Credit Suisse downgrades profitability targets, announces buyback

Credit Suisse announced a CHF1.5bn share buyback on Wednesday as it downgraded its profitability target for this year and the next.

Ahead of its investor day, the Swiss bank said it now expects return on tangible of equity (RoTE) of more than 8% for the full year 2019, down from previous guidance of between 10% and 11%.

For 2020, RoTE is expected to be around 11% "if markets are constructive and support revenue growth". The bank had previously said it was looking to achieve RoTE of 11% to 12% next year.

"Conversely, should markets remain challenging in 2020, we have identified up to 40 basis points of additional cost measures in order to protect our RoTE ambition of approximately 10%," it added.

Credit Suisse said a CHF1.5bn buyback has been approved for 2020, subject to market and economic conditions.

The group expects its investment banking division to be loss-making this year but said its pipeline of announced deals has been "building strongly" in the fourth quarter, "a marked improvement year on year".

"Looking ahead to 2020, we are working on actions that will reinvigorate the division, building on a strongly improving pipeline, which we expect will put us in a more advantageous position compared to 2019," CS said.

At 1000 GMT, the shares were down 0.5% at CHF12.85.

CMC Markets analyst Michael Hewson said: "The bank which has been embroiled in a well-publicised spat with a former employee, Iqbal Khan has been focussing more on its wealth management division to generate future profits over the past few years, and while this has reaped dividends the bank has also found itself forced to start charging customers for holding large amounts of cash with it.

"This should be a concern to all of those in European banking sector, given that Credit Suisse is one of the few banks in the region that recognised early on that they needed to change their business model in light of the new interest rate environment. If Credit Suisse is struggling what does that say about the rest of the sector, and especially those who aren’t as well advanced down the restructuring route. We’re looking at you Deutsche Bank."