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MarketScreener Homepage  >  Equities  >  Swiss Exchange  >  Credit Suisse Group AG    CSGN   CH0012138530

CREDIT SUISSE GROUP AG

(CSGN)
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Credit Suisse : Sells Credit Derivatives Portfolio to Citigroup

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08/05/2016 | 12:38pm EDT
By Christopher Whittall 

Citigroup Inc. bought a multibillion-dollar book of credit derivatives from Credit Suisse Group AG during the second quarter of this year, in another sign of European banks unloading risk.

Switzerland's Credit Suisse disclosed the sale of a portfolio comprising around 54,000 credit derivative trades in its second quarter results on July 28. The book was sold to Citigroup, according to a person familiar with the matter. Bloomberg reported Citigroup's purchase earlier on Friday.

A spokesperson for Citigroup Inc. declined to comment.

The move comes amid a broad shift in investment banking, with many European banks scaling back capital-intensive trading businesses and better capitalized U.S. lenders often stepping in to buy them.

J.P. Morgan Chase & Co. also showed interest in buying the Credit Suisse book, according to two people familiar with the matter.

For Credit Suisse, the sale was part of a broader reshaping of its business as the bank looks to dial back on volatile investment banking and boost wealth management.

The derivatives portfolio was housed in Credit Suisse's "strategic resolution unit", which is tasked with running off unwanted assets. The sale contributed to a $9 billion reduction in that unit's risk-weighted assets in the second quarter, according to the bank's results presentation

The sale slashed the bank's leverage exposure by $5 billion, Credit Suisse Chief Financial Officer David Mathers said in a July 28 results call. Such a reduction should help Credit Suisse meet leverage ratio requirements -- a regulatory measure that focuses on capital held relative to assets and investments.

The book consisted of credit-default swap trades, or CDS, not seen as strategic to Credit Suisse's trading business, according to two people familiar with the matter. It included nonstandardized CDS and those which cover less liquid securities not present in benchmark trading indexes, according to one of those people. Such CDS would be penalized by higher capital requirements under Basel III, a new regulatory framework for banks due to come into force in 2019, that person said.

Banks in Europe have been under more pressure to reduce their balance sheets than their U.S. peers, which moved faster to thicken their capital cushions following the 2008 financial crisis.

Write to Christopher Whittall at christopher.whittall@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CITIGROUP INC. -0.55% 69.35 Delayed Quote.33.21%
CREDIT SUISSE GROUP AG -0.27% 12.865 Delayed Quote.19.44%
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Financials (CHF)
Sales 2019 21 334 M
EBIT 2019 4 775 M
Net income 2019 3 215 M
Debt 2019 91 605 M
Yield 2019 2,18%
P/E ratio 2019 10,2x
P/E ratio 2020 8,42x
EV / Sales2019 5,81x
EV / Sales2020 5,62x
Capitalization 32 263 M
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Technical analysis trends CREDIT SUISSE GROUP AG
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 14,47  CHF
Last Close Price 12,87  CHF
Spread / Highest target 55,5%
Spread / Average Target 12,5%
Spread / Lowest Target -21,0%
EPS Revisions
Managers
NameTitle
Tidjane Thiam Chief Executive Officer
Urs Rohner Chairman
Pierre-Olivier Marie Bouée Chief Operating Officer
David Richard Mathers Chief Financial Officer
Andreas Niklaus Koopmann-Zulliger Independent Non-Executive Director
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