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Credit Suisse Group AG Profits Beat Forecast; But Cautious Near-Term

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Credit Suisse Group AG (ADR) (NYSE:CS) unveiled its third-quarter results Thursday, highlighting that its third-quarter profit beat analyst estimates in more than doubling to 1.025 billion Swiss francs.

At the end of the quarter, the core tier one capital ratio of Switzerland’s second-biggest bank stood at 9.8%.

Strong show by investment banking

Credit Suisse Group AG (ADR) (NYSE:CS)’s net profit for the July-September quarter was 1.025 billion Swiss Francs ($1.073 billion), against the average 810 million Swiss francs forecast by analysts in a Reuters pool. Its second quarter witnessed a steep loss after the banking group was forced to pay a U.S. fine.

Exuding confidence at the strong performance, CEO Brady Dougan said its investment banking results echoed stronger profitability and returns, as well as increased client activity. He said in a statement: “Our strong results in fixed income trading, especially in emerging markets and securitized products, and in equity underwriting were driven by significant client transactions”.

While highlighting the investment banking’s underwriter role for Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA)’s IPO in September, he said the deal was successful and one of the positives around the transaction was that it worked across the bank as it included both the private banking side and the investment banking side.

However, he stuck a cautionary note for the near-term, indicating that the start to October had been mixed. The banking group remained cautious on the final quarter even though it had a strong advisory and underwriting pipeline.

Credit Suisse focus on wealth management

CEO Dougan reiterated plans to focus on wealth management by expanding through acquisitions and by growing funds. However, he said market swings may lead to some adjustment of portfolios of the private-banking clients.

Jeffrey Vögeli and Elena Logutenkova of Bloomberg point out that Credit Suisse Group AG (ADR) (NYSE:CS) plans to allocate an equal amount of capital to its investment bank and money-managing businesses, while its local competitor UBS has shrunk its securities unit to focus on managing money for the wealthy.

Switzerland’s second-biggest bank’s fixed income and equities businesses had contrasting fortunes. Its fixed income trading rose by half, as compared to its U.S. rivals reporting an average increase of 12%.  However, the banking group’s equity trading revenues dropped 2%, slightly worse than its transatlantic peers.

In May, the Zurich-based group pled guilty to helping thousands of U.S. clients evade paying taxes to the U.S. government and agreed to pay a $2.6 billion fine.

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