The markets team in Credit Suisse’s Asia Pacific division typically plays second fiddle to the combined APAC private banking/IBD unit. In February, then CEO Tidjane Thiam was forced to defend markets employees in Asia after their disappointing set of 2019 results – he said they bring in clients to the private bank, a major contribution that isn’t always reflected in the firm’s earnings numbers.
In the opening quarter of this year, however, markets professionals, particularly those working in fixed income, were the drivers behind an overall 38% year-on-year rise in profit (to CHF252m) in the APAC division. Markets struggled to a CHF13m profit in Q1 2019, but that increased to CHF167m for Q1 2020.
Costs remained fairly flat in APAC markets, so the profit boost was caused by a 55% year-on-year spike in net revenues to CHF448m. While equity sales and trading revenues increased 19% to CHF236m, fixed income revenues went through the roof to CHF212m, a 133% jump. This was “mainly due to higher revenues from structured products, gains from hedging activities, higher revenues from emerging market rates products and higher revenues from foreign exchange products”, according to the CS first quarter results report.
There was also good news for compensation in the APAC markets team. While expenses were stable overall, compensation and benefits increased 5% year-on-year to CHF138m, primarily reflecting “higher discretionary compensation expenses and higher deferred compensation expenses from prior-year awards”.
But don’t get too excited if you work in markets at Credit Suisse in Asia. Goldman Sachs, Citi and Morgan Stanley have all reported Q1 increases in overall Asian revenues and global trading revenues as they benefited from market volatility caused by the Covid-19 pandemic. Morgan Stanley’s trading results were partly driven by a “strong performance” in Asia, the firm’s Q1 report noted, without providing regional figures. The US bank warned, however, that for the rest of 2020 it may not be able to rely on its traders to bolster its results in the face of a coronavirus-driven recession. This is likely to be the case for Credit Suisse as well.
Meanwhile, private banking at Credit Suisse – which is one part of the APAC Wealth Management and Connected (WM&C) unit, alongside investment banking – saw its revenue rise 36% year-on-year to CHF541m. Profit in WM&C as a whole, however, tumbled 50% to CHF85m as the bank made provisions for credit losses.
Covid-19 appears to have taken a toll on assets under management at the private bank in Asia. Regional AUM fell 8.2% year-on-year in Q1 to CHF197bn and was also down 10.5% on the previous quarter, “mainly reflecting unfavorable market movements and unfavorable foreign exchange-related movements”.
Still, Credit Suisse did increase its headcount of Asia-based relationship managers by 20 to 620 during the first quarter. This is a fairly standard Q1 rise for Asia’s second largest private bank, and it suggests that hiring was comparatively unaffected by the pandemic. Credit Suisse also boosted its headcount across the bank as a whole in APAC, as it did globally. It added 240 people over the course of the quarter, taking its regional workforce to 8,220.
The advisory, underwriting and financing team (i.e. the Asian investment bank ‘connected’ to the larger Asian private bank within WM&C), did not enjoy a good first quarter. Revenues decreased 83% year-on-year and 78% month-on-month to just CHF36m, primarily reflecting unrealised mark-to-market losses of CHF 160m.
Photo by Jason Briscoe on Unsplash
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