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Credit Suisse (CS) Reports Q4 Loss, Y/Y Revenue Decline

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Credit Suisse Group (CS - Free Report) reported fourth-quarter 2020 net loss attributable to shareholders of CHF 353 million ($390.6 million) against net income of CHF 852 million in the year-ago quarter.

In full-year 2020, the company reported net income attributable to shareholders of CHF 2.7 billion, down 21.9% from previous year.

Results reflected a decline in expenses and lower provisions for credit losses. However, decrease in revenues acted as a headwind.

Segment wise, on a year-over-year basis, quarterly income before tax at Swiss Universal Bank declined 43.8%. International Wealth Management reported a loss against profit in the year-ago quarter. Income before tax for Asia Pacific segment increased 17.9%, while that for Investment Bank division improved significantly. Corporate Center’s loss before tax widened from the prior-year quarter.

Revenues Increase, Costs Decline (Adjusted Basis)

Net revenues came in at CHF 5.2 billion ($5.8 billion), down 13.9% from the prior-year quarter. In 2020, the company reported net revenues of CHF 22.4 billion, up marginally from 2019.

Net interest income and trading revenues both declined 15% year over year to CHF 1.5 billion ($1.7 billion) and CHF 484 million ($535.5 billion), respectively. Commissions and fees increased 12% to CHF 3.2 billion ($3.5 billion).

Total operating expenses declined 2.5% year over year to CHF 4.3 billion ($4.8 billion), mainly due to lower compensation and benefits expenses.

Provision for credit losses came in at CHF 138 million ($152.7 million), down 5% from the prior-year quarter.

Balance Sheet Position

As of Dec 31, 2020, Credit Suisse’s net loans amounted to CHF 291.9 billion ($330.7 billion), up slightly sequentially. Total shareholders’ equity declined 7% to CHF 42.7 billion ($48.3 billion).

Risk-weighted assets decreased 3.6% from the previous quarter to CHF 275.1 billion ($311.7 billion) at the end of the fourth quarter.

Capital Position and Funding

As of Dec 31, 2020, Credit Suisse’s Basel III common equity tier 1 (CET 1) ratio was 12.9%, up from 12.7% in prior-year quarter. CET1 leverage ratio was 4.4% up 4 basis points year over year. The tier 1 leverage ratio was 6.4%, up from 5.5%.

Our Viewpoint

Focus on capital generation and restructuring initiatives is likely to strengthen Credit Suisse’s efficiency. However, given the challenging macroeconomic environment, we expect the company’s top line to remain under pressure.

Currently, Credit Suisse carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$5.4 billion ($1 billion) in fourth-quarter 2020, down 26.2% year over year. Including non-recurring items, net income came in at R$7.6 billion ($1.4 billion), up 1.5%.

Santander Consumer USA Holdings Inc. (SC - Free Report) reported fourth-quarter 2020 earnings of $1.70 per share, which easily outpaced the Zacks Consensus Estimate of $1.13. Also, the bottom line was significantly above 43 cents earned in the year-ago quarter.

Deutsche Bank (DB - Free Report) reported fourth-quarter 2020 net income of €189 million ($225.4 million) against the year-ago quarter’s net loss of €1.5 billion. Also, the German lender reported profit before taxes of €175 million ($208.7 million) against a loss of $1.3 billion in the year-ago quarter.

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