The head of the International Wealth Management division of Credit Suisse expects Europe to become the major growth factor this year. These are the reasons behind his analysis.

Last year’s decision by British voters to leave the European Union and upcoming elections in France, Germany and the Netherlands have had a detrimental effect on banking clients’ appetite to invest their cash holdings – which left a dent in the earnings of most banks. Credit Suisse (CS) now expects its customers to become more active again soon and demand for more advice on investments.

That’s at least what makes Iqbal Khan predict a turnaround at the International Wealth Management (IWM) unit, the division he is in charge of. «I would expect Europe to rebound in profitability,» he told «Bloomberg» in an interview.

Way to Go

Such a turnaround is crucial for the unit if Khan wants to achieve his own target for profit in 2018. He will need to generate an additional 700 million Swiss francs to reach the 1.8 billion pretax he's aiming for.

IWM at the end of 2016 already lowered the profit target to 1.8 billion francs from a previous 2.1 billion. The division had a 2016 pretax profit of 1.1 billion francs.

Costs Have Come Down

Within CS’ wealth management, Europe was the only region to generate lower earnings last year, while assets under management increased, according to Khan.

CS, Switzerland’s No. 2 bank, lowered its cost base in Europe to become more profitable as demanded by CEO Tidjane Thiam. «I would expect that to pay off in 2017,» Khan told «Bloomberg».

New Relationship Managers to Boost Profit

Khan expects net new money growing 4 percent this year, up from 3 percent, after exchanging 180 of his relationship managers. He says that new relationship managers tend to take along their clients.

However, banks have become better at keeping their customers even as the relationship managers change their employers.

Analysts: Not Quite as Optimistic

And not all analysts share the optimism displayed by the CS top manager in his interview. Andreas Venditti, a banking analyst at Vontobel, expects pretax profit at IWM to improve to 1.6 billion francs next year, 200 million francs short of the CS target.

Khan knows that the political uncertainties may negatively impact his business. But he still thinks that Europe will have high profitability given that it presents less risk than other parts of the world, according to «Bloomberg».