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Credit Suisse posts 3rd loss in a row on tax hit - http://allcharts.co.za |

February 14, 2018 8:49 am
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mw_logo_social Credit Suisse posts 3rd loss in a row on tax hit

ZURICH — Credit Suisse Group AG posted its third-straight annual loss Wednesday as the U.S. corporate tax overhaul forced the Swiss banking giant to write down over $2 billion in deferred-tax assets.

The bank was upbeat on its outlook, with Chief Executive Tidjane Thiam saying that “our strategy is working” as it enters the final year of a three-year restructuring plan. Its pretax income for 2017, excluding that one-time hit, jumped from the previous year on strong revenue growth in its wealth management arm.

But the bank reported a loss of 2.1 billion Swiss francs ($2.3 billion) in the fourth quarter and 983 million Swiss francs for the full year due to the changes in the U.S. tax system.

Its fourth-quarter and 2017 losses were less than analysts had expected. Analysts had expected a fourth-quarter loss of 2.3 billion Swiss francs and a 1.1 billion loss for the full year.

Credit Suisse disclosed in December that it expected a $2.3 billion hit from the value of its deferred tax assets — past credits and deductions that companies can use to offset future tax payments. The new U.S. corporate tax rate — lowered to 21% from 35% — makes these assets less valuable. Last month, UBS Group AG wrote down $2.9 billion in these assets.

The bank also signaled that it expected a long-term lift from the reduction in the U.S. corporate rate, citing a “positive business uplift expected from U.S. tax reform.”

Still, the accounting adjustment drove Credit Suisse to its third-straight year of red ink. The bank’s 2015 loss was prompted by impairment charges it took as it moved to scale back its investment banking business. In 2016, the bank lost 2.7 billion francs after reaching a settlement worth about $5.3 billion with the U.S. Justice Department at the end of that year related to mortgage securities sold before the financial crisis.

After a rocky 2015 and 2016, 2017 was a year of relative tranquility. The bank’s strategic shift toward wealth management proceeded without big disruptions and it didn’t have costly litigation issues. Its share price, which briefly fell below 10 francs per share in mid-2016, rose by 20% in 2017.

Credit Suisse said that its outlook for the global economy “remains positive,” though it alluded to the recent period of turbulence in the financial markets.

“In the first six weeks of 2018, we have seen a significant pickup in market volatility, which on the one hand had a positive impact on our secondary activities, and on the other hand, negatively impacted our primary calendar as clients wait for calmer markets in order to transact, ” it said.

Last week, the bank said it was closing a fund it had created in 2010 that allowed investors to bet on a period of tranquility in financial markets. The fund, known as XIV, plunged in value early last week, though Credit Suisse said it didn’t suffer trading losses.

Estimated net revenues in its global markets unit were up more than 10% in the first six weeks of 2018 versus the same period one year earlier, and over 15% in Asia.

The bank’s international wealth management unit saw a 9% rise in net revenues last year to 5.1 billion francs, with pretax income up 21% to 1.4 billion francs. Investment banking and capital markets posted an 8% increase in revenues from the previous year while revenues in the global markets division were largely flat.

The bank said that it didn’t expect to be subject to the base erosion and anti-abuse tax in the U.S., known as BEAT, in 2018. The tax is aimed at ensuring banks pay a minimum level of taxes on transactions with affiliated foreign entities. Last month, UBS Group AG said BEAT would add up to 60 million francs to its 2018 tax bill.

Credit Suisse also said it would propose a 0.25 franc per share dividend.

–Pietro Lombardi contributed to this article.

Write to Brian Blackstone at brian.blackstone@wsj.com

 
 

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