Costs, targets and IPO in focus at Credit Suisse investor update

Mon Dec 5, 2016 9:21am EST
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By Joshua Franklin and Oliver Hirt

ZURICH (Reuters) - Just over a year since laying out his turnaround plan for Credit Suisse (CSGN.S: Quote), Chief Executive Tidjane Thiam is expected to take another ax to costs and pare back ambitious profit targets at the Swiss lender's investor day on Wednesday.

Having previously said he was not ready to give up on the goals, Thiam may now bow to tough markets that have made the Zurich-based bank's expectations look unachievable, analysts said.

"The market knows this already, with consensus 2018 forecasts much lower than management guidance," Societe Generale analyst Andrew Lim, who has a "sell" rating on the stock, wrote in a note.

At its October 2015 investor day, Credit Suisse set a target of 6.5 billion Swiss francs ($6.4 billion) in 2018 pretax income, from 3.7 billion in 2015, across its Swiss, Asia Pacific and International Wealth Management divisions.

It also gave "illustrative" figures of group 2018 pretax income of around 9-10 billion francs and a return on tangible equity of roughly 14 percent.

"These targets appeared ambitious at the time, in part because they relied upon aggressive revenue growth assumptions, which now seem nigh on impossible," Citi analysts, who rate Credit Suisse's stock "buy", said in a note.

Instead of lowering the targets, Credit Suisse could postpone them, according to Vontobel analyst Andreas Venditti, who has a "hold" rating on the shares.

Credit Suisse declined to comment ahead of its investor day.   Continued...

CEO Tidjane Thiam (R) of Swiss bank Credit Suisse awaits a news conference to present the bank's halfyear results in Zurich, Switzerland July 28, 2016.   REUTERS/Arnd Wiegmann