Credit Suisse completes profitable year

Credit Suisse's figures are pointing upwards Keystone

Credit Suisse returned to profitability in 2009 despite a dip in performance in the fourth quarter of the year.

The bank reported an annual profit of SFr6.7 billion ($6.3 billion), compared to a SFr8.22 billion loss in 2008. It also managed to attract new assets of SFr12.5 billion in the last three months of 2009.

Chief executive Brady Dougan said tough market conditions were to blame for a lower than expected fourth quarter profit of SFr793 million ($746 million) – the worst quarter of the year.

“We had a strong start to the quarter with strong client activity. Our transaction pipeline and net new asset flows are the best we have seen since the crisis,” he said in a statement.

Credit Suisse, which weathered the economic downturn without state aid, has rebounded under the leadership of Dougan, a former investment banker.

However, the bank’s bottom line of SFr0.8 billion in the final quarter was the weakest of all quarters last year and was weaker than the SFr1.2 billion fourth quarter profit of Switzerland’s other big bank, UBS, which reported earlier this week.

Analysts polled by the Reuters news agency had expected Credit Suisse to post a SFr1.3 billion profit in the same period and SFr7.2 billion profit for the full year.

Bottom line hit

Credit Suisse’s bottom line was hit by a SFr0.5 billion charge in the United States for hiding thousands of transactions on behalf of clients from countries including Iran, which are subject to US sanctions.

A recurring accounting loss on own credit to the tune of SFr300 million also took its toll on the Swiss bank’s results.

Like UBS, Credit Suisse suffered from the so-called “scudo” tax amnesty in Italy, which led to client withdrawals amounting to SFr5.6 billion. Of the remaining SFr10billion in assets held by Credit Suisse for Italian clients, around SFr3 billion was moved onshore in Italy while some SFr7 billion stayed in Switzerland.

Dougan insisted that a shift in Credit Suisse’s private banking operations away from offshore to onshore business would shield the bank from any further amnesties.

“Even if you were to assume that we would have amnesties or similar adverse events across all Western European markets, which were as aggressive as the recent Italian scudo, our estimate is that we would not lose more than SFr25-35 billion in assets,” he said.

Dougan added that he believed his bank was well positioned to absorb the consequences of proposed regulatory changes, but emphasised that many of the publicly announced plans had a long way to go before they became reality.

Lower bonuses

New clients added SFr44.2 billion to Credit Suisse’s private banking and asset management operations last year, compared to outflows of SFr147 billion at Swiss rival UBS.

Credit Suisse also reported on Thursday that payments to staff in the form of bonuses last year were 21 per cent lower than in 2007.

The average variable compensation for 2009, Credit Suisse said, was SFr144,000, down from SFr180,000 for 2007.

“We implemented a new compensation structure that reaffirms Credit Suisse’s commitment to fair, balanced and performance-oriented compensation policies,” Dougan said.

Members of the Executive Board received no variable cash compensation for 2009, but deferred awards subject to performance criteria which could result in negative adjustments in future.

swissinfo.ch and agencies

Credit Suisse 4th quarter

Net income: SFr0.8 billion

Return on equity: 8.3%

Net new assets: SFr12.5 billion

Credit Suisse 2009

Net income: SFr6.7 billion

Return on equity: 18.3%

Net new assets: SFr44.2 billion