Credit Suisse misses expectations as 3rd-quarter net profits plunge 38%, hit by a slowdown in wealth management

  • Credit Suisse posted a 38% drop in third-quarter net profit, well below analyst expectations, as Switzerland's second-biggest bank saw a slowdown in its wealth management business.
  • Profit hit 546 million francs (462 million pounds) in the three months to September, lower than the 680.7 million francs ($747 million) analyst estimated.
  • The international wealth management business, its sore point this quarter, saw a 10% drop in revenue to 2.5 billion francs from a year ago. 
  • The Swiss lender said it would pay the second half of its 2019 dividend to shareholders, and forecasts 2020 dividend 5% higher than a year earlier.
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Credit Suisse reported a 38% plunge in third quarter net profit on Thursday, as the Swiss lender saw its wealth management business hurt by "significant foreign exchange headwinds."

The bank's net profit came in at 546 million francs in the July to September period, lower than the 680.7 million francs ($747 million) analysts polled by Bloomberg estimated.

But Credit Suisse said the large drop was because in the same period last year, it received a 327 million franc ($358 million) boost from selling its InvestLab fund platform to Allfunds group.

Credit Suisse shares fell by as much as 4.7% on Zurich's SIX exchange.

Here are the key numbers:

Profit attributable to shareholders: 546 million francs versus 680.7 million francs estimated

Net revenue: 5.2 billion francs ($5.7 billion) versus 5.3 billion francs ($5.8 billion) estimated

Loan loss provisions: 94 million francs ($103 million) vs 243 million francs ($266 million) estimated

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UBS, the bank's bigger rival in the region, fared much better by posting a 99% jump in quarterly profit to $2.1 billion earlier this week.

The international wealth management business, its main weakness this quarter, saw a 10% drop in revenue to 2.5 billion francs ($2.7 billion) from a year ago. 

The Swiss franc rose by nearly 3% against the dollar in the third quarter of the year, hitting its highest in over five years, which would mean any non-Swiss investors would have seen their income diminish in local-currency terms.

Unlike many European lenders, Credit Suisse said it would pay the second half of its 2019 dividend to shareholders and plans a 5% annual dividend growth for next year. It also said it would restart its share buyback plan to boost shareholder returns next year by spending up to 1.5 billion francs ($1.6 billion).

The bank said it expects the COVID-19 environment to "continue to result in elevated levels of transactional and trading activity, across both our wealth management and investment banking businesses, as our clients respond to the macroeconomic uncertainties."

Last quarter, Credit Suisse said it would merge its trading and investment banking division and combine its risk and compliance functions. The merged investment banking unit saw pre-tax profit rise to 370 million francs, as heightened trading helped equity and fixed income sales and trading surge 5% and 10%, respectively.

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