Credit Suisse's Wealth Arm Logs Rising AuM, Income

Tom Burroughes

2 November 2018

yesterday reported wealth management net new assets of SFr33.8 billion ($33.7 billion) for the first nine months of this year, which its chief executive said was the strongest NNA figure over nine-months since 2013. AuM rose by 4 per cent from a year before.

In the three months to 30 September, there were SFr10.3 billion of net new assets coming into the bank.

For the Zurich-listed banking group as a whole, reported pre-tax income for the quarter was $700 million, a 68 per cent year-on-year rise; for the nine months to 30 September, the figure was $2.8 billion, also rising by 68 per cent. Shares in the bank were down by 1.85 per cent at around 11:30 GMT yesterday. Reports said there was disappointment about the bank's trading unit performance. The bank pointed out that recent market conditions, such as in emerging markets, have been challenging.

Along with a number of its peers, Credit Suisse has sought to focus more on wealth management, a less capital-intensive business and stickier in terms of revenues. Also like its rivals, it has pivoted some of its business towards Asia.

The wealth businesses, which contain the Swiss Universal Bank, International Wealth Management and Asia Pacific Private Banking within Wealth Management & Connected, net interest income and fee income rose by SFr1.2 billion in the first nine months of 2018 compared with the same period in 2015, or by 20 per cent, a 6 per cent compound annual growth rate.

"So far, 2018 has allowed us to illustrate the progress we have made. The first and second quarters were characterised by generally favourable markets and strong client activity levels and you were able to see that we delivered a strong performance. The third quarter, with much more challenging conditions and lower levels of client activity, allowed us to demonstrate the resilience of our new operating model as we delivered our best third quarter of adjusted* profit since 2014," Tidjane Thiam, chief executive, said.

“The environment was challenging this summer. In addition to the usual seasonal slowdown, we saw increased volatility in emerging markets and in some emerging market currencies, as market participants worried about the impact of US dollar interest rate normalisation, and about trade tensions, as well as about significant political uncertainties. This led to a drop in client activity that compounded the usual, expected summer slowdown," he said.

Segments
At the Swiss Universal Bank business, adjusted pre-tax income totalled SFr523 million for the quarter, up by 17 per cent. In the private clients business, adjusted pre-tax income for Q3 2018 rose by 16 per cent. This increase was primarily driven by efficiency gains as relationship managers became more productive, lower contractor costs and digitalisation.

Turning to the international wealth management arm, it logged an adjusted pre-tax income gain of 8 per cent to SFr411 million. Net new assets totalled SFr7.5 billion during the quarter.

Adjusted pre-tax income in private banking rose by 13 per cent following increases across all major revenue categories, including 13 per cent growth in transaction- and performance-based revenues, reflecting higher client activity.

The Asia-Pacific Wealth Management & Connected business reported adjusted pre-tax income of SFr184 million in Q3 2018, up by 3 per cent. Private banking in Asia saw growth in net interest income and recurring commissions and fees, while transaction-based revenues fell "significantly" in the third quarter due to a shift in client sentiment in the current market, the bank said. Net new assets totalled SFr6.4 billion in Q3 2018, reflecting inflows across most of Credit Suisse's markets.