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February 9, 2012 7:43 am
Credit Suisse suffered a SFr637m ($700m) loss in the fourth quarter of 2011, hit by tough markets and an array of special charges related to restructuring to meet new capital requirements.
The loss, which compared with a net profit of SFr841m the previous year, meant full-year net profits amounted to just SFr1.95bn, not much more than the amount targeted in a single good quarter before the financial crisis.
The loss, which came in spite of SFr263m of gains based on accounting changes in the value of the bank’s own debt, was prompted by SFr981m of special charges related to restructuring and slimming down to address new capital requirements.
Of the total charges, SFr414m was attributed to “cost-efficiency measures” and SFr567m to disposing of various businesses in investment banking. The dividend will be slashed from SFr1.30 to SFr0.75.
In the quarter, Credit Suisse's investment bank shed SFr35bn of assets, weighted by risk, reflecting the acceleration of plans for a SFr80bn reduction in risk-weighted assets from the 2012 year-end to the end of the first quarter.
But shedding the assets came at a heavy cost, helping to push the investment bank into a SFr1.31bn pre-tax loss in the fourth quarter, compared with pre-tax profits of SFr558m the previous year.
Revenues fell even more steeply than at most US and European rivals, with the total 64 per cent year on year to SFr1.25bn, and halved compared with the previous quarter. Most notably, core fixed-income sales and trading net revenues plunged to just SFr36m from SFr888m the previous year, prompting a SFr469m loss.
Private banking remained profitable, although sharply down on previous quarters. The bank, which last year paid a €150m settlement in Germany and set aside SFr295m for a possible US settlement, is one of 11 Switzerland-based banks being investigated by the US authorities on allegations it helped rich Americans evade tax.
The core wealth management operation saw pre-tax profits fall steeply to SFr284m from SFr606m the previous year, with the closely watched gross margin down 0.11 percentage points year on year to just 1.09 per cent.
Net new money of SFr4bn in the fourth quarter was ahead of the SFr3.1bn reported by rival UBS, but below market expectations.
“Our performance during the fourth quarter 2011 was disappointing,” said Brady Dougan, chief executive.
About the only upbeat note was Mr Dougan's comment that 2012 had got off to a good start, with an underlying return on equity, "consistent with our target level of 15 per cent".
But while considerably more optimistic than the downbeat outlook given by UBS, analysts were disappointed Credit Suisse did not provide a longer term projection.
"Credit Suisse's results are disappointing even if the one-offs related to cost measures and accelerated deleveraging are excluded", noted Rainer Skierka, analyst at Sarasin, the private bank.
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