Below are excerpts from a CNBC interview with Credit Suisse CEO Tidjane Thiam and CNBC's Joumanna Bercetche:
Joumanna: Mr. Thiam, it's great to have you with us.
Tidjane Thiam: It's a pleasure being here, thank you for having me.
Joumanna: Looking at the numbers, it looks like the third quarter came in pretty strong. What would you say are some of the highlights?
Tidjane Thiam: It's been a good quarter. If you look at the numbers, you can see that the wealth management strategy is continuing to work. We have 72 billion coming in so far this year, in nine months, the highest ever, 28 percent up so wealth management is working. But the big, how can I say this, satisfactory point, is really global markets. You know, but we've we've really, for the last three or four years struggled to restructure the business and bring it to a good place. Revenues up 34 percent. I think it's a real industry, industry-leading performance both in fixed income and in equities. At the end of last year was a lot of debate on whether we had restructured enough or should have a new restructuring and we said, no, we think we have a good platform. Now we need to give them a chance to show what they can do and the results have been really excellent.
Joumanna: One thing you said last year is assuming revenues are flat, you would get a return on tangible equity of about 10 percent. You're tracking 9 percent. So it's proceeding in the right direction, but not quite at 10 percent. Do you think that this is a function of perhaps you have over-cut on the cost side of things to the extent that it's impeding your ability to generate revenues?
No, no, I think I think I think it's really the external environment very clearly. If you look at that return on tangible equity that you mentioning, we did 10 in Q2 and 9 in Q3. So we are tracking at that level - it's Q1 that was significantly below that where we had a 4 percent drop in revenue and that was exclusively due to external circumstances. If you look at the commercial performance of our private bank in Asia is up 13 percent in revenue in IWM, we are up 5 percent in revenue and in Switzerland we're more or less flat. So actually revenue is growing but from a low base in Q1 and in Q1, unfortunately, is very important. It is, if you wish, the worst quarter to lose revenue because of the way banking works Q1 and Q2 after the strong quarters. But 9 percent, honestly, when I look at results of other banks in this environment, when we started this, the goal was to do okay in bad environments and 9 percent I think goes in that category. So very tough. Q3 is our lowest quarter usually.
Joumanna: But you've also told us in the past that it wouldn't be unreasonable to expect, say, 11 percent in 2020 and 12 percent in 2021. How does the outlook look here? Because I'm looking at one particular part of the statement here. You say that's a little bit cautious, cautious on the fourth quarter.
Tidjane Thiam: Look, what we've done is create a platform. And we said this platform can do 10 percent. This platform can do 10 percent, even with flat revenue. Sadly, we are below flat revenues so we're at 9 percent and then we say 10, 11, 12. We think that the fundamentals that drive our numbers are healthy. So the wealth management and the diversification of our platform but continues to work. Now, some part of our activity, particularly look at IBCM, which is very difficult this quarter, primary activity across markets has dropped down, more challenging and more market-dependent. But we're confident that, as you said in your introduction, we're going in the right direction. The key thing in these results is they're strong and we continue to improve on every key metric. Net income is going up. Return on tangible equity has doubled. So the direction is correct. What we can't completely control is the speed of travel, which is quite dependent on the environment. But clearly, this bank is going to continue increasing its return continuously for the coming quarters.
Joumanna: Speaking about wealth management, there has been one development for the quarter that we need to talk about, and that is Credit Suisse's involvement in the espionage of a former employee Iqbal Khan. Your chairman has said that this will affect the reputation of the bank negatively. How do you plan to turn that around?
Tidjane Thiam: Well, it's an unfortunate affair. It's an unfortunate affair. What I will say about this is that, first of all, it's important to be fair with the people who made those decisions, believed genuinley that they're acting in the best interest of a bank. Now, the action taken was inappropriate and disproportionate. So we need to... we've been investing for quite a few years now, we are improving at all the risk and controls in the bank. And I should say- I'll take the opportunity - I've been quite quiet on this since the beginning. I did not order a surveillance of Iqbal Khan and the notion which has been repeated that for one incident in January, suddenly I got angry in September and lashed out. It's just not credible. It's not true. I did not order surveillance of Iqbal Khan. There was concern about his departure. I was involved in putting in place retention measures. I spent a lot of time with the people who were at risk and ho are still in the bank, actually. But the decision was not made.
Joumanna: So you can confirm that you had absolutely no knowledge that the COO, who has now publicly taken responsibility for this, had taken unilateral decisions to that effect. But you had no idea that it was going on?
Tidjane Thiam: Absolutely. But I will maintain with everything we've seen since when means that he felt he was acting in the best interest of the bank. And both of the issues, we don't have a policy to do those types of things because we don't customarily do those types of things. This is a point I struggle to see why it's so difficult to understand. Well, it was a unique case in the investigation once we realized it had never happened, it was a unique case. So there were no procedures and policies established to handle it.
Joumanna: I understand there's also question of governance here as well, because you're a man who has razor sharp focus on the performance of all of the individual units of the bank. You know, you're a detail-oriented person. How is it possible that the COO, a man that you've worked with for a very long time, not just that Credit Suisse, but at other institutions as well, was able to make a unilateral decision of this proportion without you being aware?
Tidjane Thiam: Have people considered that maybe he thought he wasn't doing a bad thing? Why do you feel a need to escalate? Nobody has given any consideration -
Joumanna: There's no one out there who thinks that it was a good thing and actually unfortunately it has lead to the suicide of one of your contractors.
Tidjane Thiam: And the suicide, is a horrible thing. Absolutely a horrible thing. And if you allow me, I will say really I and everybody at Credit Suisse absolutely regrets that, it's sad. And I think that's really what led to the resignation of individuals, because that was a terrible, terrible consequence. But if you allow me, if we have time, to do one thing, because I think I owe it to the family. The family of that person made a statement. We do not know with absolute certainty what led him to believe he had no option but to take his own life. There are no guilty parties. He was an honest individual with a sense of integrity. And he's being mourned by those who loved him. We therefore ask that our privacy be respected at this difficult time. That was a statement from the family in the Swiss press and that's what I would like to respect.
Joumanna: How has morale been at the bank?
Tidjane Thiam: I think good overall, because there's been a lot of noise in the media, but we tread very closely what happens in the bank, I have almost daily reports on that and It's an opportunity to really thank my clients because they've really stuck with the bank through this. I have continued to meet them. I had a big lunch with clients here in Switzerland Just last week and we know what they think of this affair. Has this been brought up in conversations with our staff? Yes, but the staff has answered and it has had no impact on our business. And I want to thank our staff also who stayed focused and continue to deliver as the results show, throughout this, and our shareholders. And I thank them for all of the messages of support that we've had.
Joumanna: Sir, why did you not say this a month ago when this story came to light? Why does it take you so long to actually speak as CEO?
Tidjane Thiam: I spoke internally at the end of the investigation. I owed communication to my staff and I did communicate with them. But I knew there would be a time to speak about this in more company. I can answer directly, that the level of falsities and lies that was present in the media did not allow a calm conversation.
Joumanna: Do you feel that you publicly owe an apology to Iqbal Khan?
Tidjane Thiam: I hope that him and his family will not disturbed by all these events.
Uri Inspector | News Intern | CNBC International
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