Credit Suisse’s US sales fall off a cliff

Credit Suisse issued 204 products worth US$521m in the US during Q2 2021, significantly down from 304 products with sales of US$1.03 billion in the prior year quarter. The bank dropped outside the top 10 US issuer group rankings for the first time since Q4 2011, finishing fourteenth with a market share of just over two percent.

 

In the months leading up to 2021, the bank’s issuance and sales had remained strong. It collected US$1.6 billion from 480 products in Q3 2020 while during the final quarter of 2020, sales stood at US$1.4 billion (442 products).

The majority of sales volumes during the second quarter were collected from structures tied to index baskets with sales reaching US$221m. This signals a shift in preference from single index equities, which were dominant in Q2 2020.

The best-selling index basket product for the period was the Trigger Callable Yield Notes - Worst of Option (22552Y135). Selling for US$39m, the income note was distributed by UBS Financial Services and tracks the Nasdaq 100 and Russell 2000. It offers a fixed monthly coupon of 5.2% pa as well as a capital return of 100% at maturity if the final level of neither index has dropped below 60% of its initial level.

The bank’s output of structured products tied to ETFs has also plummeted, totalling US$66m (24 products), compared with US$298m (61 products) in Q1 2021.

Popular underlyings during the first quarter reflected the uptick in ETF activity with top rankers including Technology Select Sector SPDR ETF (US$87m/16 products), Financial Select Sector SPDR ETF (US$74m/12 products), and SPDR S&P Biotech ETF (US$57m/13 products).

In Q2 21, this shifted to a more even spread of tech stocks like Apple (US$25m/nine products), Amazon (US$14.4m/eight products), and banks such as Citigroup (US$30m/nine products), and Wells Fargo (US$16m/nine products).

Brazil

Credit Suisse continues to be a dominant issuer in the Brazilian structured products market with an issuance of 13 products valued at an estimated BRL108m (US$20.6m) in Q2 2021.

The bank currently ranks as third on the SRP league tables and has not shifted since the second quarter of 2020, when sales stood at approximately BRL 129m (11 products).

The products issued in the second quarter are all tied to three proprietary underlyings which include CS Global Video Gaming and eSports 20% Risk Control Index, Credit Suisse Digital Health Fund Index, and the Credit Suisse Balanced Trend 5% Index.

All 13 of the products issued during the period were distributed by XP Investimentos, while payoff types included uncapped call and enhanced tracker.

One of its structures during Q2 2021 was the CS Balanced Trend 5% Index-Alta Limitada-5 anos. The certificate of structured operations (COE) has a five-year tenor and at maturity the investor receives full capital return plus [365..415]% participation in the positive performance of the Credit Suisse Balanced Trend 5% Index.

Europe

Credit Suisse issued non-flow structured products across the European market during Q2 2021 with concentrations in Germany (78), Switzerland (34), Austria (21), Luxembourg (19), Finland (two), and Italy (one).

Dominant underlyings for the period include Eurostoxx 50 (20), S&P 500 (11), Roche (eight), Novartis (seven), Apple (six), Nestle, (six), and Swiss Re (six), while a larger volume of products favour single index and single share equity asset classes.

The products were distributed by four entities including Credit Suisse itself, Deutsche Bank, Strukturinvest, and Alexandria Pankkiiriliike.

Asia Pacific

The bank is quite active as a manufacturer in the Asia-Pacific structured products market, especially in South Korea and Japan.

Main issuers of these products include Kiwoom Securities, NH Investment and Securities, and Shinhan Investment. The investments mostly track tech underlyings such as Samsung Electronics, Tesla, Micron Technology, Advanced Micro Devices, Netflix, and Hitachi.

It also issued three registered notes in the Japanese market in Q2 2021. The products track the Keyence, Panasonic, Takeda, Mitsubishi Estate, and Hitachi shares and range in maturity from under a year to almost three years.

Business lines

Credit Suisse reported a net income attributable to shareholders of CHF253m (US$275m) and a pre-tax income of CHF813m for the second quarter of 2021. The bank’s adjusted pre-tax income stands at CHF1.3 billion, which is 11% lower than its Q2 2020 figure.

Adjusted net revenues, at CHF5.2 billion, dropped by 14% from the same quarter last year.

The investment bank segment delivered net revenues of US$1.8 billion, reflecting a decrease of 41% year on year. This can be attributed to a slowdown in client activity and the deliberate actions taken regarding reductions to risk-weighted assets (RWAs) and leverage exposure.

At CHF853 billion, assets under management in wealth management reached a record high, supporting recurring commissions and fee growth of 19% YoY; client business volumes were also at higher levels.

‘Together with our more conservative approach to risk and a less favorable trading environment compared to the second quarter of 2020, we delivered a resilient underlying performance in the Investment Bank,’ stated chief executive officer Thomas Gottstein (pictured).

Click to view the bank’s second quarter earnings.