Credit Suisse Posts $2.4 Billion Profit in Quarter

INVESTMENT BANKING

Credit Suisse Posts $2.4 Billion Profit in Quarter

October 22, 2009, 7:13 AM

Credit Suisse said Thursday it earned 2.4 billion Swiss francs in the third quarter as strong results at its investment banking unit helped it bounce back from a big loss in the same period a year earlier, David Jolly reported in The New York Times.

The profit, equivalent to about $2.4 billion, marked a major turnaround from a loss of 1.3 billion francs in the July to September period of 2008. It was also a substantially stronger result than had been expected in the market. Analysts polled by Bloomberg had expected the Swiss bank, based in Zurich, to post a profit of about 1.74 billion francs.

Credit Suisse’s investment banking business posted pretax net income of 1.8 billion francs, up 5 percent from the second quarter, and a reversal from the 3.2 billion franc pretax loss it posted in the third quarter last year. It said the bulk of the business was generated by good results in areas like bond and foreign exchange trading, cash equities, as well as American leveraged finance and United States residential mortgage-backed securities secondary trading.

While banks like Citigroup and Bank of America — whose business is largely based on lending to companies and individuals — continue to suffer, banks with the greatest emphasis on trading operations have been posting stellar results this year. These institutions have been helped by the reduction of central bank interest rates to nearly zero and by taxpayer guarantees, as well as the elimination of rivals likes Bear Stearns andLehman Brothers.

Goldman Sachs, for example, posted a $3.2 billion net profit in the third quarter.

“Credit Suisse has responded to the changes in the industry over the past two years with the accelerated implementation of our client-focused, capital-efficient strategy and reduced-risk business model,” Brady W. Dougan, the bank’s chief executive, said in a statement.

The bank’s tier 1 capital ratio, a measure of capital strength, stood at 16.4 percent at the end of the quarter, up from 15.5 percent at the end of the second quarter. Mr. Dougan said the figure demonstrated the bank’s “industry-leading capital strength” and positioned it “to prosper in the new competitive landscape.”

He said Credit Suisse’s private banking and asset management had also performed well.

Credit Suisse said Tuesday that it would alter the mix of salaries and bonuses for its top employees, tie the bonuses to a specific financial measure and effectively claw back the payments if the bank’s fortunes dim. The moves represent a break with longstanding industry practices, and they bring Credit Suisse in line with pay practices endorsed in September by the Group of 20 nations.

Despite suffering a net loss for 2008 of 6 billion francs, Credit Suisse has weathered the financial crisis much better than its crosstown rival, UBS, which has been kept afloat by the largess of Swiss taxpayers. UBS will report its quarterly results on Nov. 3.