Bloomberg News

Credit Suisse to Accelerate Effort to Get Rid of Unwanted Assets

January 07, 2014

Credit Suisse Group AG's Headquarters Stand in Zurich

Pedestrians walk past Credit Suisse Group AG's headquarters in Zurich. Photographer: Gianluca Colla/Bloomberg

Credit Suisse Group AG (CSGN), the second-biggest Swiss bank, said it will reduce unwanted assets more quickly than previously announced as regulators encourage lenders to curb their reliance on borrowed money.

The bank plans to trim risk-weighted assets at the businesses it intends to exit by 58 percent by the end of 2015 from Sept. 30 levels, the Zurich-based company said in a statement on its website today. That compares with a planned 41 percent cut announced on Oct. 24.

Credit Suisse, led by Chief Executive Officer Brady Dougan, said in October it would create units within both its private banking and investment-banking divisions to house assets and businesses it doesn’t plan to keep. The Swiss bank will also trim leverage, the ratio of assets to equity, in those activities by 76 percent by the end of next year, up from a previous target of 52 percent.

“The whole point of the non-strategic units is to run them off as quickly as possible,” Chief Financial Officer David Mathers said on a conference call today. “The faster we can reduce, the better, and quite clearly there has been increasing focus among regulators around leverage exposure.”

Credit Suisse rose 2 percent to 28.60 Swiss francs by 1:45 p.m. in Zurich trading, valuing the company at 45.6 billion francs ($50.3 billion). The Bloomberg Europe Banks and Financial Services Index of 44 companies climbed as much as 2.4 percent, the biggest increase in two months.

The new reporting structure doesn’t affect earnings at the group level, the bank said today. The company restated historical financial information for its divisions in 2011, 2012 and the first nine months of 2013 to reflect the new reporting format.

Leverage Focus

“The announcement should be assessed neutrally,” Andreas Venditti, a Zurich-based analyst with Zuercher Kantonalbank, wrote in a note to investors. “The main features were already known and nothing changes in the consolidated disclosure.”

When Credit Suisse published earnings in October that missed analysts’ estimates, it announced plans to group businesses and activities it no longer wanted.

At the private banking unit, that included positions related to the revamp of the former asset management divisions and selected cross-border business the bank is exiting. At the investment-banking division, Credit Suisse plans to shrink its rates business, which focuses on government bonds and interest rate swaps and options, to improve returns.

The Swiss National Bank, which imposed a leverage limit on the country’s largest banks in the aftermath of the global financial crisis, considers that Credit Suisse and UBS AG (UBSN) need to make further improvement, SNB Vice President Jean-Pierre Danthine said in a speech last month.

“It is vital for the big banks to continue improving their capitalization, and in turn their resilience, particularly as regards the leverage ratio,” he said.

Swiss Finance Minister Eveline Widmer-Schlumpf said in November the leverage restriction for too-big-to-fail banks may be too low.

To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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