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Credit Suisse bounces back from tax amnesty woes

Credit Suisse bounces back from tax amnesty woes

Outflows from Credit Suisse’s international wealth business stemming from tax amnesties have started to wane, with the firm reporting a roughly 72% decrease year-on-year in assets lost to regularization programs.

The firm’s International Wealth Management (IWM) Private Banking segment saw CHF 1.6 billion ($1.7 billion) in outflows due to tax amnesties in 2017, down from CHF 5.7 billion ($6.1 billion) in 2016, according to Credit Suisse’s annual results released February 14.

In the fourth quarter of 2017, IWM Private Banking lost only CHF 500 million ($537.8 million) because of the programs.

This compares to outflows of CHF 2.2 billion ($2.4 billion) in the last three months of 2016, including CHF 1.5 billion ($1.6 billion) in outflows from Latin America alone, according to previous results.

Tax amnesty programs across emerging markets, most notably in Latin American countries like Chile, Brazil and Argentina, and changes to income Swiss secrecy laws have caused investors to withdraw their wealth from Swiss banks.

‘It is notable that regularization outflows were significantly down this year, year over year, which is a very positive development for our margins and for our profitability,’ said Credit Suisse chief executive Tidjane Thiam on February 14 in a call with analysts.

Total IWM Private Banking assets grew to CHF 366.9 billion ($394.6 billion) in 2017, a CHF 43.7 billion ($47 billion) increase compared to the end of 2016.

IWM comprises the firm’s Latin America, Europe, Middle East and Africa, and Eastern Europe businesses, a spokesperson for the firm said. 

Six days before Credit Suisse reported its results, Citywire Americas  reported the firm was set to close its on-the-ground private banking operations in Peru and Venezuela following a strategic review. 

The upshot

In terms of financial results, IWM posted net revenues of CHF 5.1 billion ($5.5 billion) in 2017, up from CHF 4.6 ($5 billion) billion 2016.

As a group, Credit Suisse posted revenues of CHF 20.9 billion ($22.5 billion) last year, compared to CHF 20.3 billion ($21.8 billion) in 2016. The firm posted a CHF 983 million ($1 billion) loss after paying 2.7 billion ($2.9 billion) in income tax expenses, mostly linked to a recent reform in US tax laws.

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