According to a report in Reuters, Credit Suisse Group AG (NYSE:CS) is planning to increase assets under management (AUM) in its private banking division in Japan. At present, the Swiss Bank is in troubled waters and its decision comes after other banking majors like U.S.-based Merrill Lynch, a division of Bank of America Corporation (BAC) and French bank, Societe Generale Group (SCGLY) have already closed their private banking operations in Japan.
Credit Suisse believes that the exit of many banking majors from the private banking sphere has opened up opportunities to gain market share in the Japanese market. Further, the Swiss bank believes that the demand for services that merge the banking and brokerage business has increased in Japan in recent times.
Back in 2009, Credit Suisse had launched its private banking operations in Japan and later in end-2011, it had acquired British lender HSBC Holdings plc’s (HSBC) private banking business there. Notably, at present, the Swiss banking giant aims to cater to Japanese customers having more than ¥1 billion ($10 million) in personal financial assets.
Japan is currently an attractive investment option for Credit Suisse as the country is looking to promote sustainable economic growth and recovery after the financial crisis and Fukushima disaster in 2011. Credit Suisse has been experiencing a sluggish economy for the past few quarters in Europe and hence, has been eyeing profitable opportunities outside the continent.
Further, in the U.S., where the Swiss bank has a significant footprint, it has been plagued by stringent regulations and weak consumer demand owing to the sluggish economic recovery. Further, it is facing probes by U.S. regulators for allegedly facilitating tax evasion by American clients.
We believe that Credit Suisse’s strategic expansion of its private banking operations in Japan will be a much-needed boost to its top line. Notably, the Private Banking & Wealth Management division contributed more than 50% of the total revenue of Credit Suisse in 2013 and expansion of such a profitable aspect of its business will bode well for the company going forward. However, the sluggishly recovering economy and the stringent litigation remain looming concerns.
Credit Suisse carries a Zacks Rank #5 (Strong Sell).