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As always, pride comes before the fall. No sooner had the global head of investment banking at Credit Suisse Group AG boldly declared “We’re back” in an interview with Bloomberg News published on Tuesday than the next day his bosses issued their third warning about results this year.

New York-based chief rainmaker David Miller had spoken about his hiring plans and said the struggling bank was in the home stretch of its turnaround. That sounds like jarring noise alongside Wednesday’s news that the bank expects a loss in investment banking in the second quarter and that further job cuts are likely on the way.

This corporate malaise is entertaining for competitors and will fuel the habit of market nerds who have taken to calling Swiss bank Debit Suisse for its ability to keep losing money. But for the bank itself, the situation is serious and not improving. Over time, this will lend credence to questions about the strength of its balance sheet and its leadership.

Credit Suisse’s depressed financial performance in investment banking contrasts with the relatively positive outlook of its peers. Bloomberg Intelligence estimates that bond and currency industry-wide trading revenue is expected to grow about 6% from the second quarter of last year, while for equities it is expected to be flat. . Transaction and fundraising advisory fees, meanwhile, are expected to rise from the first quarter, although down about a third from the second quarter of last year.

Comments from senior bankers at rivals suggest these estimates are conservative, at least on the trading side. Executives said they like the kind of good market volatility that allows investors and companies to trade, while allowing banks to charge healthy spreads between bid and ask prices – and not get caught up in them. bad positions.

JPMorgan Chase & Co. chief operating officer Daniel Pinto told investors last month that its second-quarter earnings in the markets would be 15-20% higher than a year earlier – the estimate consensus used by BI is a 10% upside for the bond. commercial activity only. Deutsche Bank AG executives signaled that their strong performance in the first quarter continued into the second in bond trading. Goldman Sachs Group Inc. Chairman John Waldron spoke last week about clients trading healthy volumes.

Stock and bond trades and issuances aren’t quite as good: Comments range from “resilient” or “resilient” to Pinto’s prediction of a 45% decline in Q2 revenue year-on-year for JPMorgan.

For Credit Suisse, part of the problem is its business orientation: it has a large concentration in securitizations and commercial mortgages, which was weak in the first quarter and likely remains difficult now. The leveraged loan market has been a relative bright spot: the bank has played a role in recent big deals like Broadcom Inc.’s $61 billion deal for VMware Inc. But this kind of risky lending is risky in times of volatility and the market has slowed considerably this year.

The really serious problem for Credit Suisse is the uncertainty about where it is in its recovery and how long it will take. I’ve said before that it will take longer than many investors seem to expect given the stock price performance. Although the stock has fared significantly worse than Deutsche Bank so far this year, it still trades at a higher multiple of expected book value.

Uncertainty does not help with hiring or retention, which will degrade the quality of its staff. It also lends credence to speculation that the board is not completely happy with Thomas Gottstein as chief executive and that the bank is going to have to raise new equity.

It seems too early for a change of management or a capital increase. Credit Suisse’s capital adequacy ratio was just above its short-term target at the end of the first quarter at 13.8%, but below its longer-term target of 14%. But keep taking losses and that goal slips away. If Credit Suisse does not arrest its deterioration by the final months of this year, leadership and capital issues will become real.

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This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times.

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