Credit Suisse Group AG (NYSE:CS) released its earnings report for the three months through September this morning before the market opened on Wall Street. The company showed net income of 454 million Swiss Francs, or around $509 million. the figure for income fell far short of what analysts were looking for from the investment bank, and shares tumbled in pre-market trading as a result.
Analysts following Credit Suisse Group AG (NYSE:CS) were looking for income of 705 million Swiss Francs from today’s earnings report. The large miss was driven by a huge drop in revenue at the company’s investment banking business, and persistently high costs. Credit Suisse managed to cut compensation rates by 24% compared with the second quarter, but that clearly wasn’t enough to offset the loss in revenue.
Credit Suisse earnings
This morning’s earnings demonstrate some of the difficulty in dealing with the new investment world. Banks are facing tighter regulation and oversight of their activities, and it’s hurting their bottom line. Monetary policy across the world has destroyed the fixed income market, and that leaves almost every company in the business hurting.
Credi Suisse AG (NYSE:CS) is a strong bank, but its earnings are as susceptible to quick changes in the market as other banks. The company is making strides to comply with regulatory efforts to improve capitalization ratios and other features at banks.
Cedit Suisse says that it has reduced its Reisk Weighted assets by around $31 billion in the last twelve months, leaving the figure at $169 billion. The firm’s Basel III Tier 1 capital ratio is up to 10.2%. It stood at 9.2% at the end of the firm’s last earnings report. Credit Suisse is deleveraging, and its doing it faster than competitors. That means its results are likely to suffer in the coming quarters, but it is actually adding value to its business.
Credit Suisse performance
Credit Suisse AG (NYSE:CS) shares have been performing well through 2013 despite the slow down in the company’s earnings. Shares in the investment bank have increased by more than 35% so far this year, though today’s devaluation has tempered those gains somewhat.
Basel III, among other big trends, is going to have a massive effect on the balance sheet and the bottom line of the world’s biggest banks. Investors who don’t understand the financial market will have a hard time getting their bets on investment banks right as the new regulations come into force.