Shares up 6.4 per cent and, surprise, surprise, investment banking is the star.
From the Thursday’s press release:
Credit Suisse Group reports net income of CHF 2.0 billion in the first quarter of 2009
• Strong return on equity of 22.6%, low risk profile and further strengthened capital position tier 1 ratio of 14.1% as of quarter-end.
• Private Banking pre-tax income of CHF 1.0 billion; net new assets of CHF 11.4 billion with strong inflows from both the international and Swiss businesses.
• Wealth Management business is positioned well for success in a changing industry landscape.
• Investment Banking returned to significant profitability with pre-tax income of CHF 2.4 billion; strong revenue growth and market share gains in key client businesses, leading to good returns on capital and lower risk usage.
• Consistent, disciplined fair value accounting approach, including net writedowns of CHF 1.4 billion in commercial mortgage-backed securities (CMBS).
• Asset Management pre-tax loss of CHF 0.5 billion primarily reflects unrealized private equity losses in line with the decline in public markets; continued progress made on strategy to focus on asset allocation, the Swiss businesses and alternative investments and more closely align them with the integrated bank.
Brady W. Dougan, Chief Executive Officer, said:
We are pleased with Credit Suisse’s performance in the first quarter of 2009. We believe that these results, in particular our strong return on equity, show that our differentiated strategy and our robust, integrated and capital-efficient business model with a low risk profile can be a powerful generator of earnings. The results also show the benefit of the measures we took last year across the bank, including cost reductions and the further strengthening of our capital position.
- Investment Banking returned to significant profitability, reflecting the progress that has been made in reducing risk and executing on its client-focused, capital-efficient strategy. We believe that our realigned platform is capable of delivering sustainable profitability and good returns on capital, with reduced earnings volatility. During the quarter, we saw our key client businesses generate strong revenue growth and gain market share. At the same time, we made substantial progress in repositioning a number of previously loss-making businesses, returning these areas to profit this quarter through changed operating models and revised risk limits.
Highlights from the investment banking division:
Investment Banking reported income before taxes of CHF 2,414 million in the first quarter of 2009, compared with a loss before taxes of CHF 3,423 million in the prior-year period. Net revenues increased significantly to CHF 6,442 million from negative CHF 503 million in the prior-year period, reflecting the substantial progress that has been made on the realignment of Investment Banking towards a clientfocused, capital-efficient strategy. Investment Banking achieved a significant increase in market share in key client businesses, increasing revenues in these areas to CHF 6.3 billion, reflecting strong results in areas including global rates and foreign exchange, US residential mortgage-backed securities secondary trading, cash equities, prime services, and flow and corporate derivatives.
Of Investment Banking’s total net revenues, Credit Suisse estimates that approximately CHF 1.3 billion
was due to more normalized market conditions, including the narrowing of credit spreads, the reduction in the differential between cash and synthetic instruments, the reduction in market volatility and the stabilization of the convertible bond market since the fourth quarter of 2008. Revenues in Investment Banking also benefited from fair value gains on Credit Suisses own debt of CHF 365 million.
Investment Banking’s results also benefited from lower non-compensation costs. These fell by 19% in US
dollar terms compared with the first quarter of 2008 due to a combination of lower fixed noncompensation costs (including reduced travel and entertainment costs and professional fees) and reduced brokerage & commission expenses. Compensation expense of CHF 2.9 billion included the vesting of prior-year compensation awards (including from the Partner Asset Facility plan) and a performance-related compensation accrual for 2009 that reflected the improved risk-adjusted profitability of Investment Banking.
And finally the writedowns:
Net valuation adjustmen s and exposures in Investment Banking Credit Suisse took a consistent and disciplined approach to fair value accounting throughout the first quarter of 2009. This led to CHF 1.4 billion of net writedowns in CMBS. In the first quarter of 2009, Credit Suisse did not early adopt the new accounting guidance concerning fair value issued in April 2009 by the Financial Accounting Standards Board. Credit Suisse is obliged to and will adopt these new standards in the second quarter of 2009 but does not expect a significant impact on fair values as a result of this guidance.
Related links:
Morgan Stanley not in Q1 happy bank club – FT Alphaville
Dissecting bank results – FT Alphaville
The IBs of March – FT Alphaville
The return of the IB capital call – FT Alphaville
Bank of America in Q1 happy bank club – FT Alphaville