Saturday 29 November 2014

Credit Suisse sees biggest quarterly loss since 2008

Katharina Bart

Published 23/07/2014 | 02:30

An illuminated logo sits on a wall outside a Credit Suisse Group AG office in Zurich, Switzerland
An illuminated logo sits on a wall outside a Credit Suisse Group AG office in Zurich, Switzerland

Credit Suisse has reported its biggest quarterly loss since the peak of the financial crisis in 2008, the result of a 1.6 billion Swiss franc (€1.3bn) settlement with US authorities over helping its clients to evade taxes.

The Swiss bank also said it would quit commodities trading, reversing a statement of just two months ago, as it continues to overhaul its investment bank to get back to double-digit capital returns from its remaining activities.

Credit Suisse's fixed income unit outshone both its wealthy client unit and its US rivals with a 4pc rise in sales and trading. That compares to drops of at least 10pc at American banks including Goldman Sachs and JPMorgan last week.

Credit Suisse said the investment bank cuts would allow resources and funds to be reassigned to its private bank, which disappointed investors with a 39pc drop in revenue and swung to a loss due to the fine.

"I want to reiterate that we deeply regret the past misconduct that led to this settlement and that we take full responsibility for it," Brady Dougan, chief executive of the Zurich-based lender said yesterday

"The continued trust and support of our clients helped us mitigate the impact of the settlement on our business."

Credit Suisse's private bank has been under scrutiny since the bank's guilty plea to the US criminal charge, with investors worried about clients pulling money out of its wealth management business as a result. Mr Dougan said the bank's capabilities to offer services to clients were not hampered as a result of the settlement.

The private bank won 10.1 billion francs of net new money in the quarter - a key indicator of future revenue - which was slightly above analysts' consensus for 9.27 billion francs.

"The guilty plea in the US appears to have had no negative impact on business and... we believe the shares remain attractively priced," Nomura analyst Jon Peace said.

Pretax profit at Credit Suisse's investment bank, where it cut back under-performing areas like its interest rate trading arm, was near unchanged on the year at 752 million francs.

But the investment bank result failed to underpin the bank's shares.

The bank also said it would wind down its commodities trading, where it is a mid-sized player, joining investment banks like Deutsche Bank, JPMorgan and Barclays that are either exiting or significantly downsizing their activities in commodities.

Credit Suisse's exit leaves only a small number of players in commodities trading, which had been seen as the absolute necessity of investment banking only a few years ago, including Goldman Sachs, Citigroup, Morgan Stanley and some new comers such as BTG Pactual.

The fixed income outperformance, on the back of activities such as mortgage servicing, helped it counter a drop in equity trading. (Reuters)

Irish Independent

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