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#MoneyBeat Five Things to Watch in Credit Suisse Earnings

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NocRoom    0

After a rocky 2015 and 2016, last year was a period of relative tranquility for Swiss banking giant Credit Suisse. Its strategic shift toward wealth management proceeded without big disruptions. It didn’t have costly litigation issues. Its share price, which briefly fell below 10 francs per share in mid-2016, rose by 20% in 2017.

Still, Credit Suisse is likely to post its third-straight annual loss due to a $2.3 billion write-down in deferred-tax assets as a result of the U.S. tax overhaul.  And it took a reputational hit last week when it said it would shut down a product, known as XIV, that allowed investors to bet against volatility in financial markets.

Here are five things to look for in Wednesday’s earnings and Chief Executive Tidjane Thiam’s press conference.

Tax-Driven Loss

Credit Suisse is expected to post a 2.25 billion franc loss ($2.41 billion) in the fourth quarter and 1.11 billion franc loss for 2017 as a whole, according to analyst estimates compiled by the bank. These losses would have been driven by the one-off tax charge and excluding that, Credit Suisse would have run a profit. Still, it would mark the third-straight year that Credit Suisse has posted an annual loss.


The deferred-tax issue isn’t the only one facing Credit Suisse and other banks. Analysts will want to see whether the Base Erosion Anti-Abuse Tax, known as BEAT, which the U.S. has implemented, will affect the bank’s tax rate. The BEAT is aimed at ensuring banks pay a minimum level of taxes on transactions with affiliated foreign entities. Last month, UBS Group AG said BEAT would add up to 60 million francs to its 2018 tax bill.

XIV Collapse

Credit Suisse is shutting down its VelocityShares Daily Inverse VIX Short Term ETN , known by its ticker symbol XIV, which the bank created in 2010. The value of XIV—which was a way for investors to bet on a period of calm in financial markets—moves inversely to the S&P 500 VIX Short-Term Futures Index, which jumped early last week. Credit Suisse said it didn’t suffer trading losses from XIV. Still, look for Mr. Thiam to be asked about its demise.

Volatile Markets

Mr. Thiam will likely be quizzed on his views of recent financial market volatility and the steep drop in global equity markets, and whether this has affected the mood of the bank’s ultra-rich clients.

Wealth Management

The bank is more than two years into a strategic overhaul that has emphasized wealth management as a source of stable profits, with a particular focus on Asia. This will make metrics like net new money and assets under management central as a gauge on how this shift is progressing.

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