By Joshua Franklin
ZURICH (Reuters) - Credit Suisse's (S:CSGN) wealthy clients are sitting on record amounts of cash amid uncertainty in the global economy, Chief Executive Tidjane Thiam on Tuesday, striking a cautious tone for the Swiss bank's third-quarter results.
"Transaction levels are lower," Thiam said when asked about client activity in the third quarter. "Cash balances are the highest we've had historically, I think, at 30 percent," added Thiam, who was speaking at a Bank of America Merrill Lynch (NYSE:BAC) conference in London.
Many investors' appetite for risk has fallen away in 2016 with markets facing economic and political uncertainty from an emerging market slowdown and national votes in Europe and the United States.
This has put a big dent in bank share prices as they earn less in commissions and fees.
In the presentation webcast from London, Thiam also guided investors for some outflows in its domestic business in the third quarter as it cut down on risk by pruning relationships with external asset managers.
Shares in Credit Suisse were down 4 percent at 1100 GMT, a steeper drop than the European banking index (SX7P), which was 1.1 percent lower.
One analyst said strong credit markets had raised hopes Credit Suisse could see higher revenues in the third quarter.
ASIA J-CURVE
Central to Thiam's strategy for Credit Suisse is growth in private banking, particularly in Asia. For this, Credit Suisse has hired around 100 private bankers in Asia Pacific so far in 2016. Thiam hopes this will pay off down the line.
"Yes it depresses the profitability temporarily but when you know how steep the J-curve is once they start being productive, this will pay back, we believe, handsomely," he said.
Poaching bankers from rivals is one of the main ways wealth managers attract new clients but it can take around 18 months for a new hire to break even for their new employer.
On a positive note, Thiam said he expected Credit Suisse's global markets business -- one of its two investment banking divisions -- to be profitable in the third quarter.
The unit had returned to profitability in the second quarter following steep losses at the end of 2015 and the start of 2016.
He added the division's new CEO, Brian Chin, was working to identify additional cost savings to boost profitability.
Despite negative interest in Switzerland since January 2015, Thiam said Credit Suisse's net interest income was very strong "for a number of reasons," and that returns on Credit Suisse's loan book were "very good".
Zurich-based Credit Suisse reports third-quarter results on Nov. 3.