Credit Suisse profit plummets for 2001

Analysts are surprised by size of fourth quarter losses at Credit Suisse Group Keystone

Credit Suisse Group expects a fourth quarter loss of about SFr800 million ($468.4 million). Net profit will have dropped 72.3 per cent in 2001.

The company, which also runs Switzerland’s second-biggest domestic bank, explained on Thursday that the loss reflected one-off charges and loan provisions at its investment-banking arm, Credit Suisse First Boston (CSFB).

CSFB alone will report a net loss of approximately $1 billion (SFr1.71 billion) for the last three months of 2001, the group said. The figure reflects restructuring charges, losses in Argentina and exposure to bankrupt US energy trading group Enron.

Higher costs

A spokeswoman for Credit Suisse said the announcement of the figures was brought forward because of higher costs and provisions than the group had anticipated. Full results are due on March 12.

“Since the market was not aware of the additional costs and provisions, we wanted to provide this information as soon as possible,” the spokeswoman said.

Credit Suisse has also been keen to comply with disclosure rules in the United States since its listing on the New York Stock Exchange last September.

Weaker than expected

The figures put pressure on Credit Suisse’s stock price on the Swiss Exchange as the final numbers for 2001 were lower than expected.

Analysts at UBS Warburg had expected 2001 net income to be around SFr2.6 billion, rather than the announced SFr1.6 billion.

Orun Palit, fund manager with AIG Privat Bank, warned that these latest figures would hit the share price.

“Those with bad results should release them now and include them in 2001 – that is the best,” explained Palit. “I’m sure some of the charges could have been deferred until the first quarter.”

Shares in Credit Suisse Group traded as low as SFr64.50, but then moved off lows to trade down 1.4 per cent at SFr65.25. The stock has already tumbled from a high of SFr71.30 on Tuesday, as traders cited unspecified rumours of losses.

One-offs

CSFB’s pre-tax one-off charge totalled $845 million in the fourth quarter.

The largest single figure was $745 million in restructuring expenses tied to staffing reductions and other cost-cutting initiatives, which was about $95 million higher than the $650 million previously announced.

On top of that, there was a further $100 million that CSFB agreed to pay to settle charges by the US Securities and Exchange Commission and the National Association of Securities Dealers for the mishandled allocation of hot new stock offerings.

Beyond those figures, CSFB set aside credit provisions for the fourth quarter totalling $339 million in set-asides to cover general credit risk.

That figure excluded $218 million in pre-tax losses taken on Argentina and pre-tax losses for exposure to Enron. In addition, there were also pre-tax write-downs on the value of CSFB’s private equity holdings of $104 million.

swissinfo with agencies