Banks

Credit Suisse cuts profit goals as revenue hopes fall short

Key Points
  • Switzerland's second-largest lender said on Wednesday it expects to hit a return on tangible equity (RoTE) above 8% this year, below its previous target of 10-11%. The Zurich-based bank also cut its forecast for next year.
  • While performance at its Global Markets trading division, the focus of previous criticism, has picked up in 2019, revenues have fallen in its investment banking and capital markets business due to floundering M&A activity.
Credit Suisse revises profitability targets amid tough environment
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Credit Suisse revises profitability targets amid tough environment

Credit Suisse cut a key profitability target for this year and next as a drop in dealmaking, negative interest rates and uncertainty caused by global trade tensions dimmed the outlook.

Switzerland's second-largest lender said on Wednesday it expects to hit a return on tangible equity (RoTE) above 8% this year, below its previous target of 10-11%. The Zurich-based bank also cut its forecast for next year.

"If markets are constructive and support revenue growth, we would expect our year-end 2020 RoTE to be approximately 11%," the bank said in a statement ahead of an investor day in London.

"Conversely, should markets remain challenging in 2020, we have identified up to 50 basis points of additional cost measures in order to protect our RoTE ambition of approximately 10%."

Credit Suisse previously aimed to achieve 11-12% RoTE in 2020.

The bank will present its first investor update since completing a three-year restructuring in 2018 which cut back its investment banking activities, boosted cooperation with wealth management, and whittled down costs.

While performance at its Global Markets trading division, the focus of previous criticism, has picked up in 2019, revenues have fallen in its investment banking and capital markets business due to floundering M&A activity. Credit Suisse now expects the division to make a loss this year.

The bank last month appointed new leadership to the division and aims to bolster its M&A activity by adding more bankers to advise deals in growth industries including technology and healthcare.

"Looking ahead to 2020, we are working on actions that will reinvigorate the division, building on a strongly improving pipeline, which we expect will put us in a more advantageous position compared to 2019," it said on Wednesday.

The Swiss lender said it expected to distribute at least 50% of net income to shareholders looking ahead to 2020 by growing its dividend at least 5% annually, and through a share buyback of 1-1.5 billion Swiss francs.