Helman Sitohang says Credit Suisse’s Asia-Pacific investment banking business, including advisory, equity and debt capital markets, fixed income and equity sales & trading posted the strongest ever first-quarter profits from January to March 2013.
Profitability and shareholder return on equity are the buzzwords for investment bank divisions across the industry. Recent earnings results from US and European banks find UBS, Deutsche Bank and Credit Suisse leading the pack in the first quarter.
With the European economy stuck in recession, Asia is picking up the slack for the industry. Traditionally Asia earnings have been more volatile. Investment bankers such as Sitohang are charged with trying to smooth that, and make the region a more reliable, sustainable contributor to profitability.
Sitohang, who runs the investment bank for the region from his base in Singapore, says the firm wants a diversified book of business that is not overly dependent on one product. Revenues from trading and flow business are roughly equal to revenues from advisory and deal fees, he says. He also argues that Credit Suisse’s revenue sources are balanced across fixed income versus equities, and at a country level as well.
Credit Suisse declined to break out Q1 investment bank figures for Asia from what it reported globally on April 24. Group return on equity for the first three months of the calendar year reached 16% (annualised according to international, non-US, accounting standards), while the investment bank’s return on capital hit 23%. According to Sitohang, the Asia Pac return on equity was greater than the firm’s average, although he would not say by how much.
Credit Suisse says Asia Pac group revenues in Q1 hit SFr940 million, up 8% from a year ago, while income before taxes of SFr352 million was up 94%.
Globally, rival UBS’s results make it the most profitable of the top-tier investment banks, with a 37% RoE in the first quarter. Deutsche Bank achieved a 25% RoE. Sitohang declined to comment on other banks’ performance, but noted that Credit Suisse global investment bank revenues were greater than UBS.
He says the cost-cutting phase is over within the investment bank. The firm aims to make its profitability sustainable by avoiding boom/bust type business decisions, by maintaining a ceiling on costs, by keeping an eye on risk (particularly in line with Basel 3 capital rules) and emphasising collaboration and efficiencies with the private banking and wealth management division as well as within the investment bank. The firm attributes 15% of net revenues to “collaboration initiatives”.
The firm hopes this approach will enable it to weather upturns and downturns in Asia. Sitohang cites longstanding presences in markets such as Indonesia and Vietnam as reasons why the firm can do well when opportunities arise.
