Credit Suisse Q3 earns disappoint with 74 pct drop

AP News
Posted: Oct 21, 2010 5:51 AM
Credit Suisse Q3 earns disappoint with 74 pct drop

Swiss bank Credit Suisse Group on Thursday said third-quarter net profit slumped 74 percent to 609 million Swiss francs ($621.4 million), far below even pessimistic expectations, due to "challenging conditions" in the markets.

Net profit attributable to shareholders during the same period of 2009 was 2.35 billion francs.

The Zurich-based bank gave no clear outlook for the rest of the year, with Chief Executive Brady Dougan stating only that its business model, global presence and market position would enable the bank to "deliver high returns and generate strong cash flow as markets improve."

Net new assets _ a key indicator of future business in the banking industry _ reached 14.6 billion francs during the quarter. The figure is expected to easily beat that of cross-town rival UBS AG, which has been trying to regain client confidence in the wake of heavy investment losses and a high-profile tax evasion scandal.

Analysts had predicted a net profit of 976 million francs for Credit Suisse, though some anticipated significantly lower results due to higher salary and bonus costs because of hirings at its investment bank.

Zuercher Kantonalbank described the results as "negative." Shares in Credit Suisse shares lost 3.1 percent of their value, dropping to 42.01 francs by late morning.

Credit Suisse said if fair value reassessment of its debt and other paper gains are included in the balance sheet then underlying net profit during the quarter was 960 million francs _ a result Dougan described as "solid."

The bank's chief financial officer, David Mathers, told reporters during a conference call that the quarter was marked by "low market volumes and subdued client activity" and that "the industry is at a cyclical low." Core revenue was down 30 percent to 6.28 billion francs due to lower trading.

Credit Suisse again stressed that it was well-prepared to meet tighter regulatory requirements for capital reserves, including the so-called "Swiss finish" proposed by national financial oversight authorities to protect the country's two biggest banks from collapse.

A Swiss government committee proposed earlier this month that Credit Suisse and UBS should hold reserves of 10 percent in common equity and 19 percent in total capital by 2019. The requirement, if approved, would be stricter than new international rules approved in Basel last month and could put the big two Swiss banks at a disadvantage unless other countries follow suit.