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


Delayed Quote. Delayed Swiss Exchange - 12/09 11:30:40 am
13.025 CHF   +0.27%
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Europe's Top Investment Banks Look to Tackle Decline with New Leadership

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11/15/2019 | 09:04am EST

By Pietro Lombardi

The appointment of new top brass at Credit Suisse Group AG investment banking-and-capital markets division this week is the latest in a series of high-level changes at Europe's leading investment banks.

The reshuffles have come as regional lenders lose ground to U.S. competitors and are hit by falling revenue, while facing the challenges of new technology, regulation and geopolitical tensions.

"Investment banks face structural headwinds that they cannot avoid," Berenberg analysts said in a recent report on the industry. "Many cling to the hope that higher volatility will be a silver bullet, but recent experience suggests otherwise."

The leadership change at Credit Suisse--where veteran banker David Miller replaced James Amine as head of investment banking and capital markets--follows similar moves at some of the region's financial powerhouses.

Deutsche Bank AG investment bank chief Garth Ritchie left in July, with Chief Executive Christian Sewing assuming oversight of the unit. In March, Barclays announced the departure of its investment bank head, while Andrea Orcel left UBS Group investment banking arm in late 2018.

Revenue at the 12 biggest investment banks in Europe and the U.S. fell 11% on year in the first half of 2019 to $76.8 billion, hitting a 13-year low, and headcount continued to fall across the industry, according to Coalition, an industry data provider.

In this environment, European players continue to lose market share to U.S. peers.

Since 2009, U.S. banks' share of global investment banking revenue rose roughly 10 percentage points and now stands at about 53%, according to data provider Dealogic. In the same period, the share of European banks declined more than 10 percentage points to 25%.

Investment banking operations in Europe compare poorly in terms of costs and revenue with U.S. counterparts and generate an operating profit before provisions that is 70% lower, according to Berenberg.

The brokerage mentions several reasons, including a more concentrated U.S. market that gives banks more pricing power and U.S. banks' quicker reaction to the financial crisis.

"We believe that one of the key reasons that European banks still underperform U.S. banks is that they never adequately dealt with their balance sheet issues," it said.

In recent years, several European banks have restructured their investment banking operations. Deutsche Bank is exiting its global-equities sales and trading business and eliminating 18,000 jobs. In April, France's Societe Generale SA (GLE.FR) said it would cut nearly 1,600 jobs after a slump in investment-banking revenue, with the unit including fixed income and equity trading and securities services bearing the brunt of the cuts. Credit Suisse started a sweeping restructuring in 2015 to streamline its investment-banking operations. Rival UBS launched a similar overhaul years earlier.

Recent results highlight the challenges facing the restructured banks.

Credit Suisse's investment banking-and-capital markets division swung to a pretax loss in the third quarter, as fewer mergers and acquisitions and IPOs contributed to a 21% decline in revenue. The Swiss bank's global investment banking operations ranked seventh in the first nine months of the year, down one rung from a year earlier, according to Dealogic.

In the same quarter, Deutsche Bank posted a loss partly due to restructuring costs and lower revenue at its fixed-income operations. In comparison, Morgan Stanley, Barclays PLC and JPMorgan Chase & Co. achieved double-digit growth in fixed-income trading revenue in the period.

Troubles in Europe likely mean gains for U.S. competitors, according to Berenberg.

"As European IBs continue to restructure their operations in search of better returns, we believe U.S. IBs will continue to take market share."

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

Stocks mentioned in the article
ChangeLast1st jan.
BARCLAYS PLC 1.00% 171.1 Delayed Quote.12.54%
CREDIT SUISSE GROUP AG 0.27% 13.025 Delayed Quote.20.28%
DEUTSCHE BANK AG 0.38% 6.55 Delayed Quote.-6.34%
JPMORGAN CHASE & CO. 0.01% 135.02 Delayed Quote.38.33%
MORGAN STANLEY -0.04% 49.77 Delayed Quote.25.60%
SILVER 0.04% 16.596 Delayed Quote.6.99%
SOCIÉTÉ GÉNÉRALE -0.09% 29.33 Real-time Quote.5.52%
UBS GROUP -0.04% 11.93 Delayed Quote.-2.37%
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Financials (CHF)
Sales 2019 21 280 M
EBIT 2019 4 683 M
Net income 2019 3 251 M
Debt 2019 89 523 M
Yield 2019 2,17%
P/E ratio 2019 10,2x
P/E ratio 2020 8,45x
EV / Sales2019 5,72x
EV / Sales2020 5,48x
Capitalization 32 134 M
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Average target price 14,63  CHF
Last Close Price 12,99  CHF
Spread / Highest target 54,0%
Spread / Average Target 12,6%
Spread / Lowest Target -21,8%
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David Richard Mathers Chief Financial Officer
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