Fixed Income Softens Q2 Hit for Credit Suisse

Credit Suisse’s total strategic and non-strategic investment banking businesses, including prime services, contributed a pre-tax income of 752 million Swiss francs during the second quarter.
By Rob Daly(2147487629)
Credit Suisse’s total strategic and non-strategic investment banking businesses, including prime services, contributed a pre-tax income of 752 million Swiss francs during the second quarter.

The income is 9.2% lower than the first quarter’s earning, but a hair below, 0.27%, earnings accrued in the second quarter of 2013.

These earnings, however, did not stop the entire bank from posting a 370 million Swiss franc loss from pre-tax continuing operations for its core business, which includes the bank’s private banking and wealth management, investment banking and corporate center organizations, for the quarter. Much of the loss is attributed to a 30% increase in operating expenses and the final 1.62 billion Swiss francs settlement with the U.S. government over cross-border issues.

Through it all, the bank achieved a Tier 1 common equity ratio of 9.5%, which is expected to exceed 10% by year-end.

In the meantime, Credit Suisse leadership attribute the investment bank’s earnings to the strong performance of its fixed income trading, underwriting and origination businesses. However the approximately 1.97 billion Swiss francs generated in the second quarter similarly tracks to the bank’s overall earnings with the businesses earning 5.2% less than the first quarter of this year, but duplicating the earnings of the same quarter of 2013.

Bank management managed to reduce the investment banking division’s total operating expenses to approximately 2.37 billion Swiss francs, or a 3% reduction compared to Q2 2013. They expect further savings as they restructure the investment banking business, which should yield a $200 million savings in operational efficiencies, an $8 billion reduction in risk-weighted assets and a $25 billion savings in leverage exposure reduction by the end of the process.

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