Credit Suisse numbers boosted by bond trading

Credit Suisse reported stronger-than-expected third quarter profits today, bolstered by its investment bank, which benefited from a rise in bond-trading and fees from the multi-billion dollar listing of China's Alibaba.

This marks a return to profit for the Zurich-based bank after it reported its biggest loss since the financial crisis in the previous quarter, due to a 1.6 billion Swiss franc hit after pleading guilty in a US tax investigation.

The results show that Credit Suisse remains reliant on investment banking to drive earnings even though it is trying to balance this more evenly with its wealth management arm, which caters to the financial needs of wealthy people.

The bank said it would chop risk-taking at its investment bank, with several potential large “structural reductions” following cuts earlier this year that included parts of its bond-trading division and commodities.

Finance chief David Mathers did not specify where the latest cuts would be made. "We have seen a mixed start to October, with recent market volatility benefiting certain businesses across both divisions, while negatively impacting others," chief executive Brady Dougan said in a statement. The investment bank's pretax profit surged 43 per cent, benefiting from exits from costlier, less lucrative activities and as fixed-income trading snapped back from last year, when it was hit by uncertainty over the US Federal Reserve's bond buying.

Mr Dougan singled out cash equities and Brazil, where investors are rethinking their emerging markets exposure, as areas for improvement.

The bank’s securities business was buoyed in the third quarter by the Alibaba listing, where investment banks, including Credit Suisse, shared $300 million in fees.

“We have a strong advisory and underwriting pipeline but the pace of execution in the fourth quarter will depend on market conditions,” Mr Dougan said. The investment bank took up just over 60 per cent of Credit Suisse’s risk weighted assets, based on the third-quarter results, a slight reduction on the same period last year, with the remainder with its private bank.

Credit Suisse's private bank, under pressure as cash-strapped governments go after undeclared assets in Swiss offshore accounts, pulled in 7.4 billion Swiss francs in net new assets, a key indicator for future revenue. But it lost 1.1 billion francs from a single client withdrawal in Switzerland, the bank said.

Reuters