Credit Suisse posts steep Q1 profit drop
GENEVA (AP) — Swiss bank Credit Suisse Group reported a 95 percent drop in net profit for the first quarter Wednesday as it took big charges on its debts and paid out higher bonuses.
Switzerland's second-biggest bank said its net profit attributable to shareholders during the first three months fell to 44 million Swiss francs ($48.19 million), way down on its net profit of 1.14 billion francs in the comparable period a year ago.
However, the result represents a turnaround from the fourth quarter of 2011 when it posted its first loss since 2008, as it reduced its exposure to potentially-risky investment banking at a time when Europe's economy was facing acute problems related to a raging debt crisis.
The first quarter result also beat average analyst predictions for a net loss attributable to shareholders of 391 million Swiss francs ($428.3 million) due to significant writedowns, restructuring costs and bonus programs.
The Zurich-based bank attributed the reduced profits to writedowns of 1.6 billion francs ($1.75 billion) related to the rising cost of its own debt, and 534 million francs in bonds-related costs from derivatives handed out as part of 2011 bonuses for more than 5,500 bankers.
Chief Executive Brady W. Dougan described the results as "a good start to 2012," and credited the performance to cost-cutting and other measures since mid-2011. He said the bank also benefited from an improved operating environment in the first quarter and had cut its risk-weighted assets at the investment bank beyond target.
The bank reported that its revenues were hurt — but its expenses were favorably impacted — by the strengthening of the Swiss franc against all major currencies.
Credit Suisse has also been fighting a tax evasion battle like its cross-town rival UBS AG, with U.S. authorities demanding details on hundreds of American clients suspected of hiding money in secret Credit Suisse accounts.
The bank estimated Wednesday in its financial report that it faced possible losses of up to $2.3 billion due to litigation, but did not specify how much of this might be due to the tax evasion battle.
Chief Financial Officer David Mathers told reporters that the bank has been "aggressively reducing risks and costs" and is "ahead of the competition" in terms of complying with new industrywide requirements for banks to increase their capital cushion.
Swiss media had speculated before Wednesday that Credit Suisse was preparing to announce the loss of thousands more jobs. The bank has already announced plans to cut 3 percent of its global workforce and save about 2 billion francs in annual costs by the end of 2013.
The bank's financial report showed that since the fourth quarter of 2011 it had cut 1,000 jobs, taking its workforce down to 48,700 employees. Private banking lost 800 jobs; investment banking lost 200.