Credit Suisse plays safe but makes commodities' loss
CREDIT Suisse made a loss trading commodities in the first quarter as it reduced the size of its bets, setting itself apart from the biggest financial players who upped their stakes to try and maintain profits in calmer conditions.
Credit Suisse, Switzerland's second-largest bank behind UBS, posted an overall first-quarter profit of 2.1bn Swiss francs (CHF) (€1.4bn) yesterday but this included a loss of CHF66m from its commodity, emissions and energy product trading.
"We had small losses in fixed income arbitrage trading and minimal losses in commodities, driven by losses in our commodities exit businesses, compared to revenues in 1Q09 and significantly lower revenues from our ongoing commodities business," Credit Suisse said in its quarterly report. The bank had trading revenues of CHF99m from commodities in the previous quarter and CHF214m in the first quarter of 2009.
The bank reduced its daily average Value at Risk (VaR) in commodities during the first quarter by almost 30pc from the same period last year, down to CHF17m from CHF24m. Daily average VaR was CHF1m below the last quarter of 2009.
VaR is a standard industry measure for how much of a bank's money is at stake on any day for trading a particular market. The bank's total VaR was up to CHF104m from CHF95m the previous quarter, though it was substantially lower than the CHF204m at risk in the first quarter of 2009.
"There has been relative stability in oil and other commodity prices in recent months," VTB Capital analyst Andrey Kryuchenkov said. "With less volatility, sometimes you have to risk more money to make a smaller profit than in the past."
Credit Suisse's moves in commodities are in contrast to US investment banks Goldman Sachs and Morgan Stanley, two of the biggest financial players in the market. Goldman increased its VaR in commodities to $49m in the first quarter, up by almost 30pc from the previous quarter and the first quarter of 2009, though the bank reported on Tuesday net revenues from commodities fell short of the 2009 period, without providing further details.
On Wednesday, Morgan Stanley said its Value at Risk for commodities stood at $27m in the first quarter, up $4m from the previous quarter and up $1m from a year ago, but net income from commodities "reflected reduced levels of client activity".