Due to a strong showing from the Swiss bank’s investment banking arm, Credit Suisse reported a 29% increase in its profit, from from 1.22 billion francs a year earlier to 1.57 billion Swiss francs or approximately $1.47 billion. This surpassed expectations of earnings at 1.44 billion francs.
If one-time charges such as improved credit spreads (that which hit Morgan Stanley earnings strongly), settlement with Huntsman Corporation and discrete tax benefit are not considered, the firm will be reporting an income of CHF2.5bn.
Uncommon to many earnings report, the bank also showed a higher revenue from last year, as its top line grew up 6.9% to 8.6 billion francs from 8.1 billion francs.
CEO Brady Dougan said in the earnings release: “We had a solid quarter in Private Banking, with strong inflows across all regions and a high gross margin in Wealth Management, partly driven by increased momentum in revenues from delivering integrated solutions jointly with Investment Banking. We have continued to prepare our Wealth Management business for the new environment by expanding our international footprint and building an efficient, global platform that complies with applicable laws and regulations.”
On the performance of its IB department, he added: “We made good progress in executing our differentiated strategy. We recorded very good results in our client and flow-based businesses and improved the performance of the repositioned businesses. We reduced our exposure to the areas we decided to exit. We gained significant market share in many products, including in prime services, cash equities, our suite of algorithmic and electronic trading tools and analytics, global rates, foreign exchange and high grade trading.”
Pretax income margins were lower for the wealth management and corporate & retail banking divisions but it saw a significant improvement for the same measure via investment banking, which increased from 8.2% to 27.5%.
The company’s tier 1 ratio of 15.5% was higher than the 14.1% reported in Q1.
Analysts see this strong report as a sign that Credit Suisse is benefiting from weakness in its competitors as more banks who have far worse balance sheets and asset portfolios see more negative effects of the crisis. With such growth in both the top and bottom lines, pressure increases for its peers Deutsche Bank and UBS who report next week Tuesday and on August 4, respectively.