Thiam’s Challenges in Five Charts One Year After the Overhaul

(Bloomberg) -- Tidjane Thiam returned Credit Suisse Group AG to a surprise profit in the three months through June, just months after accelerating a restructuring plan. Now, the chief executive officer will have to convince investors that his cost-cutting efforts continue to bear fruit.

The Zurich-based lender on Thursday will probably post a third-quarter loss of 150 million Swiss francs ($154 million), according to the average estimate of seven analysts in a Bloomberg survey. That compares with a profit of 779 million francs a year earlier, when the CEO first unveiled his overhaul.

The following five charts illustrate some of the challenges the CEO faces.

Thiam stepped up the pace of his overhaul in March, announcing an additional 2,000 job cuts for this year, after volatile markets prompted the company to write off about $1 billion on risky securities over six months. The CEO said in September that the bank had achieved more than two thirds of the planned cuts, with the bank forecasting restructuring costs to peak at about 1 billion francs this year.

Credit Suisse tapped investors for about 6 billion francs a year ago to meet tougher regulatory requirements and fund its restructuring plans. While that helped boost the common equity Tier 1 ratio to 11.8 percent by the end of June, analysts forecast the measure of financial strength will remain little changed in the third quarter, trailing Swiss rival UBS Group AG. The lender targets a CET1 ratio of about 13 percent by 2018.

Credit Suisse is pushing ahead with the run-down of its strategic resolution unit -- the bad bank handling the disposal of unwanted assets. While the company initially targeted a reduction in risk-weighted assets at the division by about 40 percent to 37 billion francs by 2017, Thiam has since shifted more assets from global markets to the bad bank, with the lender scheduled to present investors with fresh targets in December.

Under Thiam, Credit Suisse pledged to boost profitability by shrinking the securities business and expanding wealth management, mirroring a move UBS unveiled in 2012 under then-new CEO Sergio Ermotti. The Asia-Pacific division, earmarked for growth and investment under Helman Sitohang, will probably post net new assets of 16 billion francs this year, with 3.7 billion francs in the third quarter, according to analyst estimates compiled by the company.

Credit Suisse may struggle to reach its profit goal at the Swiss universal bank, which is earmarked for a partial initial public offering in 2017 to help raise capital buffers. Analysts surveyed by the company forecast the unit to post a pretax profit of 2 billion francs in 2018, below a target of 2.3 billion francs presented as part of Thiam's wider overhaul last year.

To contact the reporter on this story: Jeffrey Vögeli in Zurich at jvogeli@bloomberg.net.

To contact the editors responsible for this story: Simone Meier at smeier@bloomberg.net, Keith Campbell