Tier 1 FX dealer Credit Suisse resumes dividends despite profit falling 38%

Credit Suisse, one of the world’s largest FX prime brokerages, reported a profit of 546 million Swiss francs (£461m) for the three months to September, below the 572 million franc median of bank-compiled analyst estimates.

Rewarding senior executives for poor performance is something which Tier 1 banks have been good at over the past few years.

Fred “The Shred” Goodwin of infamous RBS notoriety is one example, having romped home with a massive pension after causing one of the world’s largest banks to collapse at the end of the Millennial decade, taking a huge part in the global financial crisis of the time.

Today, it is Credit Suisse that is the villain of the peace, resuming dividends despite the company’s huge drop in profit.

Yes indeed, they still made a profit, so this case is not the same as Mr Goodwin’s, however it does demonstrate a one rule for them and another for us culture in the financial markets industry.

Credit Suisse said it planned to restart its share buyback plan next year, spending up to 1.5 billion Swiss francs to repurchase stock. The lender also forecast a 2020 dividend five per cent higher than the previous year’s.

Shares in the bank fell as much as 5.25 per cent following the publication of the results. Credit Suisse shares have lost more than a quarter of their value so far this year – falling twice as much as those of arch-rival UBS, but staying ahead of the European banking index.

Chief executive Thomas Gottstein said that if exceptional items were excluded, underlying performance across the bank’s main divisions had been healthy.

The drop in profits reflected a 327 million franc revenue boost Credit Suisse recorded in the same period last year from the sale of its InvestLab fund platform.

The results also included provisions of 152 million Swiss francs for major litigation expenses, and restructuring expenses of 107 million francs.

Back in the summer, Credit Suisse stated that it would make major changes with effect from August 1, 2020, includeing the creation of a global Investment Bank to build a client-centric global platform with critical scale for corporate, institutional and entrepreneurial clients. It will integrate Global Markets, Investment Banking & Capital Markets and APAC Markets.

Th initiatives included the creation of Global Trading Solutions and a globally integrated Equities platform. GTS will combine Credit Suisse’s International Trading Solutions and APAC Solutions to maximize the capabilities of Credit Suisse’s wholesale business for corporate, institutional and entrepreneurial clients. It is set to allow for further global technology integration, a unified risk set-up and the delivery of a wider range of products, greater scale and better pricing for customers.

Credit Suisse will also establish combined Chief Risk and Compliance Officer (CRCO) function to create alignment across its control functions.

Credit Suisse explains that the initiatives necessitate some changes within its executive leadership team. On July 29, 2020, the Board of Directors affirmed the amended Executive Board roles of Brian Chin and Lara Warner and the new role of Lydie Hudson.

As a result of these changes, David Miller will step down from the Executive Board. David Miller is committed to continuing his career at Credit Suisse.

Perhaps these are essential initiatives aimed at modernizing the bank, and gaining access to important markets which are vital in today’s fragmented electronic financial sector, and thus any dividends may be justifiable for future growth via R&D.

There, I have finally said something nice about a Tier 1 bank. Get the flags out….

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