By Elena Logutenkova and Aaron Kirchfeld
Oct. 21 (Bloomberg) -- Credit Suisse Group AG will probably follow Deutsche Bank AG in reporting a third straight quarter of profit after the lenders shunned state aid during the financial crisis and benefited from the rebound in bond and stock markets.
Net income at Credit Suisse, the second-largest Swiss bank, probably totaled 1.74 billion francs ($1.72 billion) in the third quarter after a loss a year earlier, based on the median estimate of 14 analysts surveyed by Bloomberg. Frankfurt-based Deutsche Bank said today it expects to report net income of about 1.4 billion euros ($2.1 billion), helped by tax credits, beating the 811 million-euro analyst estimate.
Both profited from the record-low interest rates that drove revenue from trading debt, currencies and commodities to a record at JPMorgan Chase & Co. and to the third-highest level ever at Goldman Sachs Group Inc. UBS AG probably missed out on the credit-market rebound after closing debt units and shedding employees, analysts said.
“Deutsche Bank and Credit Suisse are benefiting from the rebound in capital markets,” said Daniel Hupfer, who helps manage about $46 billion, including shares in all three banks, at M.M. Warburg in Hamburg. “UBS will also profit from a better environment, but not as much as the others because it’s still busy restructuring certain businesses.”
Credit Suisse, which publishes third-quarter results tomorrow, has risen 107 percent in Swiss trading so far this year to 59.10 francs, while Deutsche Bank has climbed 93 percent to 53.80 euros. Zurich-based UBS, the largest Swiss bank by assets, has advanced 29 percent to 19.11 francs.
A Year Later
Banks that navigated the crisis are piling up profits a year after the bankruptcy of Lehman Brothers Holdings Inc. spurred an unprecedented effort by governments around the world to save the financial system. New York-based JPMorgan earned $3.59 billion in the third quarter, while Goldman said net income more than tripled from a year earlier to $3.19 billion.
Credit Suisse Chief Executive Officer Brady Dougan told investors in London this month the bank’s interest rates business was the biggest contributor to revenue at the investment bank in the first half. The market environment for that business has been “better than historic levels,” he said.
The Zurich-based bank gained market share in underwriting global bond and stock sales in the first nine months of the year, data compiled by Bloomberg show.
Dougan, 50, announced a plan yesterday to boost salaries for 7,000 senior employees as a portion of total pay after Wall Street bonuses were blamed for contributing to the financial crisis. The bank will also introduce deferred equity and cash- based awards whose value will vary based on earnings.
‘Fragile’ Economy
Deutsche Bank, which is due to report detailed third- quarter earnings on Oct. 29, said it expects all business segments to report positive results. Pretax profit for the quarter will be about 1.3 billion euros, it said.
CEO Josef Ackermann said last month that Germany’s largest bank may gain share in areas including U.S. interest-rate derivatives, global fixed income and emerging-market debt after competitors dropped out or were bought.
While rising stocks and bonds led to a “significant improvement” in sentiment, the financial industry and economy remain “fragile” because of rising corporate insolvencies and unemployment, Ackermann, 61, said in a speech on Oct. 12.
Deutsche Bank’s securities unit, led by Anshu Jain, 46, and Michael Cohrs, 53, may have earned 811 million euros in the third quarter, helped by rising revenue from trading stocks and bonds, according to estimates from eight analysts before today’s announcement. The unit generated more than two-thirds of the bank’s pretax profit in the first half.
‘Big Swing Factors’
“For Deutsche Bank the big swing factors are write-ups of asset valuations and fixed-income trading,” said Christian Gattiker, head of research and strategy at Bank Julius Baer & Co. in Zurich.
Deutsche Bank’s debt unit may have generated revenue of 2.2 billion euros in the third quarter, the analysts estimated, compared with 2.8 billion francs at Credit Suisse.
“As long as interest rates are low, investment banks will have good earnings,” said Florian Esterer, who helps manage about $49 billion at Swisscanto Asset Management in Zurich. “If you get money from the central banks practically for free, it’s quite easy to reinvest it profitably.”
At UBS, CEO Oswald Gruebel, 65, said in August that rebuilding the fixed-income business may take nine more months after it cut risk and “lost key people.” The bank said that month that it added more than 20 senior bankers, including Dimitri Psyllidis, 43, formerly at Merrill Lynch & Co., who joined as head of foreign exchange and rates trading globally.
Money Outflows
UBS will book a charge to reflect an improvement in its own debt in the third quarter, Chief Financial Officer John Cryan said on Sept. 30. A 1.2 billion-franc charge on its own debt contributed to UBS’s second-quarter loss of 1.4 billion francs.
The bank may report a 281 million-franc third-quarter loss on Nov. 3, according to the median estimate of seven analysts. UBS had the biggest losses of any European bank from the credit crisis, data compiled by Bloomberg show.
UBS, which in August agreed to pass on data on as many as 4,450 accounts to the U.S. to settle a lawsuit related to tax evasion, probably saw further withdrawals from its wealth management business, analysts said. The outflows may amount to 19 billion francs in the third quarter, while Credit Suisse’s private bank probably attracted a net 11 billion francs, according to Sanford C. Bernstein Ltd.
To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.netAaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net
Posts
No comments:
Post a Comment