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Earnings

Credit Suisse second-quarter net profit jumps 45%, beating expectations

Key Points
  • Tidjane Thiam, chief executive officer of Credit Suisse, told CNBC at the end of last quarter that there was a cloud of uncertainty over the bank's performance this year.
  • However, Credit Suisse said that the second quarter saw a "more supportive environment" on the back of optimism over Sino-U.S. trade talks and dovish comments from central banks.
  • Credit Suisse began a share buyback program at the start of 2019, with the aim of purchasing 1 billion Swiss francs by the end of 2019.
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Our outlook is mixed, Credit Suisse CEO says

Credit Suisse reported a net income of 937 million Swiss francs ($945 million) for the second quarter of this year, beating analyst expectations.

Analysts polled by Reuters expected a net profit of 720.3 million Swiss francs ($726.13 million) for the second-quarter of 2019.

The Swiss bank had reported a net profit of 647 million Swiss francs for the same period a year ago.

Here are some of the key highlights for the quarter:

  • Pre-tax income hit 1.3 billion Swiss francs vs 1.1 billion Swiss francs a year ago
  • Return on tangible equity stood at 9.7% vs 6.9% a year ago
  • CET1 ratio reached 12.5% vs 12.8% a year ago

The Swiss-lender surprised analysts on Wednesday by achieving a return on tangible equity (ROTE) of nearly 10% ahead of expectations. ROTE measures the bank's ability to deal with potential losses. The higher the ROTE, the more sound the bank is considered to be.

The bank achieved this number for the first time since the restructuring drive taken up in the fourth quarter of 2015.

Speaking to CNBC's Carolin Roth, Thiam said: "We also think we can go much higher on that (ROTE)...and that's a function of particularly the growth in wealth management."

The bank's international wealth management division grew from a year ago. It reported a net income of 444 million Swiss francs for the second quarter of 2019 compared to 433 million Swiss francs a year ago.

Credit Suisse said that wealth management "delivered robust results in the second quarter with stronger asset gathering after the slowdown experienced in the first quarter of the year."

Shares rose almost 3% in early deals. 

'Not a fan of low interest rates'

At the end of last quarter, Tidjane Thiam, chief executive officer of Credit Suisse, told CNBC that there was a cloud of uncertainty over the bank's performance this year. The Swiss-lender cited geopolitical and macroeconomic uncertainty as a potential risk to client activity.

However, Credit Suisse, in its latest report, said that the second quarter saw a "more supportive environment" on the back of optimism over Sino-U.S. trade talks and dovish comments from central banks. Both the European Central Bank (ECB) and the U.S. Federal Reserve have signaled that more stimulus is needed to boost their respective economies.

The logo of Swiss banking giant Credit Suisse is seen on October 17, 2017 in Zurich.
Fabrice Coffrini | AFP | Getty Images

Market expectations point to a rate cut in the United States Wednesday, when the Federal Reserve announces its latest policy decisions. There's also a market consensus that the ECB will cut rates at its next meeting in mid-September. Both central banks have recently tried to reduce their stimulus to their economies since the sovereign debt crisis, but economic data is still showing weaknesses.

Speaking to CNBC, Thiam said: "I am not a great fan of low interest rates, as a great a believer in the importance of savings in the economy. Subsidies to debtors and penalties for savers, I think in the long term harms the economy."

Low interest rates stimulate borrowing.

Uncertainty ahead

Looking ahead to third quarter results, Credit Suisse said that so far there have been "healthy levels" of client engagement, but it remains to be seen "whether this translates into activity".

"We must also underline that we expect the usual seasonal slowdown in revenues," the bank said in a statement about its third quarter performance due to the holiday season.

Credit Suisse began a share buyback program at the start of 2019, with the aim of purchasing 1 billion Swiss francs by the end of 2019.

Shares of Credit Suisse are down more than 25% over a 12-month period.