It was a tale of two halves at Credit Suisse in the first quarter of 2019: the Swiss bank’s equities and fixed income traders did well and outperformed the rest of the market; but Credit Suisse’s M&A bankers, its equity capital markets bankers and its debt capital markets did badly and were mostly trounced by rivals.
Pay at the Swiss bank is being allocated accordingly.
The year-on-year first quarter revenue growth at Credit Suisse’s investment banking and markets business is shown in the chart below. In both equities and fixed income trading, Credit Suisse seized market share and was the standout top performer. In M&A, ECM and DCM its performance was indisputably dismal.
Credit Suisse’s traders will be rewarded for their achievement. In the documents accompanying the results, the bank says compensation and benefits spending in global markets rose as more was accrued for ‘discretionary compensation’ (bonuses) and as salary expenses increased. In the feeble investment banking division, by comparison, Credit Suisse says discretionary compensation expenses were “lower” than before.
Headcount also seems to have been delicately adjusted to reflect the travails (or not) of the first quarter. Twenty people net disappeared from the investment banking division in the three months to March (from a total of 3,100), while 110 people were added to the global markets division, which ended up with 11,460 employees in total.
What made Credit Suisse’s global markets division so resilient in Q1? Yet again, the bank might want to thank the efforts of Mike Stewart, the global head of equities whom it hired from UBS in 2017. An equity derivatives professional by background, Stewart has rebuilt Credit Suisse’s structured equities business, which has become a growth driver for the bank. Last year, Credit Suisse said equity derivatives revenues rose 70% in the third quarter. In the first quarter of 2019, Credit Suisse again said structured derivatives revenues were “significantly” higher, while cash equities revenues floundered.
In fixed income sales and trading Credit Suisse said the first quarter brought higher credit trading revenues, higher emerging markets trading revenues and higher macro trading revenues. – All of which were in contrast to feeble activity at, say, Goldman Sachs and Citigroup.
What went wrong in the investment banking division? Here, Credit Suisse blamed the trusty culprits of the “geopolitical environment”, the U.S. government shutdown and concerns about slower growth. It’s not clear, however, why CS would have been more affected than other banks, particularly American ones.
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