Pre-tax income at the private banking arms of the Swiss Universal Bank and International Wealth Management arms of Credit Suisse fell last year, while the overall group posted a loss.

(Updated with share price.)

Credit Suisse today announced that unadjusted pre-tax private banking income at its Swiss universal banking arm – a newly-created and separate entity – fell by 29 per cent year-on-year to SFr869 million ($864.3 million) in 2015. On an adjusted basis, pre-tax income was SFr821 million, down from SFr790 million. This entity of the Zurich-headquartered banking group also reported a 69 per cent year-on-year fall in unadjusted pre-tax income, to SFr166 million, in the fourth quarter of 2015.

Shares in the lender slid on news of the banking group's loss. Around 1500 London time, they were down more than 12 per cent. Shares are at the lowest level since 1991 (source: Bloomberg). Analysts say that while the bank has started to de-risk its investment banking operation and focus more on growing markets such as in Asia, this move has come amid more volatile times in such markets. 

Separately, at the newly-created international wealth management arm of the bank, covering activities outside of Switzerland, unadjusted pre-tax income in private banking dropped 34 per cent year-on-year to SFr526 million. In Q4, it posted a SFr56 million loss, the bank said. On an adjusted basis, IWM’s private banking showed pre-tax income of SFr813 million from SFr769 million in 2014.

As reported last November, the bank saw the exit of US private banking head Philip Vasan, as the Swiss bank moved to shift its US-based private banking operation to Wells Fargo.

Switzerland’s second-largest banking group last year announced it had restructured its business divisions as part of moves to restore profitability. At the overall group level, Credit Suisse reported a net loss, attributable to shareholders, of SFr2.944 billion in 2015, against a comparable profit of SFr1.875 billion in 2014. Net revenues fell 9 per cent year-on-year in 2015 to SFr23.797 billion. In the bank’s “core” results (excluding certain figures from the “strategic resolution unit”), Credit Suisse said pre-tax income for 2015 was SFr88 million, against SFr7.2 billion in 2015.

Details
At the Swiss universal banking unit, assets under management at the private banking arm were SFr241 billion, down 8.6 per cent from a year before; at the international wealth arm, private banking AuM was SFr289.6 billion, down by 10.5 per cent from a year before, the bank said. The gross margin on assets at the Swiss private banking business was 146 basis points; in IWM, the gross margin was 102 basis points.

In the Asian private banking business, pre-tax income (on an adjusted basis) in Q4 was SFr48 million, down from SFr67 million a year earlier; for the whole of 2015, the figure was SFr344 million, up from SFr310 million. Net revenues were SFr1.178 billion, a gain from SFr1.037 billion. The results were driven by higher interest income, transaction-based revenues and recurring fees, partly offset by higher operating costs from new hires and spending on growth projects. The Asia business reported net new assets of SFr17.8 billion, a 12 per cent net new asset growth for last year. In total, Asia AuM stood at SFr150 billion at the end of the reporting period.

Losses
Explaining the deterioration in its group-level figures, the bank said the figures included “substantial charges which are not reflective of our underlying business performance”, such as a goodwill impairment charge of SFr3.8 billion, restructuring costs of SFr355 million, and litigation items of SFr821 million last year. The goodwill impairment mainly stemmed from the bank’s acquisition in 2000 of Donaldson, Lufkin & Jenrette.

“Since October 21, we have been implementing with discipline our new strategy, with a new organisational structure and the completion of our capital raise, for which we are grateful to our shareholders. Our three new geographic divisions have had a good year delivering profitable growth,” said Tidjane Thiam, group chief executive.

“APAC, SUB [Swiss universal banking] and IWM’s [international wealth management] private banking business have increased their adjusted pre-tax income by 21 per cent, 25 per cent and 4 per cent, respectively, compared to 4Q14.

“This performance was achieved in spite of challenging conditions, particularly in 4Q15. The fourth quarter of 2015 was characterised by volatile market conditions, pressures on market liquidity, a sharp decline in oil prices, widening credit spreads, continued uncertainty linked to asynchronous monetary policies, and large fund redemptions by market participants affecting asset prices,” he said.