Credit Suisse reports 45 percent drop in Q1 profit

AP News
Posted: Apr 27, 2011 6:54 AM
Credit Suisse reports 45 percent drop in Q1 profit

Credit Suisse reported a 45 percent drop in first-quarter net profits Wednesday, not as bad as analysts had expected, due to the impact of a strong Swiss franc, a one-off charge and stricter rules for capital reserves.

The Zurich-based bank said its net profit for the first three months of the year fell to 1.14 billion Swiss francs ($1.31 billion) from 2.06 billion francs a year earlier. Core revenue fell 13 percent to 7.81 billion francs.

Analysts had expected the slide in earnings as fixed-income sales and trading income had also hurt rival UBS AG, Switzerland's biggest bank, which reported its own earnings on Tuesday.

Credit Suisse Group, a global player in investment banking, private banking and corporate advisory, also saw its profits hurt by a previously disclosed charge of 467 million francs against the value of its own debt.

Zuercher Kantonalbank's analysts, however, said the net profit was still slightly higher than they had expected and that net new money inflows were strong while the fixed income decline wasn't as bad as expected.

"The first-quarter result of Credit Suisse is solid, offers no surprises and is on the whole within the range of our estimates," the Zurich cantonal bank's analysts said in a statement. "After several disappointments in a row this should be seen as positive."

Shares in Credit Suisse rose almost 1 percent Wednesday morning on the Swiss Exchange.

Credit Suisse played up its underlying return on equity of 18.8 percent, a gain in market share and generation of 19.1 billion francs in net new assets.

It said it was well prepared to capitalize on its improved market position going into the next quarter despite volatile currency exchange rates due to Europe's sovereign debt crisis and turmoil in the Middle East.

"We have provided further evidence that our business model generates stable, high-quality earnings," CEO Brady Dougan said. "We also expect clients to remain active with an increased appetite for higher return assets and comprehensive advisory services."

He had cut the profits goal for Switzerland's second-biggest bank in February in response to tougher capital requirements.

The bank had lower losses and writedowns during the global financial crisis than its competitors, particularly UBS AG.

The share price of Credit Suisse has nevertheless sagged since 2009, to about 40 Swiss francs from 60 francs, as hopes faded that it would be able to maintain its lead over UBS.

The bank's chief financial officer, David Mathers, said Credit Suisse had "a strong quarter overall" and was well-positioned and strongly capitalized in line with new global and Swiss regulations.

On Tuesday, UBS reported an 18 percent drop in net quarter profit, but the figure was better than expected, causing the share price to surge and adding pressure on Credit Suisse.

Those results set a "high bar for Credit Suisse, who are in a much better position, but have had a bit of a reputation for underachieving in the last four quarters," said Chris Wheeler, an analyst at Mediobanca.

Other bank competitors in the U.S. and Britain also have reported lower profits for the first quarter.