Credit Suisse Group AG (VTX:CSGN) today announced its first-quarter financial results, reporting a “strong and consistent performance”. The bank’s revenue was little changed, but its profits soared 23 percent. Capital concerns, however, weighed on investor sentiment, dragging confidence and the share price down.
Credit Suisse’s shares had shed 3.02 percent to CHF 26.00 by 10:26 BST today, well below the Swiss blue-chip SMI index, which had gained about one percent. The bank’s stock is up about 3.7 percent year-to-date, though still some 5.3 percent in the red annually.
Credit Suisse reported that net revenue in the first quarter of 2015 had risen three percent on an annual basis to CHF 6.673 billion (about $6.940 billion), while net income attributable to shareholders surged 23 percent to CHF 1.054 billion.
However, the Zurich-based bank's common equity tier one ratio (CET1), a closely-monitored measure of its financial strength, dipped to 10.0 percent from 10.1, prompting investors to consider the possibility of fresh capital being raised in the near future.
“These numbers show the Credit Suisse dilemma — an earnings beat, strong wealth management performance, but capital ratios are shaky and the investment bank is losing share versus peers,” Deutsche Bank analyst Matt Spick, said as quoted by The Financial Times.
The sharp rise in the value of the Swiss franc, following the decision by Switzerland’s central bank to drop the cap on the franc’s exchange rate to the euro in January, was the chief factor that weighed on the bank’s performance and its capital ratios.
“Our swift and proactive response to the changed currency and interest rate environment post the Swiss National Bank’s announcement mitigated the impact on our results,” Credit Suisse’s outgoing chief executive Brady Dougan commented. “Looking at the second quarter to date, the momentum in the businesses has carried over from the first quarter. We remain committed to our capital and leverage goals and expect to make further progress in executing our strategic initiatives over the balance of 2015.”
Dougan will be leaving Credit Suisse at the end of June, to be replaced by current Prudential boss Tidjane Thiam. Thiam is expected to bring about a strategic change in the Swiss lender, especially in its investment banking unit, which has proved to be more capital-expensive than other operations.