Credit Suisse said Thursday that it planned to shrink its investment bank and other businesses as it grappled with stricter regulatory requirements and a challenging fixed-income market.
The announcement of the planned changes came as the Swiss bank reported that its third-quarter profit rose nearly 79 percent from the same period a year earlier, although the results still fell short of market expectations. The bank said its overall revenue was weighed down by difficult conditions in its fixed-income business.
The bank said it planned to move nonstrategic lines into its business units, so that the bank’s management could focus on areas it believes will be core product lines in the future. Credit Suisse and its larger rival UBS have shed loans and other debt in recent years to meet Swiss regulatory rules, while also bolstering their capital reserves.
“To ensure that we continue to advance this evolution and drive growth in high-returning businesses, particularly in private banking and wealth management, we are accelerating our existing wind-down strategy and enhancing our disclosure through the creation of nonstrategic units within each of our two divisions,” said Brady W. Dougan, Credit Suisse’s chief executive. “The clear separation of the nonstrategic units will free up management time and resources to focus on our ongoing businesses and growth initiatives.”
As part of its plans, Credit Suisse said it would simplify its interest-rate trading products and cut back its more capital-intensive activity, in hopes of reducing the bank’s exposure to riskier assets by $7 billion by 2015. It said it would also shift fixed-income businesses it is exiting to the nonstrategic portion of the investment bank.
Credit Suisse reported third-quarter profit of 454 million Swiss francs ($508 million), up from 254 million Swiss francs a year earlier. But that was well short of the 705 million francs expected by analysts surveyed by Reuters.
Credit Suisse, which is based in Zurich, took a pretax charge of nearly 1.1 billion francs in the year-earlier quarter to meet new accounting rules that required it to consider the cost of repurchasing its own debt as the value of that debt improved.
The bank said its third-quarter results reflected “resilient” profitability in its private banking and wealth management business, as well as “strong” revenue on equity trading and “continued progress on cost and capital.”
Credit Suisse said it had reduced risk-weighted assets by $31 billion during the last year, cutting the total to $169 billion, “thereby exceeding our 2013 year-end target ahead of schedule.” The bank also said it had raised its Basel III core equity Tier 1 ratio, a measure of its ability to weather financial shocks, to 10.2 percent from 9.3 percent at the end of June.