Credit Suisse beats Q2 expectations, to set new strategy this year

Credit Suisse Group AG on Thursday posted better-than expected earnings and improved its capital cushion ahead of a strategy shake-up under the Swiss bank’s new chief executive.

The figures are for the three months before ex-Prudential PLC head Tidjane Thiam took over as head of the bank three weeks ago, but the market is watching for any clues to his plans.

“The management team and I have begun to evaluate how to best evolve the bank through an in-depth strategic review,” Thiam said in a statement.

“Before the end of the year, we will set out a strategy and business model that will allow us to achieve profitable and sustainable growth.”

Zurich-based Credit Suisse gave little detail what this new strategy could be but the frequent references to Asia Pacific suggest analysts’ hopes for a renewed focus on wealth management there could be well founded.

A high-ranking Credit Suisse banker told Reuters that Thiam’s initial focus would be to scrutinise the bank’s existing businesses which soak up considerable capital, mainly investment banking areas such as macro products and prime brokering, or business for and with hedge funds.

Credit Suisse will evaluate whether these areas are productive as “feeders”, or providers of business, to the bank’s other units as well as looking at their cost of capital.

This would come before any attempt to tap shareholders for cash, this person said, which isn’t expected before autumn.

Analysts expect Credit Suisse to need to raise at least 5 billion francs in order to bolster its capital, which strengthened slightly in the second quarter.

For the three months to June 30, Credit Suisse said net income stood at 1.1 billion Swiss francs ($1.15 billion), compared with an average forecast of 783 million in the poll of 6 analysts.

Shares in Credit Suisse were seen opening up 3.2% in premarket indicators.

Despite the upbeat earnings, Credit Suisse’s fixed-income securities, currencies and commodities (FICC) business was hit by risk-adverse sentiment, with investors spooked by concerns ranging from Greece’s sovereign debt crisis to the timing of a long-awaited U.S. interest rate hike.

“The new strategy should address some of the pressures apparent in our second-quarter results,” Thiam said, adding that they would look to make the business less capital intensive.

On top of a renewed focus in Asia, many analysts also expect Thiam to scale back Credit Suisse’s cash-intensive investment bank.

($1 = 0.9591 Swiss francs)