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Credit Suisse Warns Over Coronavirus Uncertainties After Q1 Earnings Beat
Fixed income revenue was up 17% to $1.2 billion, helped by higher volume in macro and global credit products, though unrealised loss in leveraged finance offset some of the gains.
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Credit Suisse Group AG posted a 75% rise in first-quarter net profit on Thursday, even as it cautioned the global coronavirus pandemic could impact performance in coming quarters.
"The scale of the adverse economic impact of the COVID-19 crisis is still difficult to assess and we would caution that we may also see further reserve build and impairments in the coming quarters," the Swiss bank said in a statement, adding the bank believed it could nonetheless maintain a "resilient" financial performance.
Credit Suisse saw net profit rise to 1.314 billion Swiss francs ($1.35 billion), helped by a negative tax rate and one-off gains, and as a boost to trading revenue from volatile markets and "exceptionally high levels of client activity" in some areas helped cushion a rout in deal-making.
Fourteen analysts polled by the bank had on average expected to see net profit of 997 million francs for the quarter.
"Thanks to our strong capital and liquidity base, we are well positioned to support our clients, employees and societies in the coming quarters, during which we expect the COVID-19-related uncertainty to persist," said Thomas Gottstein, presenting the bank's results for the first time since taking over as chief executive from Tidjane Thiam in February.
Thiam quit after a scandal over spying on senior executives hit the bank's reputation.
The first major European lender to report earnings since the coronavirus pandemic upended markets and brought businesses and economies to a halt, Credit Suisse said it had built up over one billion Swiss francs in reserves during the quarter to reflect the challenging economic environment and pressure on oil prices.
U.S. banks have already set aside billions of dollars to cover potential loan defaults due to the virus and other European lenders are expected to do likewise when they start reporting results over the next two weeks.
Credit Suisse, which generates the bulk of its profit from managing money for the rich, said its corporate lending business was starting to see some signs of stress.
Provisions for credit losses jumped to 568 million francs from 81 million francs in the first quarter of 2019, as each of the bank's divisions - led by its investment banking unit- increased expectations for loan losses.
The bank's capital ratio fell to 12.1% from 12.7% over the quarter, driven in part by companies drawing down from their credit facilities.
Its investment banking and capital markets division posted a 47% drop in revenue to 189 million francs as deal-making and IPOs ground to a standstill after a bumper start, though its global markets trading division benefited from a spike in trading volume.
Fixed income revenue was up 17% to $1.2 billion, helped by higher volume in macro and global credit products, though unrealised loss in leveraged finance offset some of the gains. Equities revenue was up 22% on the year.
International Wealth Management, its only standalone wealth division, meanwhile, benefited from higher levels of client activity, with revenue up 6% to 1.5 billion francs.
The bank's assets under management fell by 0.1 trillion francs to 1.4 trillion francs, as a result of negative market moves.
The fall in managed assets is widely expected to hurt earnings in coming quarters, as the bank generates lower fees from managing fewer assets.
Prior to the bank's first quarter results, analysts had on average expected full-year net income to fall by a quarter to 2.6 billion francs for the full year.