Assets rose and pre-tax income also gained at the private banking and wealth arm of Credit Suisse last year, the Zurich-listed lender said today.

The private banking and wealth management unit at Credit Suisse, Switzerland’s second-largest bank, said pre-tax income in the fourth quarter of last year fell 6 per cent on the previous quarter to SFr882 million ($949.6 million) but rose strongly, by 108 per cent, on the fourth quarter a year earlier. For the full year, the figure came in at SFr2.088 billion, a 36 per cent fall.

The cost/income ratio of this part of the Zurich-listed lender was 71.4 per cent, rising from 69 per cent in the previous quarter but down from 86.4 per cent in the final three months of 2013. Net revenues at the private banking and wealth business fell 6 per cent year-on-year, to SFf3.226 billion in the final quarter of last year, the banking group said.

Credit Suisse has been cutting costs and repositioning its business to boost profitability in recent months, with measures including reducing risk exposures at its investment bank. In the fourth quarter of 2013 the bank created non-strategic units within its private banking and wealth management and investment banking divisions and separated non-strategic items in the corporate center. It did this to speed up cuts in capital and costs associated with what it regards as "non-strategic" activities and positions, and to shift resources to focus on the strategic businesses and growth. Credit Suisse draws a distinction between “strategic” and “non-strategic” results.

After the reporting period of this latest batch of results, Switzerland in January saw a surge in the exchange rate of the Swiss franc against the euro after the country’s central bank ceased its policy of holding the exchange rate at 1.20. A number of firms, such as UBS earlier this week, have said the higher rate will impact its profits in 2015.

“We are implementing a number of measures to offset the impact from the strong appreciation of the Swiss franc and the more pronounced low interest rate environment on our profitability, following the SNB’s announcement in January. Based on 2014 earnings, we estimate the net adverse impact on our profit to be approximately 3 per cent and expect to more than offset this impact through the announced measures by end-2017,” Brady Dougan, chief executive, said in today’s statement.

In the “strategic” businesses of private banking and wealth management, Credit Suisse said that in the fourth quarter of 2014, it reported income before taxes of SFr1.007 million and net revenues of SFr3.206 billion. The quarterly results were affected by the higher exchange rate during that period of the dollar against the Swiss franc, which benefited revenues and assets under management, while forcing up costs.

For the full year in its “strategic” businesses of private banking and wealth management, net revenues were slightly lower compared to 2013, with lower net interest income and lower transaction- and performance-based revenues partially offset by higher other revenues. Recurring commissions and fees were stable. Provision for credit losses was SFr112 million in 2014 on a net loan portfolio of SFr236 billion

Across the whole of the private banking and wealth division, total assets under management were SFr1.377 trillion, up by SFr11.2 billion from the end of the third quarter of 2014. Foreign exchange and positive market movements were partly offset by net asset outflows, the bank said.

This division logged net asset outflows of SFr3.0 billion in 4Q14. In the “strategic” portfolio, however, wealth management clients contributed net new assets of SFr4.4 billion in 4Q14 with continued strong inflows from emerging markets, particularly EMEA and Asia Pacific, partially offset by Western European cross-border outflows.

Investment banking
In the investment banking side of the firm, Credit Suisse said pre-tax income of SFr579 million for strategic businesses increased by 20 per cent on stable revenues, a reduced cost base and lower leverage exposure compared to 4Q13. Total reported pre-tax income was SFr12 million, including funding valuation adjustments and losses in the non-strategic unit.

For the entire bank, Credit Suisse said net income attributable to shareholders for the full year was SFr2.105 billion in 2014, a 10 per cent fall from 2013; on its “strategic” basis, the figure was SFr4.962 billion, a 3 per cent drop.

The bank has a total Swiss capital ratio, on a look-through basis, of 16.5 per cent.