Credit Suisse 2Q2019: volatility impacted revenue

Credit Suisse posted negative net revenues of CHF184m in the second quarter, compared to net revenues of CHF24m in the same quarter last year and negative net revenues of CHF91m in 1Q2019.

Negative treasury results in 2Q2019 reflected losses of CHF208m with respect to structured notes volatility, mainly relating to interest rate movements, and negative revenues of CHF83m relating to funding activities, according to the bank.

Negative revenues and losses were partially offset by gains of CHF59m relating to hedging volatility, gains of CHF15m relating to fair value option volatility on own debt and gains of CHF11m on fair-valued money market instruments.

Credit Suisse issued 862 structured products across 17 different jurisdictions in the second quarter of 2019, according to SRP data. The products sold an estimated US$2.5 billion, almost level compared to the same quarter in 2018, when US$2.4 billion was collected from 865 products, but down from US$2.6 billion (from 882 products) in 1Q2019.

Four hundred and seventy-three products worth US$1.3 billion – more than half of the total issuance and sales for the quarter – were marketed in the USA via, among others, Incapital, Morgan Stanley Wealth, Raymond James, Stifel, Wells Fargo, and Goldman Sachs Private Banking. The latter was also responsible for distributing the best-selling product of the quarter that came in the shape of the Leveraged S&P 500 Notes 22552FAR3 which sold US$35.4m in April.

Other highlights in 2Q2019 included the Global Resource Preservation Portfolio Note USD 2023, which was distributed by Crelan in Belgium and sold €8.7m (US$9.7m) at inception. The 3.7-year, capital-protected medium-term note is linked to two portfolios – defensive and dynamic – each linked with different weights to equities (Thomson Reuters Global Resource Protection Select Index) and bonds (DPAM L Bonds EUR Quality Sustainable Fund).

In Brazil, the bank launched 12 products in collaboration with XP Investimentos, a local advisory firm, including eight products linked to the proprietary Credit Suisse Digital Health Fund Index, while the FTSE 100 Defensive Autocall Plan 3, which was distributed by Dura Capital in the UK, was the best performing product in the period, providing a capital return of 109.75% after just one year of investment.

Credit Suisse has reported the outstanding volume for structured notes stood at CHF51.1 billion (US$52.4 billion) as at June 30 2019, down 1.14% from the previous quarter, but up 6.4% from year-end 2018.

More than 62% of the outstanding volume, or CHF32.1 billion, was tied to structures linked to equity underlyings; 30% to fixed income products; seven percent to credit; and the remaining one percent was linked to others.

As of the end of June 2019, the bank had outstanding long-term debt of CHF 158.0 billion, which included senior and subordinated instruments. Assets under management of CHF214.7 billion were CHF4 billion higher compared to the end of 1Q19, mainly driven by favourable market movements and net new assets.

‘In the second quarter, we continued to deliver a strong operating performance through the disciplined execution of our strategy, with higher profits, both year on year and sequentially,’ stated Tidjane Thiam (pictured), chief executive officer, commenting on the results.

‘The results demonstrate the continued value of our regional, client-focused operating model, allowing us to fully leverage our leading wealth management and investment banking capabilities.’

Click the link to view the full 2Q2019 results and the financial report.