Credit Suisse Group AG will shrink parts of its investment bank and focus on growth in Asia and wealth management, said its new chief executive officer. The shares surged the most in four months.
“We're dealing with a really very well performing investment bank, but where sometimes regulation has developed in an unsupportive or unfavorable way and the pragmatic thing to do is take that into account,” Tidjane Thiam, who started as CEO this month, told analysts on a conference call Thursday. That will mean shrinking some of the division's activities, he said, without identifying them.
Mr. Thiam, 52, formerly CEO of insurer Prudential Plc, said Switzerland's second-biggest bank will allocate more capital to wealth management and seek to grow in Asia and developed markets such as its home country. Scaling back the investment bank in favor of managing money for rich clients would mirror the approach of UBS Group AG, the bank's larger Swiss rival.
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Credit Suisse shares jumped as much as 7.8%, the biggest intraday gain since Mr. Thiam's appointment was announced in March.
As global regulators order lenders to hold more capital to absorb potential losses, the fixed-income trading departments of their investment banks have been among the most affected. Revenue from debt trading fell 13% to 1.24 billion francs ($1.3 billion) at Credit Suisse in the second quarter from a year before, the company said Thursday.
CLEAR DIRECTION
The private banking and wealth management unit posted a pretax profit of 1 billion francs in the period, beating analysts' estimates, after a loss a year earlier when it was fined for helping Americans evade taxes.
“The direction of travel is clear,” said Mr. Thiam. “I've said I like the shape of these results. You've seen private banking wealth management driving forward.”
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Net income was 1.05 billion francs, compared with a loss of 700 million francs a year earlier, the bank reported.
Credit Suisse's common equity Tier 1 ratio, a key measure of financial strength, was 10.3% at the end of June, the lowest along with Bank of America Corp. among the seven leading investment banks that have reported data for the second quarter, figures compiled by Bloomberg Intelligence show.
Mr. Thiam said it's not clear whether the bank will need to raise more equity, adding that Credit Suisse will concentrate on businesses, such as wealth management, that operate “comfortably” above their cost of capital. He plans to present his new strategy later this year.
A focus on activities offering a high and steady return on equity will mean “more of a retrenchment in fixed-income business and emphasis on equities,” Otto Dichtl, a credit analyst at Stifel Nicolaus Europe Ltd. Thursday in London.
