Credit Suisse Q1 profit beats expectations

Credit Suisse reported an 8% jump in first-quarter net income on Wednesday as revenues rose on the quarter but fell on the year.

Net income attributable to shareholders came in at CHF749m from CHF259m in the final quarter of 2018 and CHF694m in the first quarter of last year. This was ahead of analysts' expectations of around CHF692m and marked the highest quarterly profit since the third quarter of 2015.

Meanwhile, revenue rose from CHF4.8bn in the final quarter of last year to CHF5.4bn, but was down from CHF5.6bn in the first quarter of 2018. The drop in quarter-on-quarter revenue was attributed to lower net revenues in Investment Banking & Capital Markets, Asia Pacific and Global Markets.

Investment Banking & Capital Markets saw a pre-tax loss of CHF93m versus pre-tax income of CHF59m in the first quarter of last year, reflecting lower market activity across debt and equity underwriting, which was hit by the US government shutdown, investor concerns over a slowdown in US corporate earnings and GDP growth and the uncertain geopolitical environment.

Meanwhile, revenue in that division was down 33% to CHF356m,driven by lower revenues from debt and equity underwriting, reflecting a decline in the industry-wide fee pool and lower revenues from advisory and other fees.

Return on equity was 6.9% compared to 2.4% in Q418 and 6.7% in Q118.

"In a challenging quarter, which was the first after the end of our three-year restructuring, we achieved our fifth consecutive quarter of positive income," said chief executive officer Tidjane Thiam.

"We are now operating with a lower risk profile, a stronger capital base and a structurally lower cost base. Our model is resilient; this allows us to protect our bottom line during periods when markets are challenging and provides upside when conditions improve. The first quarter was one of three very distinct months: a challenging January, a limited recovery in February followed by a strong March, which was our second-highest revenue month in the last 39 months."

At 1130 BST, the shares were up 2.7% at CHF13.87.

CMC Markets analyst Michael Hewson said: "Having spent the last three years restructuring the business to focus on areas like wealth management and paring back the higher risk trading business, this focus appears to be reaping dividends.

"The investment banking division is still underperforming, not too much of a surprise given the weakness seen in recent updates from its US peers, nonetheless there is no escaping the fact that having returned to annual profit last year the business appears to be heading in the right direction, even if trading conditions still remain challenging.

"The bigger question is whether this improvement for Credit Suisse is the canary in the coalmine for European banks, with more reports out later this week, or a notable exception?"