for this year and next as a drop-in dealmaking, negative interest rates and uncertainty caused by global trade tensions dimmed the outlook.

Switzerland's second-largest lender said on Wednesday it expects to hit a return on tangible equity (RoTE) above 8 per cent this year, below its previous target of 10-11 per cent. The Zurich-based bank also cut its forecast for next year.

"If markets are constructive and support revenue growth, we would expect our year-end 2020 RoTE to be approximately 11 per cent," the bank said in a statement ahead of an investor day in London.

"Conversely, should markets remain challenging in 2020, we have identified up to 50 basis points of additional cost measures in order to protect our RoTE ambition of approximately 10 per cent."

Credit Suisse previously aimed to achieve 11-12 per cent RoTE in 2020.

The bank will present its first investor update since completing a three-year restructuring in 2018 which cut back its investment banking activities, boosted cooperation with wealth management, and whittled down costs.

While performance at its Global Markets trading division, the focus of previous criticism, has picked up in 2019, revenues have fallen in its investment banking and capital markets business due to floundering M&A activity. Credit Suisse now expects the division to make a loss this year.

The bank last month appointed new leadership to the division and aims to bolster its M&A activity by adding more bankers to advise deals in growth industries including technology and healthcare.

"Looking ahead to 2020, we are working on actions that will reinvigorate the division, building on a strongly improving pipeline, which we expect will put us in a more advantageous position compared to 2019," it said on Wednesday.

The Swiss lender said it expected to distribute at least 50 per cent of net income to shareholders looking ahead to 2020 by growing its dividend at least 5 per cent annually and through a share buyback of 1-1.5 billion Swiss francs ($1.00-$1.50 billion).