Credit Suisse 2Q Net Slips But Bests Views By Far
Credit Suisse Group Thursday said quarterly net profit slid because turmoil roiling financial markets took a heavy toll on its investment banking business, but recorded far more buoyant earnings than expected by analysts.
The Zurich-based bank said net profit for the three months ended June 30 shrunk to 1.22 billion Swiss francs ($1.17 billion), from CHF3.2 billion year-earlier.
The slump in profit is particularly pronounced because Credit Suisse posted an excellent year-earlier quarter, when outstanding market conditions and the absence of write-downs caused profits to surge.
However, analysts had expected a much steeper drop, to an average CHF594 million and, compared with hometown rival UBS AG, Credit Suisse has managed to limit the credit crunch fallout. The bank reiterated that it hasn't used monoline insurance to hedge subprime securities, hasn't sponsored any SIVs and hasn't been active in underwriting auction-rate securities, all areas that have troubled rivals.
In its outlook, the bank said the market would remain difficult, and that it will manage business "conservatively."
Write-downs included CHF503 million on debt due to narrower credit spreads and CHF22 million for major buyout loans, set against gains in trading collateralized debt obligations, or CDOs.
By contrast, UBS has recorded major write-downs and three consecutive quarterly losses that forced it to seek over CHF29 billion in fresh funds to replenish its capital against mortgage losses.
Credit Suisse's minor dent from leveraged loans bodes well for Deutsche Bank, which also does considerable business with big loans. Deutsche Bank reports the quarter next Thursday.
Credit Suisse’s shares, which have lost 27% so far this year alongside a 28% slide in the Stoxx Europe 600 bank index, closed at CHF49.90 Wednesday, giving the bank a market capitalization of $53.09 billion.
By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@dowjones.com
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