23 Apr 2009
April 23 (Bloomberg) -- Credit Suisse Group AG, the biggest Swiss bank by market value, reported profit that exceeded analysts' estimates in the first quarter, helped by a recovery in trading revenue.Net income was 2 billion Swiss francs ($1.7 billion), compared with a 2.15 billion-franc loss in the year-earlier period, the Zurich-based bank said in a statement today. Earnings were twice the 1 billion-franc median estimate of 14 analysts surveyed by Bloomberg News.
Chief Executive Officer Brady Dougan said he's "optimistic" about the bank's prospects, as plans to cut 5,300 jobs and eliminate money-losing businesses at the investment bank yield results. Zurich-based UBS AG, which hired Dougan's former boss Oswald Gruebel as CEO this year, reported a first- quarter loss of almost 2 billion francs.
"These results give the strong impression Credit Suisse is winning share in private banking and investment banking as competitors are in disarray," said Huw van Steenis, an analyst at Morgan Stanley.
Credit Suisse's stock is the seventh-best performer in the 65-company Bloomberg Europe Banks and Financial Services Index this year. The 39 percent gain lifted the bank's market value past UBS to 47 billion francs. UBS fell 3 percent, cutting its market capitalization to 42.2 billion francs.
‘Prudent Approach'
"Our prudent approach in the new market environment has served us well," Dougan said in a statement. "While we may still be affected by continued volatility and market disruptions if difficult conditions persist, we believe that we are in a position to weather the storms and perform well when market opportunities arise."
Credit Suisse's securities unit reported a pretax profit of 2.4 billion francs in the quarter, beating analysts' forecasts, compared with a 3.4 billion-franc loss a year earlier. Earnings at the wealth management and retail banking division fell 25 percent. The asset management unit had a loss of 490 million francs, after a 544 million-franc loss a year earlier.
Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. reported first-quarter results last week that beat analysts' forecasts as trading revenue surged. UBS said last week its first-quarter loss stemmed mainly from a 3.9 billion- franc writedown on hard-to-trade assets.
Return to Profit
Financial institutions worldwide have amassed $1.3 trillion of losses and shed more than 307,000 jobs since the U.S. subprime mortgage market collapsed. UBS, the European bank with the highest losses, has taken writedowns of about $50.6 billion, more than triple the $15.4 billion at Credit Suisse, data complied by Bloomberg show.
Credit Suisse had completed about half of the job reductions announced in December by the end of 2008, the bank said in its annual report. The remainder will go by the middle of this year, putting the company on course for cost savings of about 2 billion francs.
Paul Calello, head of Credit Suisse's securities unit, said in February the Swiss company would exit investment-banking businesses that lost 14.6 billion francs last year to return to profitability. Businesses such as emerging markets trading, U.S. leveraged finance, equity trading strategies and convertibles returned to profitability, reaching total revenues of 1.4 billion francs in the quarter and offsetting a writedown on commercial mortgage-backed securities of the same amount.
Trading Revenue
Total sales and trading revenue was 6.25 billion francs, compared with a 256 million-franc loss a year ago. Earnings at the unit also benefited from a 365 million-franc fair value gain on Credit Suisse's own debt, as well as a positive valuation adjustment of 413 million francs on residential mortgage-backed bonds and subprime collateralized debt obligations and a 50 million-franc gain on leveraged finance commitments.
Gruebel told UBS shareholders last week that markets are "extremely unstable" and that the bank's outlook "remains cautious," after announcing 7,500 additional job cuts. Dougan, 49, took over as CEO of Credit Suisse in May 2007 from Gruebel, 65, after heading the investment bank for three years.
Losses tied to distressed loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and credit crisis exact a higher toll on financial institutions, the International Monetary Fund said April 21 in a report on the state of the global financial system.
