The private banking and wealth arm of Switzerland's second-largest bank reported stronger net income in Q2.

The private banking and wealth management arm of Credit Suisse reported pre-tax income of SFr937 million ($977 million) in the second quarter of 2015, a quarter-on-quarter gain of 12 per cent and a recovery from a loss of SFr749 million a year ago. The Zurich-listed firm was reporting results for the first time under new group chief executive Tidjane Thiam.

Net revenues for the private banking and wealth management unit stood at SFr3.152 billion in the quarter, up from SFr2.972 billion in the first three months of the year and up from SFr3.046 billion a year ago, it said in a statement today.

Total operating costs at Switzerland's second-largest bank rose 3 per cent quarter-on-quarter to SFr2.171 billion.

Assets under management fell slightly over the quarter, down 1.3 per cent to SFr1.355 billion at the end of June; the bank booked SFr14.2 billion in net new money in Q2, against SFr17 billion in the previous quarter but up from SFr10.1 billion a year ago. (While the bank did not go into the detail in its results statement as far as this publication could discern, it is possible that the adverse impact of a stronger Swiss franc exchange rate since the start of this year may have affected AuM figures overall.)

The cost/income ratio of this unit of the bank improved considerably over the year as it swung back into profit, with a ratio of 68.9 per cent, narrowing from 71 per cent in the first quarter, and 123.8 per cent 12 months ago.

Strategic results

Since the end of 2013, Credit Suisse has separately disclosed its strategic and non-strategic results in addition to its reported results. The strategic results encompass the businesses that Credit Suisse plans to focus on going forward, while the non-strategic results include the ones that it intends to wind down or exit.

As far as its “strategic results” are concerned, the firm said it logged a gain in pre-tax income in the second quarter, standing at SFr1.001 billion, a quarterly gain of 1 per cent; net revenues of SFr3.091 billion, up 4 per cent, and a cost/income ratio of 66.6 per cent, down from 67.6 per cent in the previous quarter. Net new assets on this strategic basis were SFr15.4 billion.

The bank said that wealth management clients contributed net new assets of SFr9.0 billion with continued “strong inflows from Asia Pacific, driven by Greater China, and a solid contribution from Switzerland and Europe, Middle East and Africa".

Net asset inflows in Switzerland benefited from “good momentum” in the ultra-high net worth individual client segment, the bank said.

The non-strategic businesses reported a pre-tax loss of SFr64 million on lower revenues compared to the second quarter 2014. Operating expenses were SFr112 million, primarily reflecting the continued winding-down of operations and costs of SFr66 million to meet requirements related to the settlements with US authorities regarding US cross-border matters.

“Credit Suisse reported improved profits in the second quarter. Asia-Pacific delivered a strong performance. Effective collaboration and alignment between our private banking and investment banking franchises have led to excellent growth in profits in Asia-Pacific,” Thiam said.

“Overall, our wealth management activities produced an improved performance and generated a good return on regulatory capital as a few initiatives are bearing fruit, particularly in Asia-Pacific and in Switzerland,” he continued.

Thiam noted that during the quarter, Credit Suisse has launched a new advisory offering, Credit Suisse Invest, in Switzerland, following the Asia-Pacific launch of the digital private banking platform in the first quarter.

Group results
Across the whole bank, Credit Suisse said that strategic results showed net income attributable to shareholders stood at SFr1.418 billion, up from SFr1.235 billion in the previous quarter and SFr1.288 billion a year ago.

Net revenues were SFr6.491 billion, up from SFr6.673 billion; return on equity was 13.9 per cent, up from 12 per cent in the previous quarter.