Credit Suisse ends restructuring with plan for up to $3 billion share buyback

By Brenna Hughes Neghaiwi

ZURICH (Reuters) - Credit Suisse plans to buy back 2 to 3 billion Swiss francs ($2-3 billion) of shares over the next two years and raise its dividend, voicing confidence that its strategy is working after a painful three-year restructuring.

Switzerland's second-biggest bank confirmed commitments to distribute half of net profit to shareholders, mainly through buybacks or special dividends, offering a sweetener to investors who have had to stomach hefty share price declines during Chief Executive Tidjane Thiam's three-and-a-half-year tenure.

By focusing on managing assets for the world's wealthy, particularly the very richest and entrepreneurs in Asia, Credit Suisse hopes to increase profitability despite challenges such as shaky markets and risk aversion among wealthy investors.

"We think the strategy is working," Thiam said at the bank's investor day in London on Wednesday. "The actions taken during the restructuring mean the bank is now more resilient in the face of market turbulence."

Credit Suisse expects to achieve pre-tax income of 3.2-3.4 billion francs in 2018, hitting a full-year profit for the first time since 2015.

It aims to raise earnings in the midterm, confirming its target of a 10-11 percent return on tangible equity for 2019, rising to above 12 percent by 2021, compared to 6 percent expected for this year.

It plans to increase its dividend by at least 5 percent annually from 2019 onwards.

The bank this month wraps up the restructuring programme, which slashed costs as it shrank risky and capital-intensive investment bank activities, reduced financing costs and wound down non-strategic business, cutting thousands of jobs.

The stock has more than halved since Thiam, former CEO of insurer Prudential, stepped into the role in July 2015, falling nearly 56 percent compared to the overall European banking index's 38 percent drop.

Shares edged higher by midday, lagging the sector index.

"We welcome the decision to start buybacks, albeit we had hoped for more, and would note the 2019 RoTE (return on tangible equity) target is prudently based on flat year-on-year revenue developments, which suggests there is still room to beat this target in our view," Citi analysts said in a note.

DELIVERING RESULTS

Credit Suisse's balance between wealth and investment banking, between mature and emerging markets, and its focus on entrepreneurs, had delivered results, Thiam said on Wednesday.

Both Credit Suisse and larger rival UBS are focusing on lucrative relationships with the world's wealthiest and with entrepreneurs.

They hope to court more of these clients by offering a full range of private and investment banking services, from estate planning and asset management to lending the ultra-rich money to buy ships and jets, and helping them find new investors for their family firms.

"Our billionaire clients care about this," Thiam said. "People don't leave, the assets don't leave, when you have such a cohesive, integrated strategy."

Shares initially surged when Thiam was appointed CEO in 2015, amid high hopes that he could redirect the Swiss lender as successfully as he steered Prudential, where expansion in Asia helped boost shares by more than 150 percent.

But announcements of nearly $1 billion in writedowns on the heels of a 6-billion-franc capital increase, followed by a spat over executive pay amidst annual losses, created initial distrust amongst investors.

Thiam had asked for patience as he refocused the bank on wealth management and scaled back its investment bank.

($1 = 0.9930 Swiss francs)

(Reporting by Brenna Hughes Neghaiwi; Editing by Maria Sheahan, Shri Navaratnam and Adrian Croft)