Profit at Credit Suisse soars

Profit in the fourth quarter at CS was better than expected. Credit Suisse

The Credit Suisse Group has reported net profit of SFr5.6 billion ($4.72 billion) for the year 2004, more than seven times what it made in 2003.

All banking businesses made year-on-year profit improvements, the group said on Thursday. Net profit in 2003 was SFr770 million.

But Switzerland’s second-largest bank said its result had been marred by a charge of SFr242 million after tax in the fourth quarter.

This was mainly due to an increase in a provision relating to the sale of insurance unit Winterthur International in 2001.

Net revenues for 2004 were SFr54 billion, up five per cent on 2003.

The board of directors is to propose a dividend of SFr1.50 per share and will also seek permission for a two-year share repurchase programme for a value of up to SFr6 billion.

The year 2004 was the first in which Credit Suisse calculated its earnings according to United States rather than Swiss acounting rules, which had the effect of cutting net profit for the previous year by a hefty SFr4.2 billion to the SFr770 million figure.

Credit Suisse said in a statement on Thursday that good performances from Private Banking and Corporate and Retail Banking in the fourth quarter contributed to a “very good full-year result”.

Fourth-quarter net profit rose by 22 per cent to SFr959 million from SFr784 million a year earlier, helped by higher earnings at its investment-banking unit.

“We delivered a good 2004 result as our businesses responded well to the changing market environment but the fourth quarter was impacted by provisions relating to the sale of Winterthur International, a loss on the disposal of a minority holding and severance costs at Credit Suisse First Boston,” explained CEO Oswald Grübel.

Increased profitability

“However, I am very pleased that all our banking units reported increased profitability compared with 2003, while significant year-on-year improvements show that Winterthur is making continued progress towards sustainable profitability,” he added.

But he cautioned that the group still had “some way to go” to realise its full potential.

Grübel announced in December that he planned to boost profit to SFr8 billion in 2007 by combining operations into three units and focusing on the securities division’s most profitable businesses and customers.

This included folding investment arm Credit Suisse First Boston into the company’s other banking operations and cutting up to 300 jobs.

Credit Suisse plans to sell the Winterthur insurance business, which it bought for about $10 billion in 1997. Winterthur dragged CS to a record loss in 2002 after lower stock markets led to write-downs in its investments.

Analyst Simon Maughan at investment bank Dresdner Kleinwort Wasserstein commented that Credit Suisse had now “crossed the divide” between banks confident enough to launch share buyback plans and those still reluctant to do so.

“That was the biggest positive for us in the results,” he said.

Confident

Grübel commented that the group was confident that the strategy announced at the end of last year would transform it into a “stronger and more formidable” competitor in the market place.

In its outlook, Credit Suisse said the group had proved itself capable of delivering improved performance in the face of “mixed market trends”.

This market environment is expected to continue in 2005 and the strategic plan announced in December will allow Credit Suisse Group to remain competitive, the statement added.

Without going into great detail, the group said that the intention to become a fully integrated bank would allow it to continue to compete effectively by seizing market growth opportunities and capturing revenue and cost synergies.

Rival UBS, which is Switzerland’s largest bank, last week reported a record net profit of SFr8 billion, up 29 per cent on its 2003 result.

swissinfo with agencies

Key facts

2004 financial figures:

Net profit: SFr5.6 billion (SFr770 million in 2003)
Net revenues: SFr54 billion (+ 5% on 2003)
Earnings per share: SFr4.80
Proposed dividend: SFr1.50

In brief

Alfred Escher founded Schweizerische Kreditanstalt in 1856 as a “credit engine” to push forward the expansion of the rail network and the industrialisation of Switzerland.

The Credit Suisse Group has three business units:
Credit Suisse (private banking, corporate and retail banking); Credit Suisse First Boston (institutional securities, wealth and asset management), Winterthur(insurance).

The group employs around 60,000 staff worldwide.