Shares of Credit Suisse Group AG CS have gained 1.4% on the NYSE since the announcement of second-quarter 2018 results. Net income attributable to shareholders came in at CHF 647 million ($656.7 million), up significantly from CHF 303 million in the year-ago quarter.
Results reflected a decline in expenses and lower provisions for credit losses. However, decrease in revenues acted as a headwind.
Segment wise, on a year-over-year basis, quarterly income before tax at Swiss Universal Bank and International Wealth Management improved 10% and 19%, respectively. Also, income before tax for Asia Pacific segment increased 15%, while that for Global Markets division declined 42% year over year. Investment Banking & Capital Market’s income before tax improved 41% from the prior-year quarter.
Revenues Increase, Cost Decline (Adjusted Basis)
Net revenues came in at CHF 5.6 billion ($5.7 billion), up 7% from the prior-year quarter.
Total operating expenses declined 2% year over year to CHF 4.5 billion ($4.5 billion), mainly due to lower compensation and benefits expenses along with general expenses.
Provision for credit losses came in at CHF 73 million ($74 million), down 11% from the prior-year quarter.
Capital Position and Funding
As of Jun 30, 2018, Credit Suisse’s Look-through Basel III common equity tier 1 (CET 1) ratio was 12.8%, down from 14.2% in prior-year quarter.
The Look-Through Swiss CET1 leverage ratio was 3.9% up 1 basis point year over year. The Basel III CET1 ratio was 12.8%, down from 14.2% in the prior-year quarter.
Risk-weighted assets increased 6.9% year over year to CHF 277 billion ($281.3 billion) at the end of the quarter.
Updates on Cost Saving Plan
Credit Suisse remains on track to achieve its cost-saving targets. The company is well positioned to lower its operating cost base below CHF 17 billion by the end of 2018.
Outlook
Credit Suisse’s outlook for global economic growth for remaining 2018 is positive, despite certain geopolitical developments and growing tensions surrounding global trade along with the impact of monetary policy changes by central banks. Uncertainty caused by these factors might adversely impact confidence.
For remaining 2018, the company believes that its Wealth Management operations globally along with Asia Pacific segment will continue benefiting from broad-based, client-led growth as it allocates capital to highest returning business opportunities.
Having reached the last leg of its three-year restructuring program, Credit Suisse seems to be on track to achieve return on tangible equity target of 10-11% by 2019.
Our Viewpoint
Focus on capital generation and restructuring initiatives is likely to strengthen Credit Suisse’s efficiency. The company’s bottom line expanded considerably this quarter owing to its three-year overhaul.
However, given the challenging macroeconomic environment, we expect the company’s top line to remain under pressure. Also, involvement in a number of legal hassles continues to hamper its financials.
Credit Suisse Group Price and Consensus
Currently, Credit Suisse carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
Itau Unibanco Holding S.A. ITUB posted recurring earnings of R$6.4 billion ($1.78 billion) in second-quarter 2018, up 3.2% year over year. Including non-recurring items, net income came in at R$6.2 billion ($1.72 billion), up 3.3%.
ICICI Bank Ltd. IBN announced first-quarter fiscal 2019 (ended Jun 30) results. It incurred a quarterly net loss of INR1.20 billion ($18 million) against net profit of INR20.49 billion in the year-ago quarter.
Deutsche Bank AG DB reported net income of €401 million ($467 million) in second-quarter 2018, which tanked 13.7% from year-ago quarter. Income before income taxes plunged 13.5% year over year to €711 million ($828.1 million).
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