Credit Suisse Group
) reported fourth quarter net income attributable to shareholders
of CHF 816 million ($894.8 million) or CHF 0.17 per share,
compared to the year-ago quarter's loss of CHF 632 million
($693.1 million) or CHF 0.62 per share. For full-year 2012, net
income attributable to shareholders came in at CHF 3.8 billion
($4.2 billion), surging 99% from the last year.
Amid an uncertain macroeconomic environment, higher net revenues,
aided by higher net interest income boosted Credit Suisse's
results. Further, reduced operating expenses and a strong capital
position were the other positives for the quarter.
However, after adjusting for certain one-time items, Credit
Suisse's net income came in at CHF 397 million ($435.4 million)
in the reported quarter. This was substantially higher than the
net loss of CHF 637 million ($698.5 million) in the prior-year
Quarter in Detail
Net revenues were CHF 5.8 billion ($6.4 billion), up 29% from the
prior-year quarter. The rise reflected higher net interest
income, increased commissions and fees income as well as elevated
other revenues. Net interest income stood at CHF 1.9 billion
($2.1 billion), climbing 17% from the prior-year quarter.
Net revenues for full-year 2012 reached CHF 24.0 billion ($26.3
billion), down 9% year over year.
Private Banking & Wealth Management segment reported net
revenues of CHF 3.3 billion ($3.6 billion), increasing 8% from
the prior-year period. The Investment Banking unit reported net
revenues of CHF 2.7 billion ($3.0 billion), substantially up from
the prior-year quarter.
Notably, effective Nov 30, 2012, the company integrated its
Private Banking and Asset Management divisions into a single, new
Private Banking & Wealth Management division. Moreover, it
transferred majority of the securities trading and sales business
in Switzerland from Investment Banking into Private Banking &
Total operating expenses were recorded at CHF 5.1 billion ($5.6
billion), down 6% from the prior-year quarter. The decline was
primarily attributable to reduced compensation and benefits
expenses as well as lower commission expenses, partly offset by a
rise in general and administrative expenses. In the reported
quarter, business realignment costs of CHF 285 million ($312.5
million) were incurred in the Corporate Center segment.
Credit Suisse continued with its expense run-rate reduction
initiatives. After achieving CHF 2.0 billion ($2.2 billion) of
expense reductions in 2012, the company increased its cost
reduction target to CHF 3.2 billion ($3.5 billion) in 2013 and
raised its total target by CHF 0.4 billion to CHF 4.4 billion ($
4.8 billion) by the end of 2015.
Capital and Funding
As of Dec 31, 2012, Credit Suisse reported a Basel 2.5 core tier
1 ratio of 15.6% and a Basel 2.5 tier 1 ratio of 19.5%, up 90 and
100 basis points (bps), respectively, from the prior quarter.
Additionally, these were compared with 10.7% and 15.2% from the
prior-year quarter, respectively.
As of the end of the reported quarter, Credit Suisse recorded a
Basel 2.5 total capital ratio of 22.3%, up 1.1% as of Sep 30,
Notably, in Oct 2012, the company announced measures to reduce
total balance sheet assets by 13% to below CHF 900 billion by the
end of 2013 on a foreign-exchange neutral basis. As of Dec 31,
2012, the total balance sheet assets were CHF 924 billion, down
10% from Sep 30, 2012 and 12% from Dec 31, 2011. As of Dec 31,
2012, the company's Financial Market Supervisory Authority
(FINMA) leverage ratio stood at 5.8%, up from 5.2% in the prior
quarter and 4.6% in the prior-year quarter.
), another Swiss banking major, reported fourth-quarter net loss
attributable to shareholders of CHF 1.9 billion ($2.0 billion) or
CHF 0.50 per share, which substantially lagged the prior-year
quarter's profit of CHF 323 million ($354 million) or CHF 0.08
per share. This compared favorably with prior quarter's loss of
CHF 2.1 billion ($2.2 billion) or CHF 0.57 per share.
The quarterly results were primarily affected by net charges for
provisions for litigation and regulatory matters as well as net
restructuring charges and own credit loss.
However, after adjusting for own credit loss along with
restructuring and regulatory charges, UBS AG's adjusted pre-tax
loss came in at CHF 1.2 billion ($1.3 billion) in the reported
quarter. The company experienced lower net interest and trading
revenues excluding own credit, while net fee and commission
income and other income increased. Further, decreased operating
expenses acted as a tailwind for the quarter.
In our viewpoint, given the stressed operating environment,
earnings of Credit Suisse will remain under pressure in the
upcoming quarters. However, prudent business model changes can
lead to improvement in efficiency and bolster its competitive
Amid the uncertain regulatory environment and the Eurozone debt
crisis, the company will focus on generating capital. Its
restructuring initiatives are also encouraging. We believe that
such efforts would improve the company's operating efficiency in
Credit Suisse retains a Zacks Rank #2 (Buy). Other, foreign bank
stocks that are performing well include
BNP Paribas SA
ICICI Bank Ltd.
). Both these stocks carry a Zacks Rank #2.
(BNPQY): ETF Research Reports
CREDIT SUISSE (CS): Free Stock Analysis
ICICI BANK LTD (IBN): Free Stock Analysis
UBS AG (UBS): Free Stock Analysis Report
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