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Credit Suisse posts record Q4 loss as crisis erodes trading
By Elena Logutenkova |
February 12, 2009, Thursday
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Print Edition
Print Edition
CREDIT Suisse Group AG, Switzerland's second-biggest bank, yesterday reported a record fourth-quarter loss after the worst financial crisis since the Great Depression battered trading results.
The bank fell as much as 8.3 percent in Swiss trading after reporting a net loss of 6.02 billion francs (US$5.2 billion), wider than the 4.2-billion-franc estimate of analysts surveyed by Bloomberg News. For 2008, the deficit totaled 8.2 billion francs.
Credit Suisse, which sidestepped the worst of the United States subprime crisis, suffered trading losses after the September collapse of Lehman Brothers Holdings Inc roiled financial markets. Chief Executive Officer Brady Dougan said in December that the bank would cut 5,300 jobs and exit some proprietary activities to weather "challenging" markets. The pace of new investment by wealthy clients also slowed in the fourth quarter.
"Net new money is slightly below what we expected, but comes in a difficult environment," said Teresa Nielsen, an analyst at Bank Vontobel in Zurich who rates the bank "hold."
Credit Suisse fell 2.18 francs to 28.70 francs by 9:27am Zurich time yesterday, bringing the decline over the past 12 months to 49 percent. US banks plunged on Tuesday, dragging the Standard & Poor's 500 financial index down 11 percent.
"We have had a strong start to 2009 and were profitable across all divisions year to date," Dougan said in a statement. "We have positioned our businesses to be less susceptible to negative market trends if they persist in the coming months."
Declines aid
The investment bank had a pretax loss of 7.78 billion francs in the quarter after 3.19 billion francs of writedowns on leveraged loans and structured products and as trading hedges failed. Credit Suisse also had about 600 million francs in costs related to cutting jobs. Unlike UBS AG, the biggest Swiss bank, Credit Suisse declined government aid to split off toxic assets. Profit at the private banking unit fell 36 percent to 876 million francs, hurt by a 407-million-franc provision for auction-rate securities. The asset management division had a loss of 670 million francs after the value of private equity and other investments had to be marked down by 599 million francs.
Credit Suisse plans a cash dividend of 10 centimes a share for 2008, versus 2.5 francs for the previous year.
Credit Suisse attracted 2 billion francs of net new money from wealthy clients in the fourth quarter, down from 11.3 billion francs in the third, and saw "positive" net new assets in January, Chief Financial Officer Renato Fassbind said.
UBS clients withdrew a net 54.2 billion francs from its main wealth management units in the fourth quarter.
Credit Suisse lowered its mid-term target for return on equity to 18 percent from more than 20 percent previously, and raised the minimum target for its Tier 1 capital ratio, a measure of solvency, to 12.5 percent from 10 percent.
UBS on Tuesday reported a record 19.7-billion-franc loss for 2008 and said it will cut 2,000 more jobs at the investment bank to return the unit to profitability. Deutsche Bank AG, Germany's biggest bank, last week reported a record 4.8-billion-euro (US$6.3 billion) loss for the fourth quarter and its first annual deficit in more than 50 years.
Financial institutions globally have amassed US$1.09 trillion of losses.
The bank fell as much as 8.3 percent in Swiss trading after reporting a net loss of 6.02 billion francs (US$5.2 billion), wider than the 4.2-billion-franc estimate of analysts surveyed by Bloomberg News. For 2008, the deficit totaled 8.2 billion francs.
Credit Suisse, which sidestepped the worst of the United States subprime crisis, suffered trading losses after the September collapse of Lehman Brothers Holdings Inc roiled financial markets. Chief Executive Officer Brady Dougan said in December that the bank would cut 5,300 jobs and exit some proprietary activities to weather "challenging" markets. The pace of new investment by wealthy clients also slowed in the fourth quarter.
"Net new money is slightly below what we expected, but comes in a difficult environment," said Teresa Nielsen, an analyst at Bank Vontobel in Zurich who rates the bank "hold."
Credit Suisse fell 2.18 francs to 28.70 francs by 9:27am Zurich time yesterday, bringing the decline over the past 12 months to 49 percent. US banks plunged on Tuesday, dragging the Standard & Poor's 500 financial index down 11 percent.
"We have had a strong start to 2009 and were profitable across all divisions year to date," Dougan said in a statement. "We have positioned our businesses to be less susceptible to negative market trends if they persist in the coming months."
Declines aid
The investment bank had a pretax loss of 7.78 billion francs in the quarter after 3.19 billion francs of writedowns on leveraged loans and structured products and as trading hedges failed. Credit Suisse also had about 600 million francs in costs related to cutting jobs. Unlike UBS AG, the biggest Swiss bank, Credit Suisse declined government aid to split off toxic assets. Profit at the private banking unit fell 36 percent to 876 million francs, hurt by a 407-million-franc provision for auction-rate securities. The asset management division had a loss of 670 million francs after the value of private equity and other investments had to be marked down by 599 million francs.
Credit Suisse plans a cash dividend of 10 centimes a share for 2008, versus 2.5 francs for the previous year.
Credit Suisse attracted 2 billion francs of net new money from wealthy clients in the fourth quarter, down from 11.3 billion francs in the third, and saw "positive" net new assets in January, Chief Financial Officer Renato Fassbind said.
UBS clients withdrew a net 54.2 billion francs from its main wealth management units in the fourth quarter.
Credit Suisse lowered its mid-term target for return on equity to 18 percent from more than 20 percent previously, and raised the minimum target for its Tier 1 capital ratio, a measure of solvency, to 12.5 percent from 10 percent.
UBS on Tuesday reported a record 19.7-billion-franc loss for 2008 and said it will cut 2,000 more jobs at the investment bank to return the unit to profitability. Deutsche Bank AG, Germany's biggest bank, last week reported a record 4.8-billion-euro (US$6.3 billion) loss for the fourth quarter and its first annual deficit in more than 50 years.
Financial institutions globally have amassed US$1.09 trillion of losses.
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