Once again today, Credit Suisse is emphasizing that the restructuring of its investment bank is over. Ninety jobs were cut from the investment banking and capital markets division last year. 390 were cut from global markets. A glorious future awaits. Or does it?
Neither the global markets division nor the investment banking and capital markets (IBCM) divisions at Credit Suisse reached their revenue targets for 2018. - Global markets scraped 85% of the annual target. IBCM achieved 91%. Worse, were costs - which in global markets were 111% of the 2018 target. Worse too was return on regulatory capital, which fell from 3.2% to 1.2% in the global markets division last year. Worst of all was the performance of two particular business units in the fourth quarter.
Credit Suisse said today that revenues in its Asian markets fixed income sales and trading business fell 91% year-on-year in the fourth quarter. Revenues in the bank's global equity capital markets business were down by nearly the same amount - 87% year-on-year.
Big losses at both businesses were to blame. At Credit Suisse's Asian business, there was an $85m fourth quarter loss for reasons that haven't been made clear. At Credit Suisse's equity capital markets business, there was a loss relating to a, "single block trade."
Credit Suisse's Asian traders will suffer as a result. - The bank said today that it cut compensation 27% in Asia in the fourth quarter, reflecting "lower discretionary compensation expenses." For the year as a whole, compensation spending in Asia was down 14%.
The real question is where the markets business goes from here. CEO Tidjane Thiam said 2019 hasn't started entirely well in the global markets division. - Although activity is up on the fourth quarter of 2018, it's down on the first quarter of 2018.
Given that Credit Suisse's global markets business was 11% over its cost targets last year and barely scraped a return on regulatory capital, surely more restructuring is in order? Thiam remains adamant that this isn't the case and said today the bank will benefit from the end of its restructuring in 2019, particularly as other banks are in the process of making cuts. "We want to give the business a chance," said Thiam. Credit Suisse's traders will need to make the most of it.
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