Credit Suisse chief says bank sector sell-off ‘not justified’
Credit Suisse chief executive Tidjane Thiam says his bank is “stronger than ever” and the unceremonious dumping of bank shares is “not justified”.
The Swiss bank’s shares fell another 8 per cent on Tuesday — worse than the 4 per cent fall at Deutsche Bank, which came under fire from investors fretting about its capital and liquidity.
Credit Suisse is now worth 20 per cent less than it was a week ago, before it reported disappointing full-year results, and almost 50 per cent less than when Mr Thiam took over amid great expectations in July.
Mr Thiam said he would not talk about day to day share price movements. “What I can say is that we have a strong balance sheet,” he said. “[We have] 11.4 per cent common equity tier one [capital], it’s the strongest we have ever been. We have no liquidity issues.” Credit Suisse targeted a common equity tier one ratio of 12.2 per cent by the end of 2015.
Banks across Europe and the US have been pummelled in recent weeks, with analysts blaming share price falls on everything from low interest rates to woes in China to poor economic growth to weak oil prices and the risk of higher loan defaults.
Some have even likened the rout to the collapse of Lehman Brothers in 2008, which triggered a mass sell-off in banking stocks.
“The banking system in general is much stronger than in 2008, 2009 [but] there are a lot of memories of that period,” said Mr Thiam. “Some of the scenes we are seeing today are not justified . . . Banks are smaller, they are deleveraged, they are less risky, they are better capitalised.”
Mr Thiam said some of the market’s worries centred on bank balance sheets — a question he said Credit Suisse can “answer”. Markets were also “very much driven by news flow” on a given day, he added.
Deutsche Bank dominated a news cycle after analysts speculated on its ability to honour coupons on junior debt, and the bank released a statement saying it could meet the payments.
Wolfgang Schäuble, Germany’s finance minister, and John Cryan, Deutsche Bank’s co-chief executive, then both publicly commented on the bank’s soundness.
The Swiss government avoided adding to the nervousness around Credit Suisse by refusing to depart from its usual practice of not commenting on individual banks.
Mr Thiam, who has asked the board to cut his bonus by 25-50 per cent, said market developments were “very hard to predict”.
“Most people will tell you today that the global economy is still OK,” he said. “The markets are in a very different place and are pricing a major world recession.”
As for Credit Suisse, Mr Thiam said: “We need to continue to implement our strategy with discipline and clarify where there are misunderstandings.”
One case in point is a perception that the bank is targeting SFr9bn-SF10bn in pre-tax profits by 2018 — Mr Thiam says that target was never given because he deliberately avoided setting a profit target for the investment bank for fear of incentivising risky activities.
“We gave no target for the investment bank,” he said. “I feel completely vindicated.”
Credit Suisse’s strategic update included 2018 pre-tax targets for its Asia-Pacific, international wealth management and Swiss banking businesses, along with “illustrations” of pre-tax figures for its two investment banking divisions.
Some analysts tallied the targets and “illustrations” together to arrive at a group-wide pre-tax profit of more than SFr9bn ($9.24bn) by 2018.