Credit Suisse confirms loss, cuts bad assets

Urs Keller

Credit Suisse made a third-quarter net loss of SFr1.26 billion ($1.08 billion), the bank reported on Thursday, confirming a warning issued last week.

Switzerland’s second-largest bank also revealed a massive SFr1.7 billion trading loss and pointed to trouble in global markets as it warned of a difficult fourth quarter.

Revenues between January and September halved to SFr3.11 billion compared with SFr6.03 billion during the same period last year, it said.

Investors drove shares down more than eight per cent on Thursday morning on the Swiss stock exchange as they feared investment banking, which was hit by a pre-tax loss of SFr3.2 billion, would continue to struggle.

“While understandable in the context of the market environment, this result is clearly disappointing,” the company’s chief executive, Brady Dougan, said in a statement.

“We expect the market to remain very challenging and we are cautious with regard to the outlook for the fourth quarter.”

He added that Credit Suisse was working to further reduce its risky liabilities – reportedly between SFr10 billion and SFr15 billion.

Exposure

Credit Suisse said it had cut its exposure to assets most severely affected by the turmoil on the mortgage and credit markets.

The bank had trimmed its exposure to leveraged finance by 17 per cent to SFr11.9 billion, while exposure to commercial mortgage-backed securities fell by 15 per cent to SFr12.8 billion.

Those cuts came slower than I previous quarters and Credit Suisse still holds assets of SFr6.8 billion in residential mortgage and subprime assets, it said.

While the company’s 9-month performance followed SFr2.4 billion in writedowns and poor results at its investment banking division, its profitable private banking business continued to see strong inflows.

Private banking saw a net increase of SFr14.5 billion, a sign Dougan said that the bank still enjoyed considerable trust among customers.

Shares down

Credit Suisse shares are down nearly 30 per cent on the Swiss stock exchange since the start of the year, and Dougan said that management pay for the year would reflect the company’s performance.

The bank is nevertheless in a better position than many of its European rivals, which have seen their share prices drop some 50 per cent over the same period.

Stock in UBS, Switzerland’s largest bank, has fallen nearly 65 per cent since January.

Last week, it received some SFr60 billion in assistance from the Swiss government in exchange for a 9.3 per cent stake in the bank.

UBS has rid itself of virtually all of its toxic assets and has significantly boosted its cash safety net, the bank said.

Credit Suisse opted against government assistance but was forced to seek a SFr10 capital injection from the government-controlled Qatar Investment Authority.

swissinfo with agencies

Credit Suisse

Credit Suisse was founded in 1856 by Alfred Escher under the name Swiss Credit Institution.

The original purpose of the bank was to finance the expansion of private railroad networks and to industrialise Switzerland

It opened its first branch outside Switzerland in 1942, in New York City.

In 1993, it purchased the People’s Bank of Switzerland and in 1996, the two retail banks merged and were renamed Credit Suisse.

The bank is divided into three divisions – investment banking, private banking and asset management – and employs over 50,000 people.