Credit Suisse follows UBS in reporting record Q4 loss

11 February 2009

Credit Suisse Group AG, Switzerland's second-biggest bank, reported a record fourth-quarter loss of 6.02 billion francs ($5.2 billion) after the worst financial crisis since the Great Depression battered trading results.

The bank fell as much as 8.3 per cent in Swiss trading after announcing its results, wider than the 4.2 billion-franc estimate of analysts. For 2008, the deficit totaled 8.2 billion francs. As well as write-downs, the company's investment-banking arm lost money on hedging positions that it said failed to work amid the turmoil that swept financial markets in the final three months of 2008. This mammoth loss marked a reversal from the net profit of 540 million francs that Credit Suisse generated in the fourth quarter of 2007.

Credit Suisse's results, a day after bigger rival UBS AG posted the biggest loss in Swiss history, show how even banks that initially dodged the worst of the financial crisis got swept along when the September collapse of Lehman Brothers Holdings Inc. shook stock and bond markets. (See: $27-billion Q4 loss compels UBS to slash 2,200 investment-banking positions)

CEO Brady Dougan, who announced 5,300 job cuts in December, told reporters that while he doesn't want to give ''a light at the end of the tunnel message,'' he's ''optimistic'' about the business. He said that the company has remained a net provider of liquidity to the market throughout the credit crisis. (See: Credit Suisse to shed 5,300 employees after $2.5 billion loss in first two months of Q4)

"We have had a strong start to 2009 and were profitable across all divisions year to date," Dougan said. "We have positioned our businesses to be less susceptible to negative market trends if they persist in the coming months and to prosper when markets recover."

Credit Suisse lowered its ''mid-term'' goal for return on equity, a measure of profitability, to 18 per cent from more than 20 per cent. The bank raised the minimum target for its Tier 1 capital ratio, a cushion against losses, to 12.5 per cent from 10 per cent. The company expects higher returns from its money- management operations and lower returns from the securities unit.

The investment bank had a pretax loss of 7.78 billion francs in the quarter after 3.19 billion francs of write-downs 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, the biggest Swiss bank, Credit Suisse declined government aid to split off toxic assets. (See: Credit Suisse rescues itself, UBS gets funds infusion)

Profit at the private banking unit fell 36 per cent 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.