Banks

Credit Suisse posts loss, CEO says 'buy banks'

It is a good time to buy banks: Credit Suisse CEO
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It is a good time to buy banks: Credit Suisse CEO

Credit Suisse on Thursday posted a pre-tax loss for last year after a challenging fourth quarter in which it took substantial charges and warned it expected markets to remain volatile throughout the remainder of 2016.

CEO Tidjane Thiam said only time – most likely a couple of quarters – would help to restore calm on the markets.

"The slowdown in China is by design," he told CNBC, as the country moves from an export-led economy to a consumption-led economy. It was a "difficult transition" for the country but the markets had got "extremely jittery", with shares suspended daily for "very spurious reasons".

Now, however, was a good time to buy banks, Thiam said, adding the "world would have to come to an end" before it proved risky.

We believe in Asia: Credit Suisse CEO
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We believe in Asia: Credit Suisse CEO

"Because of the FSB (Financial Stability Board which monitors the global financial system), global banks, systemically important banks will have raised $4 trillion of additional capital....There is no scenario where the banking sector blows up today," he said.

"All those doomsday scenarios are not justified."

Credit Suisse shares tumbled 9 percent in early trade.

The earnings mark the first set of results following an overhaul in which CEO Tidjane Thiam promised to scale back the investment banking business in favor of wealth management.

The group posted a full-year pre-tax loss of 2.4 billion Swiss francs ($2.38 billion) in the fourth quarter. The net loss came in at 2.9 billion Swiss francs and marked its first full-year loss since 2008. A 3.8 billion Swiss franc goodwill impairment was mainly related to the acquisition of Donaldson, Lufkin & Jenrette (DLJ) in 2000, the bank said.

"It's a clean-up and a turnaround. There is the need to deal with some legacy issues," Thiam told CNBC.

UBS profit up 79% amid 'paralyzing' volatility

"There are a lot of restructuring charges attached to what we are doing. It's a big clean-up, but it's necessary," he said.

As part of the earnings release, Credit Suisse announced that it was accelerate its program of cuts across the bank, including approximately 4,000 jobs.

The challenge for the group lies in Credit Suisse's equities and fixed income business, according to the CEO. "The fixed income activity has suffered," he said. The cost of withdrawing from certain activities in investment banking, as flagged last year, also took its toll.

"It's important to be in investment banking," Thiam said, but denied rumors he was talking to Wells Fargo about a sale of part of the investment banking and capital markets business.

The wealth management business was however performing well. While rival UBS saw outflows of 3.4 billion Swiss francs in the fourth quarter, Credit Suisse recorded 4.4 billion Swiss francs in net new assets.

Thiam said he believed the group's faith in emerging markets and Asia and had helped attract clients. Many billionaire clients were looking for opportunities and had the means to withstand volatility. "A lot of things are mispriced...and mispricing by definition creates opportunity."

"Towards the lower end there is a drop in activity...but in terms of collecting the assets and getting people to come in, we are not yet finding that difficult."

Thiam, brought in as chief executive in July from insurer Prudential, warned in a statement that the environment had "clearly" deteriorated materially during the fourth quarter of 2015. The bank's exposure to the energy sector, a potential concern amid plummeting oil prices, was "manageable", he told CNBC. It played a role in the fourth quarter losses, but not a major role, Thiam said.A combination of uncertainties surrounding Chinese growth, the abrupt drop in oil prices, large industry mutual fund redemptions of financial assets, asynchronous policies by leading central banks, lower liquidity, a strong Swiss franc had made the fourth quarter of 2015 challenging, he said. The group had seen lower levels of client activity.

"It is not clear when some of the current negative trends and in financial markets and in the world economy may start to abate," he said.

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