In its Q1 2014 results the Swiss bank announced it had missed market expectations on profit by around 20% as net income fell 34% year on year to CHF 859m. Performance in its fixed income business was particularly weak with revenue from debt trading dropping 25% to CHF 1.49bn. Equity trading was down 7.4% to CHF 1.2bn.
The wealth business however performed very differently with net inflows roughly double the expected level at CHF 10.6bn. Its pre-tax profit rose 15% year on year.
The solid performance of the wealth business in Q1 appears likely to be steady through 2014, according to Filippo Alloatti, Senior Research Analyst at Hermes Credit. “During the results call Credit Suisse said they are taking on more high net worth individuals and are seeing a move in margins,” he noted. “They're guiding for net margin to be flat or slightly higher for the FY14, this seems in line with consensus,” he added.
Longer term sustainability of performance will depend largely on whether the strong momentum in Asia Pacific and Switzerland is maintained, Alloatti said.
Lending activity is also likely to be key. “Credit Suisse talked in the past about allocation of resources to high ROE businesses and this has been delivered with Lombard lending, a very profitable product going from CHF0.5bn in Q113 to CHF2.2bn in Q114,” he added.
Alloatti added that wealth business performance could benefit others in a similar way this year such as another large Swiss bank, UBS.
