Credit Suisse announced it will shut its commodities trading business following significant quarterly losses due largely to its May guilty plea for tax evasion.
The “non-strategic” parts of its investment bank will also be trimmed going forward, the Swiss bank said, to reap greater profits and cut costs.
“The restructuring of our macro business, including the exit from commodities trading, is expected to drive further capital, leverage, and expense reductions,” Brady Dougan, Credit Suisse’s CEO, said.
He continued to say that by withdrawing from commodities, the bank is expected to cut $75 million in costs and reduce risk-weighted assets and leverage exposures by $2 billion and $5 billion respectively. Dougan also said resources used in commodities trading will be reallocated to “more profitable businesses.”
JP Morgan also sold its physical commodities business for $3.5 billion to Swiss trading house Mercuria late June after posting low revenues in the second quarter.
Credit Suisse reported a net loss of CHF 700 million ($779 million) for the second quarter in 2014—the largest loss it has faced since the financial crisis.
“The restructuring of our macro business, including the exit from commodities trading, is expected to drive further capital, leverage, and expense reductions,” Brady Dougan, Credit Suisse’s CEO, said.
In addition to knocking off the Zurich-based bank’s profits, the $2.6 billion settlement with the US authorities also brought down Credit Suisse’s capital ratio measuring financial stability to 9.5% at the end of the second quarter from 10.4% in Q2 last year.
“I want to reiterate that we deeply regret the past misconduct that led to this settlement and that we take full responsibility for it,” Dougan said. “The continued trust and support of our clients helped us mitigate the impact of the settlement on our business.”
In a conference call on Tuesday, the CEO said the bank is unsure exactly how much business it lost as a result of the litigation.
“There may be clients that didn’t do business with us, that would have,” Dougan said.
However, the bank remained optimistic about regaining profits and moving on from the impact of the legal fiasco.
“We maintained a resilient capital base and leverage ratio despite the impact of the settlement of the US cross-border matter,” Dougan and Urs Rohner, Credit Suisse’s CFO, said in a statement. “In addition to resolving our most significant longstanding legal litigation issue, we saw continued strong momentum with clients and made progress in winding down our non-strategic portfolio.”
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