Fixed-income traders in the markets unit of Credit Suisse’s Asia Pacific division are likely now casting an envious eye at their banker colleagues in ECM, following the release of the Swiss firm’s Q3 financial results. The markets team (equities and fixed income trading) in APAC, endured a torrid third quarter, registering a loss before taxes of CHF4m, compared with profits of CHF49m and CHF45m in Q2 2018 and Q3 2017, respectively. Credit Suisse’s Q3 earnings report pinned the loss on lower sales and trading revenues from fixed income.
There was bad news on the pay front for APAC markets staff, too. Compensation and benefits decreased 24% year on year in Q3, “primarily driven by lower discretionary compensation expenses, lower employee benefits, lower deferred compensation expenses from prior-year awards and lower salary expenses following our restructuring efforts,” the report said. This contrasted to an increase in global markets bonuses globally.
The third quarter in Asia shaped up better over in ‘wealth management and connected’, the larger of Credit Suisse’s two APAC units, which combines private banking with a team called ‘advisory, underwriting and financing’ (i.e. IBD). WM&C as a whole posted a profit of CHF180m, up 4% year on year.
Although private banking (CHF133m) dominated WM&C profits, advisory, underwriting and financing enjoyed a larger uptick in year-on year revenues (15%) in the third quarter. ECM bankers out performed their DCM counterparts – there were “higher equity underwriting revenues, partially offset by lower debt underwriting revenues” in Q3. And they also helped the firm gain regional market share. Credit Suisse ranks third for Asia Pacific (ex-Japan) ECM revenue by bank in the first nine months of 2018 – up 13 places from 2017, according to Dealogic.
In private banking, Credit Suisse’s most important APAC business, hiring of relationship managers has slowed down. The bank’s regional RM workforce stood at 600 in Q3 – up by 10 people year on year, but down by 10 compared with Q2. By contrast, Credit Suisse’s main rival in Asian private banking, UBS, added 72 RMs over the same period, taking its headcount to 1,100.
Meanwhile, Credit Suisse’s private banking gross margin was 76 basis points in 3Q, four basis points lower than in Q2, “mainly reflecting lower transaction-based revenues and lower recurring commissions and fees”. Credit Suisse’s RMs are at least becoming more productive. They now manage CHF346m each on average, a 7% increase from a year ago.
CEO Tidjane Thiam remains bullish on Asia. In an interview following the release of the financial results, he described the bank’s Asian business as “fantastic” and enthused about the region producing a “constant flow of new billionaires”. The Asian business is heading in the right direction, despite quarterly fluctuations, he said.
Credit Suisse has been hiring in APAC. Its overall headcount in the region increased by 250 in the year to end-September to reach 7,300, although this includes hires in Asian markets outside of Hong Kong and Singapore.
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