Even before kissing off $462 million on a ten-year hedge fund investment, Credit Suisse’s private bank hit the skids. finews.com unpacks why.
The flagship wealth management unit’s revenue tumbled more than 11 percent in the fourth quarter, even after stripping out «significant events». The annual fall was nearly as steep – 9.3 percent. All told, the wealth and asset management unit swung to a 12 million Swiss franc net loss ($13.4 million), from 630 million francs year-ago.
«Looking forward into 2021 and beyond, we aim to further accelerate growth in wealth management,» CEO Thomas Gottstein said in a statement. But first, a lot went wrong in the fourth quarter for Philipp Wehle, the 46-year-old who runs Credit Suisse's international private bank.
Unit In Tailspin
In wealth management side, recurring fee and commission income fell sharply, and transaction-and performance-based revenue edged lower. On the asset management side, management fees fell, mainly on lower real estate transaction fees.
The York hit threw the unit into a tailspin, and a boost from selling real estate and from a more expensive value of its seat on the Swiss stock exchange didn't help much. The strengthening of Switzerland’s franc against the U.S. dollar and other big currencies wrought a 104 million hit to annual pre-tax income, after taking a 293 million franc bite out of income.
An apparently ongoing rethink of its asset management unit harbors the potential for more restructuring spending in coming quarters. A rare bright spot is 4.3 billion francs raked in during the fourth quarter by Credit Suisse's private bankers – this represents nearly five percent growth in net new money against its existing assets.
Scandals Loom
Regrettably, the unit’s annual cost-income ratio hasn’t been this bloated since 2016 – which also marks the last time its net margin fell this low. It is also beset with a series of messy scandals including fighting an oligarch and defending itself in a Bulgarian drug-and-corruption scheme.
The sum total isn’t encouraging for Wehle, a German banker 20 months into his tenure atop the international private bank. Once a close associate of Iqbal Khan, his former boss and now competitor over at UBS, Wehle is keen to begin create new business opportunities with several recent high-profile hires.
