Credit Suisse said on Monday it will propose returning up to 8.0 billion Swiss francs ($6.4 billion) to shareholders over three years and its chief executive firmly ruled out making any big acquisitions.
CEO Oswald Gruebel said the bank saw no need to make any large-scale "transformational" acquisitions in order to grow and preferred to return any excess capital to shareholders. But he did not rule out smaller-scale purchases. "We will ... invest in businesses which fit our model and where we see the best long-term, sustainable returns," he told an investor day event in Zurich.
A slide presentation by Chief Financial Officer Renato Fassbind showed that Credit Suisse had earmarked 4 billion francs for investment in existing business such as alternative capital investment, commercial mortgage-backed securities, lending and mortgages in private banking and leveraged finance.
A further 3.5 billion francs had been set aside to fund "bolt-on" acquisitions with an emphasis on wealth and asset management. The bank said it would target high-growth regions, particularly in emerging markets but gave no time-frame for any possible acquisitions.
"They have laid out as clearly as possible what they intend to do with the Winterthur money," said Chris Wheeler, an analyst with Bear Stearns, who attended the investor day, referring to the proceeds from the sale last year of its Winterthur unit.
Credit Suisse sold Winterthur to France's AXA for 13.4 billion francs and had about 8 billion francs still available, after making provisions for its tier I core capital. Last month Credit Suisse paid 358 million francs in cash to buy Brazilian wealth manager Hedging-Griffo, which manages about 9.2 billion francs on behalf of wealthy clients.
The bank also said it plans to complete its current 6-billion-franc share buyback in the second quarter of 2007 and proposed paying a dividend of 2.24 francs per share for 2006 as well as a par value reduction of 0.46 francs a share.
"I think it's great news. I was expecting 5 to 7 billion Swiss francs," said Claudia Meier, head banking analyst at Vontobel. "However, the fact that it is over three years might be a little less positive."
"I also believe the fact that they said the 6-billion-franc buyback announced at the 2005 investor day will be completed is good news," said Meier. Analysts said the dividend payment was also above expectations.
The bank said it was sticking to an 8.2 billion net profit target for 2007. Some analysts said that Credit Suisse may struggle to make the target after the sale of Winterthur effectively cut the overall size of the group's business. A one-brand strategy, launched last year, was delivering cost-savings ahead of schedule, said CFO Renato Fassbind. He said he was confident that 600 million francs in savings could be achieved in 2007, one year earlier than originally planned.
An ambitious cost-cutting programme across the business was yielding big savings but would not be allowed to compromise the business, bank executives said.
"This is not about cost-cutting for its own sake, it's about improving operating efficiency so we can invest for future growth," said Urs Rohner, Credit Suisse's Chief Operating Officer.
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