It was a dank, dark autumn morning. My alarm shrilled and I stumbled into the kitchen to brew a pitch-black espresso. On auto-pilot, I reached over and switched on CNBC. Someone was lamenting the most recent "disappointing" set of Credit Suisse earnings. "Same old, same old," I thought to myself as I grumpily switched off the television.
For several years now, Credit Suisse has disappointed us and yet Brady Dougan sails on unassailable. This might be because investors recognize that the big Swiss banks are operating in a very tough regulatory environment. Or it might be that investors don’t believe anyone else could do better with this particular hand of cards.
For the third quarter of 2013, the bank reported a 40% drop in revenues from its fixed-income unit within the investment bank and a restructuring of its rates business. Net income for the whole bank was better than the comparable period a year ago, but fell short of analysts’ expectations.
The restructuring move is sensible. It is hard to make money in government bonds and associated product if you are not a top-tier player. And if, as I believe, the great bull market in bonds is over, even big players might struggle in fixed income. Nevertheless, the thought crosses my mind that Dougan is suffering from death by a thousand cuts. Since 2011, most of Credit Suisse’s quarterly results’ announcements disappoint and proffer some small change. But there is a lack of big-picture vision and thus investors continue to be wary of the stock. This year, the share has traded between SFr23 ($26) and SFr30 and doesn’t show any sign of breaking out of that range.
It is interesting that for the 2010 financial year, investment banking was the division that contributed most of Credit Suisse’s pre-tax profits. In 2012, however, private banking made the most money. And this was also the case for the third quarter of 2013: wealth management at Credit Suisse made pre-tax income of SFr510 million whereas the investment bank delivered a relatively paltry pre-tax income of SFr229 million. That compares with the $1.5 billion net earnings that Goldman Sachs reported in the third quarter or the €345 million pre-tax profit at Deutsche Bank’s investment bank.