Credit Suisse (CSGN.S) said on Thursday that it was wrapping its global markets and investment banking divisions into a single unit, as Chief Executive Thomas Gottstein puts his first major strategic stamp on the bank.
Switzerland’s second-biggest bank also posted a 24% rise in second-quarter net profit to 1.162 billion Swiss francs (981.39 million pounds), blowing past the mean estimate for 700 million Swiss francs in the bank’s own poll of 17 analysts.
“We are today announcing a series of strategic initiatives to improve effectiveness and to generate efficiencies,” Gottstein, who became CEO in February, said in a statement, as he unveiled the plan to merge the investment banking units.
The integration also includes its Asia-Pacific markets business, which previously sat under a regional division.
“These initiatives should also help to provide resilience in uncertain markets and deliver further upside when more positive economic conditions prevail.”
The bank said it was aiming to generate run-rate savings of approximately 400 million francs annually from 2022 onwards through various strategic measures announced.
Credit Suisse said it will also combine its compliance and risk functions under one head.
The bank said it was planning to pay the second half of its 2019 dividend later this year, adding its board would review its share buyback plans in due course.
Rival UBS (UBSG.S) earlier this month signalled the possibility of resuming share buybacks later this year after a stronger-than-expected performance from its investment bank helped it overshoot expectations for the quarter.
GOTTSTEIN’S MARK
The move to form a globally integrated investment bank marks a departure from the strategy under previous CEO Tidjane Thiam, who repositioned the lender to focus on wealth management and split the investment bank into two divisions.
Credit Suisse has faced criticism over the drag of its capital-intensive investment banking operations, which typically generate far less income than wealth management versus their costs, but has insisted the activities are necessary to service its ultra-wealthy clients.
Both its trading and dealmaking units have hurt results over recent years, with trading marking an improvement in late 2018, just as its dealmaking began to slide.
However the units performed well in the second quarter ahead of the integration, as a frenzy of trading activity and companies shoring up their balance sheet pushed up earnings.
The bank posted a 71% rise in profit at its global markets division, fuelled by a 42% jump in fixed income revenue.
The investment bank’s profit also jumped, with a strong rise in earnings across debt and equity underwriting as well as from advising on M&A deals – outperforming much of Wall Street which saw advisory revenue fall.
Wealth management, meanwhile, saw earnings flag slightly after bumper trading in the first quarter, with its international wealth management unit posting a 22% drop in profit as lower rates ate into margins and it set aside money for potential loan losses.
The bank’s Asia division posed a record quarterly profit of 298 million Swiss francs, driven by investment banking.