The Markets team in Credit Suisse’s Asia Pacific division is traditionally a bit player compared with the region’s colossus private banking/IBD unit. At the start of the year, then CEO Tidjane Thiam even had to defend Markets employees in Asia after poor 2019 results – Thiam pointed out how they attract clients to the private bank.
Covid-19 has changed all that. Markets in Asia generated CHF459m in net revenues in Q2, up 54% year-on-year. Just as significantly, the unit contributed 43% to overall APAC divisional revenues, compared with 32% in the second quarter of 2019.
Fixed income sales and trading revenues led the charge, with a massive 139% increase to CHF208m, mainly due to “higher revenues from emerging market rates, credit and foreign exchange products”. Equity sales and trading revenues in Asia increased 18% to CHF251m.
Credit Suisse is far from the only firm to make hay while financial markets are volatile during the pandemic – US banks have also seen their Q2 trading revenues soar. But CS is the only global bank to split out its Asian markets numbers, which suggests that the trend applies to Asia as much as it does globally. Standard Chartered, which makes about 80% of its profits from Asia, announced earlier today that its markets income grew 16% for the quarter, with rates up 149%.
At Credit Suisse, Markets certainly needed a revenue boost in Asia because for much of last year the unit struggled to meet its expenses. Profit in the three months to end-June last year was just CHF21m, compared with CHF175m during the same period in 2020.
The Swiss bank is unlikely to have hired many traders of late, however. Compensation and benefits in APAC Markets decreased 5% to CHF138m, “primarily reflecting lower salary expenses”. But this was “partially offset by higher discretionary compensation expenses”, suggesting the firm may be planning to reward its now high-performing traders with decent 2020 bonuses.
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 revenues fall 6% year-on-year to CHF412m. This meant it contributed less to the APAC pie than Markets did, a significant turnaround from last year.
The advisory, underwriting and financing team (i.e. the smaller Asian investment bank ‘connected’ to the larger Asian private bank within WM&C) enjoyed a 9% increase to CHF193m, “primarily reflecting higher structured equity origination and equity underwriting revenues”. But profit for WM&C as a whole tumbled 43% to CHF123m as the bank made higher provisions for credit losses.
Credit Suisse has not been cutting jobs in Asia during the pandemic. Its workforce of relationship managers across the region went from 600 to 620 in the 12 months to end-June, while its total APAC headcount increased by 490 over the same period to reach 8,290.
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