Particularly worrying was the decline in private banking inflows. UBS took nearly three times as much money in Q3. Credit Suisse s private bank accounts for most of the group s value.
Remember how cashhungry telecom firms floated illiquid minority stakes in their internet subsidiaries at the height of the tech boom? Spanish bank SCH has now made the idea its own. It didn t work well for investors then. It is unlikely to do so now.
The private bank is humming along. Cost control is good, as is credit quality. And the group s capital base is strong. Yet this is only a picture of relative strength. UBS has escaped many postbubble problems, but not the broader slowdown.
Ignoring a paper gain on the deconsolidation of a subsidiary, the figures were horrendous. Commerzbank is trying to cut costs but it can t afford to leak revenues in the process.
The mooted cuts may be raising hackles in Germany, but they won t make the investment bank competitive. Commerzbank needs to explain how it is going to get acceptable returns from the unit in future.
Not only are default rates still on the rise, but recovery rates have plummeted. The effect is to erode bad debt provisions. Banks may need to set aside more.
The bank is now clearly in defensive mode, which is probably the most sensible stance it can adopt. Investors can breathe a sigh of relief: it put off its May expansion plans before running up unnecessary costs.
It would be more reassuring if other items in the results were improving too. Unless the worst is really past on credit, this profit improvement may be shortlived.