Credit Suisse targets cut costs, investing in technology

6 years ago - Published in Finance, Fundamental Analysis

Credit Suisse plans to complete its group restructuring in 2018, it said Thursday as it raised its 2018 profit target for its wealth-management and connected business in Asia-Pacific, and announced new guidance for 2019 and for 2020.

"Our teams remain strongly focused on driving value for our clients and shareholders through 2018 and our objective is to achieve a group reported return on tangible equity of between 10-11% for 2019 and between 11-12% for 2020," CEO Tidjane Thiam said in the statement. 

"We expect this to be driven in large part by strong cost control, the wind-down of the strategic resolution unit and significant reductions in our cost of funding, all elements which are largely within our control," he added. 

The Swiss banking group anticipates that by the end of 2017, it will meet its 2018 target of 700 million Swiss francs ($710.9 million) in adjusted pretax profit at its wealth-management and connected business in the APAC region. It also raised the 2018 target to CHF850 million.

This is the first time it has announced ROTE goals since Thiam's revamp – which has refocused the bank more towards wealth management and less on volatile investment banking – began in late 2015. It represents a major rise from the 4.1% return posted in the first nine months of 2017. 

The bank said it aims to operate at a cost base between 16.5 billion and 17 billion Swiss francs in 2019 and 2020, compared to the 2018 target for a total cost base below 17 billion francs. 

Credit Suisse is also betting on technology, where it sees the potential for cost savings. "For example, we aim to implement more robots and to increase the share of operating systems on the cloud by 2020.," the bank said, adding that from 2019 onwards those measures will result in incremental annual productivity gains of around 600 million francs to 800 million francs over the course of 2019 and 2020.

Credit Suisse said its confident of completing the wind-down of the strategic resolution unit and lowered its 2019 adjusted pretax loss target to about $500 million from $800 million previously. The closure of the unit, a dumping ground for assets that no longer fit the bank's strategy or trades that went sour, is one of the key tasks for Credit Suisse to complete.