It's Credit Suisse's second quarter results day. Not all is well at the Swiss bank's investment banking business. Credit Suisse is still in the process of cutting CHF4.5bn of costs by the end of 2015, but some Credit Suisse investment bankers are doing well. Despite warning in May that fixed income revenues were down significantly year-on-year, Credit Suisse achieved a miraculous 4% increase in fixed income sales and trading revenues in Q2. And the bank may even be hiring.
Now is not the time to be an FX trader at Credit Suisse. The bank has announced a further CHF200m of cost savings in its 'macro business.' As part of these savings, the bank will seemingly be shifting as much of its FX trading as possible onto its electronic platform and limiting human intervention to complex trades with demanding clients. The only safe FX trading jobs at Credit Suisse probably belong to traders working on large complex trades with large hedge funds and people overseeing electronic trading systems.
Credit Suisse already relegated much of its rates business to a 'non-strategic unit' in October 2013. Now it seems to be rethinking its rates business again. From now on, Credit Suisse says it will be 'simplifying its rates business to focus on client liquidity needs in cash products and derivatives.' It will also, 'continue to build an e-offering.' The wording here is opaque: is Credit Suisse focusing its rates business on corporate clients? Maybe. You'll be safe if you work on rates e-trading.
Like Barclays, Credit Suisse is 'winding down commodities trading.' All commodities trading jobs therefore seem at risk. Fortunately, Citigroup is hiring.
Credit Suisse didn't specifically announce any equities layoffs, but it's got those CHF4.5bn of costs to cut and equities sales and trading revenues declined 18% year-on-year in the second quarter. The bank blamed the decline on poor cash equities volumes in Asia and the U.S. and a 'significant' decline in equity derivatives trading revenues compared to last year.
Credit Suisse dumped some of its emerging markets staff earlier this year. But guess what? Emerging markets are hot again. Credit Suisse CFO David Mathers attributed Credit Suisse's unexpectedly good fixed income currencies and commodities (FICC) revenues to a surge in emerging markets revenues in June.
Mathers said Credit Suisse's securitization professionals and credit traders also had a good June. In the presentation accompanying its results, Credit Suisse suggests that it might be preparing to hire for its securitization business, saying that it intends to pursue, 'further opportunities in EMEA asset finance'.
Credit Suisse is proud of its U.S. leveraged finance business and wants to replicate it elsewhere. The bank says it's 'targeting growth opportunities in EMEA to complement existing strengths.' We conclude that all current leveraged financiers are safe and that Credit Suisse may be hiring more of them in Europe.
ECM revenues at Credit Suisse rose 30% year-on-year in the second quarter and 24% year-on-year in the first half. Mathers pointed out that this offset Credit Suisses's poor performance in equities sales and trading. If working in a boom market is a measure of job security, Credit Suisse's ECM bankers are safe.
As ever, Credit Suisse has produced a bubble chart depicting its sentiments about its businesses. Embedded below, this confirms that credit products, securitized products (and - strangely - cash equities) are hot. Rates and FX ('macro products') are not.
So, what's worrying about Credit Suisse's results? For all the bank's noise about restructuring and cost cutting, costs still seem to be rising and return on equity (ROE) still seems to be falling.
In the first half of 2014, costs at Credit Suisse's investment bank, excluding the impact of legal settlements and the fair value of the bank's own debt, rose from 77% to 78% of its revenues. Over the same period, the return on equity in the bank's strategic businesses (ie. those it wants to stay in) fell from 17% to 13%. This doesn't look like a business in recovery.
There was some good news for pay in the investment bank, however. In the first half, compensation costs in the investment bank rose by 2%, despite a 2.5% reduction in staff.
Mathers said this was partly down to the way that compensation at the bank is being accrued - it may fall in the second half. Promisingly though, he said that Credit Suisse intends to pay its investment bankers a higher proportion of cash in future as this makes will make it easier to control compensation costs in the years to come.
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