ZURICH: Credit Suisse Group AG said Tuesday it swung to its second consecutive quarterly loss, as the Swiss lender struggled to restructure its investment banking business.
Zurich-based Credit Suisse reported a first-quarter net loss of 302 million Swiss francs ($311 million), compared with a profit of 1.05 billion francs in the same period last year. Net revenue fell 30% to 4.64 billion francs.
The Global Markets division of Credit Suisse’s investment bank, the trading unit that has been home to problematic debt positions that have generated significant write-downs in recent months, swung to a pretax loss of 635 million francs for the quarter from a profit of 842 million francs in the same quarter last year, as net revenue fell 60%.
The loss for Credit Suisse’s investment bank had been flagged earlier by the lender. In addition, Credit Suisse’s wealth management businesses, which the bank is relying upon to anchor its planned revamp, turned in better numbers than many analysts had expected for the period.
Credit Suisse’s earnings report comes amid a difficult stretch for European banks generally, and shortly after rival UBS Group AG, the world’s biggest wealth manager, reported disappointing first-quarter results.
Credit Suisse Chief Executive Tidjane Thiam said that while there were “tentative signs” of a much-needed pickup in client activity in March and April, “low levels of client activity are likely to persist in the second quarter of 2016 and possibly beyond.”
The most recent quarterly results contrast with the same period last year, when a strong performance from Credit Suisse’s investment bank helped to boost the bank’s earnings. Analysts had expected a net loss of 195 million francs for the quarter and 5.27 billion francs in revenue.
Credit Suisse shares have lost nearly 50% of their value since Mr. Thiam took over last July. He has sought to wean Credit Suisse from its historically robust investment bank to focus more on relatively less costly, and traditionally more reliable, wealth management businesses—particularly in Asia and other emerging markets.
While the shift has generally been welcomed by investors, its implementation has been hampered by volatile market conditions. In addition, internal confusion regarding the change in leadership at the investment bank unit has complicated the effort, as The Wall Street Journal has reported previously.
In March, Credit Suisse surprised investors and analysts with news that problematic debt trading positions in the investment bank had caused $633 million in write-downs in the fourth quarter, and a further $346 million in write-downs into the first quarter as of March 11. Credit Suisse said at that time it would further slash the risk-weighted assets allocated to the investment bank, pull out of businesses and cut an additional 2,000 jobs at the unit.
Earlier this month, Credit Suisse said it sold off distressed-debt assets that had been lodged on its investment bank’s books—reducing its credit exposure, and resulting in an anticipated charge of roughly $100 million. On Tuesday, Credit Suisse said its exposure to distressed debt positions fell 79% compared with the prior, fourth quarter, while its collateralized loan obligations fell 81%.
Late last year, Mr. Thiam tapped investors for new equity to bolster Credit Suisse’s relatively thin capital cushion, and to underpin his restructuring effort. The bank has said it intends to keep its key capital ratio between 11% and 12% this year. On Tuesday, Credit Suisse said the ratio stood at 11.4% at the end of the first quarter—the same level as in the fourth quarter.
Total operating expenses in the first quarter fell 3%, to 4.97 billion francs, Credit Suisse said.
Pretax profit for Credit Suisse’s overall business in Asia fell 46% to 251 million francs. The unit’s private banking business pulled in 4.3 billion francs in net new assets in the quarter, Credit Suisse said, compared with 4.5 billion francs in the same period last year.
Credit Suisse’s Switzerland-based Swiss Universal Bank unit attracted 700 million francs in net new assets for its private banking business, less than half of the amount realized in the same period last year. The International Wealth Management division, which covers markets outside of Asia and Switzerland, reported 5.4 billion francs in net new assets for its private banking unit in the period, compared with outflows in the same period last year.
Pretax profit at the Swiss Universal Bank, which is slated for a partial initial public offering by the end of next year, was flat compared with the period last year at 426 million francs, Credit Suisse said. Net revenue at the business slipped 2%. The International Wealth Management unit reported a 3% rise in pretax profit in the quarter, while net revenue rose 4%.