On Thursday, Credit Suisse Group AG (ADR) (NYSE:CS) reported that net profit for the second quarter rose nearly 33 percent on the year, on a rise in both stock and bond trading from its investment bank.
The Zurich-based bank beat analyst estimates with a 1.045 billion Swiss francs ($1.12 billion) net profit for the quarter, compared to 1.017 billion francs seen by analysts in a Reuters poll.
Higher revenues in the majority of investment banking businesses
Mirroring a strong performance by Wall Street rivals, Credit Suisse Group AG (ADR) (NYSE:CS) more than doubled pre-tax profits at its investment banking division from a year ago when trading was badly hit by the Eurozone crisis. Compared to the previous quarter, typically the strongest period for capital markets activity, pre-tax profit was down 42 percent.
Credit Suisse is targeting cost savings of 3.2 billion Swiss francs in 2013
Chief Executive Officer Brady Dougan and Chairman Urs Rohner said, “Our results for the second quarter and first half of 2013 demonstrate that our business model is performing well and delivering solid revenues, while we continue to make progress in reducing our cost base and balance sheet, thus generating good returns.”
Going ahead, the bank said it is targeting cost savings of 3.2 billion Swiss francs in 2013, 3.8 billion francs by the end of 2014 and 4.4 billion francs by the end of 2015.
Credit Suisse Tier 1 capital ratio increased to 15.3%
In the wake of the financial crisis, Credit Suisse Group AG (ADR) (NYSE:CS) has scaled back some of the more aggressive elements of its investment bank and dealt with a relatively strict regulatory regime in its home country. Roughly one year ago, the Swiss central bank singled out Credit Suisse as needing to better bolster its defenses against possible future losses, and the bank has since shed businesses, raised more capital and slashed costs.
Credit Suisse said its Tier 1 capital ratio, an indicator of higher-quality capital held in order to protect against potential losses, increased to 15.3% under international regulations known as Basel III that are being phased in world-wide.
Credit Suisse reassures investors that they can handle interest rise
Credit Suisse Group AG (ADR) (NYSE:CS) CEO Brady Dougan on Thursday tried to reassure investors that a transition to higher interest rates will be positive for the group, and said second quarter earnings offered encouragement for the remainder of the year.
There are concerns that the group’s bond portfolio could take a hit when rates rise, but Dougan was relatively sanguine.
“We do have $1.3 trillion in client assets in our private banking wealth management business. The impact of increased interest rates there is going to be pretty significant and that’s going to have a big impact on our overall results,” he told CNBC.
“But I think on the investment banking side, we run a much more capital-efficient banking model, a much more inventory-like model, so our hope is that we’ll be able to manage through those rises in interest rates in terms of their impact on inventories, reasonably well.”
Net income for the second quarter climbed
Net income attributable to shareholders for the second quarter climbed 33 percent to 1.05 billion francs from 0.79 billion francs in the previous year. Meanwhile, the increase was 18 percent in earnings per share to 0.52 francs from 0.44 francs, reflecting a 24 percent growth in shares outstanding.
Credit Suisse Group AG (ADR) (NYSE:CS) said its core income before tax was 1.534 billion Swiss francs for the second quarter, an increase of 38 percent from last year.
Net revenues increased 12 percent to 7.03 billion francs from last year’s 6.26 billion francs, while core net revenue rose 11 percent to 6.9 billion francs.
In the quarter, core net interest income climbed 62 percent and commission and fees grew 16 percent, while trading income plunged 67 percent from last year.