What's going on?
The second-largest bank in Switzerland, Credit Suisse, and British multinational bank Standard Chartered reported second-quarter earnings on Tuesday – and they were something of a mixed bag.
What does this mean?
Credit Suisse has reason to celebrate: it doubled its profits over the same time last year, crushing expectations. It’s in the swan song of a three-year turnaround plan where it’s focused on managing the money of the uber wealthy, scaled back on expenses, and shifted away from trading. Zing!
Standard Chartered’s revenues grew by 6%, but it’s not all good: its operating costs (i.e. its day-to-day expenses) grew by 7% – which means it’s getting squeezed for 1% more than it’s bringing in.
Why should I care?
For markets: Switzerland outperforms England for once.
Credit Suisse’s stock was up by 2% (quelle surprise!) as investors approved of its mission to serve the rich. Meanwhile, Standard Chartered’s shareholders were likely worried about the bank’s costs mounting faster than its cash coming in, not to mention its vulnerability to trade war tensions – its stock dropped 1%. Standard Chartered’s one of the biggest trade-financing banks (i.e. it provides a chunk of cash for international trade), so it could be hit by the fallout of the US-China trade war (despite only a small portion of its business being directly affected).
The bigger picture: Muhammad must go to the mountain.
Credit Suisse has done well with the wealthy and it’s hungry for more – it’s now got its eyes on one of the Middle East’s biggest economies, Saudi Arabia. The bank’s seeking a full license in the oil-rich country, and would join Citigroup (which got a Saudi investment banking license in April) and Goldman Sachs (which received approval to trade last year). The kingdom’s looking mighty fine to western banks and investors – partly since its government is planning on making some changes to privatize more of its economy (which means, in theory, more money available to be managed).