By Brenna Hughes Neghaiwi

ZURICH (Reuters) – Credit Suisse on Thursday said it plans to up lending volume and capitalise on a boom in share listings, to shore up revenue after low interest rates and legal charges tipped the bank into the red in the fourth quarter.

Switzerland’s second largest lender posted a 353 million Swiss franc ($392.79 million) net loss for the fourth-quarter after booking 757 million franc in legal charges. That compared with expectations for a 566 million franc loss in its own poll of 18 analysts. The result left annual profit down 22%.

The poll was compiled before the bank settled a legacy residential mortgage-backed security case for $80 million less than it had previously flagged.

The bank’s shares indicated up 0.5% in pre-market activity.

“Despite a challenging environment for societies and economies in 2020, we saw a strong underlying performance across Wealth Management and Investment Banking, while addressing historic issues,” Chief Executive Thomas Gottstein said in a statement.

“Looking forward into 2021 and beyond, we aim to further accelerate growth in Wealth Management and deliver sustainable returns in Investment Banking.”

The earnings cap a tumultuous year for Credit Suisse, which began with the ousting of Tidjane Thiam as chief executive over a spying scandal, and then the onset of the pandemic just as his replacement Gottstein took the helm.

Wealth managers have profited richly off bumper trading and client demand for greater counsel during the COVID-19 pandemic, helping rivals UBS Group AG and Julius Baer Gruppe AG post windfall gains. Credit Suisse, however, faced setbacks in its core business last year everywhere outside Asia.

Outside Asia, only Credit Suisse’s investment bank managed to post profit gain in 2020, as higher expected lending losses and headwind from negative interest rates and a strong Swiss franc bit into earnings.

Revenue from fixed income trading was down 8% at 713 million Swiss francs compared to a year earlier in the fourth quarter while equity sales and trading earnings were 5% lower at 498 million Swiss francs, underpeforming strong gains seen at several other investment banks.

Factoring out one-off gains that boosted results in 2019 and set it back in 2020, the bank said it would have seen a 6% pre-tax profit gain for the year.

Zurich-based Credit Suisse targets 10% annual earnings growth in its wealth management business over the next three years as it strives towards profit goals.

REVERSAL OF FORTUNES

Gottstein, who became chief executive last February as the novel coronavirus was surging in China, is reconfiguring Credit Suisse’s investment banking business and targets branch closures and a digital overhaul of its home business to cut costs.

Its standalone international wealth management unit, which covers rich clients outside Asia and Switzerland, saw net revenue dip 17% in 2020, as bumper trading failed to offset the negative impact of lower interest rates and a depressed U.S. dollar.

The division was also hit by a 414 million franc fourth-quarter impairment on a hedge fund equity stake, which impacted its struggling asset management business.

Its Swiss private clients business, covering both wealthy home market customers and the bank’s only retail accounts, saw pre-tax profit dip 16% on the back of weaker revenue and higher provisions for loan losses.

Its Asia-Pacific business, meanwhile, saw revenue rise 4% on higher transaction fees and the region’s stronger recovery from the pandemic. That, however, failed to offset a jump in lending provisions, resulting in a 10% profit decline.

In a reversal of fortunes, Credit Suisse’s investment bank, which has been the focus of overhaul efforts over the past five years, saw a surge in revenue, helping the business to its second consecutive year of profit gain.

Profit grew six-fold from the prior year during the fourth quarter, with higher trading activity helping equity sales and trading rise 5%. Fixed income trading was largely flat and advisory revenue was up 16%, while capital markets revenue leaped by 90%.

The bank proposed a dividend of 0.2926 francs per share, up 5.4%, and said it started a buyback in January targeting a total of 1.0 billion to 1.5 billion francs in buybacks for the year.

($1 = 0.8987 Swiss francs)

(Reporting by Brenna Hughes Neghaiwi; Editing by Christopher Cushing)

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