Credit Suisse won’t reach the profitability target it set itself for 2019. The bank will resort to well-established measures to keep shareholders happy.

At the beginning of his tenure as CEO of Switzerland’s second-largest bank, Tidjane Thiam was weary of committing himself to a specific profitability target. He said in 2015 that if the bank missed a target, it would make shareholders nervous and lead to ever bigger demands for cost cuts.

Credit Suisse has now fallen into a said trap: at last week's investor day in London, Credit Suisse reported that return on tangible equity would breach the 8 percent mark. Originally however the bank had aimed for 10 percent.

Deferred Target

The bank wanted to reach its original target with well-known measures it sees as under its own control. But the difficulties facing the banking industry have counteracted the progress it has made in many areas – and the investment banking division now facing a loss for the full year.

Thiam expects to reach the 10 percent return on tangible equity target in 2020 instead, adding that even 11 percent is achievable in case of a good business year. The bank said that it expected to reach the target by implementing the measures it had identified already.

A return on tangible equity of 12 percent, however, seems out of sight at the moment – with Credit Suisse defining it as a medium-term target.

Buybacks and Dividends

The board of the bank hopes to keep shareholders happy with measures similar to the ones it implemented a year ago. Credit Suisse intends to buy back shares worth at 1 billion Swiss francs ($1 billion).

The bank will likely spend half of its net profit on buybacks and dividends. It also announced that it aims to increase the dividend by at least 5 percent a year.

Further Cost Measures

Should the business environment remain challenging, the bank will resort to measures generally associated with low profitability rates: further cost cuts. CFO David Mathers said in his presentation that the company could yet add another 0.4 basis points through extra measures.

The bank didn’t detail the potential for such measures but in the past, the bank achieved the biggest impact through job cuts.