Credit Suisse Swings to a Loss
Credit Suisse
(CS) - Get Report
swung to a net loss of $2.1 billion in the first quarter, as it wrote down $5.2 billion tied to leveraged finance products.
The Zurich-based bank reported a net loss of 2.15 billion Swiss francs, vs. last year's profit of 2.7 billion in Swiss francs. Net revenues of 3 billion Swiss francs plunged 72% from the first quarter last year, as net writedowns in leveraged finance products totaled 5.3 billion Swiss francs. The writedown dwarfs the 3.2 billion Swiss franc writedown the bank recorded for all of 2007.
"Other than the areas affected directly by the credit crisis, most of our businesses performed well, with revenues near, or in some cases above, those in the first quarter of 2007," CEO Brady Dougan said in a company statement.
Shares were advancing 2.6% to $52.94 in recent trading.
However, when compared to the previous year's quarter, private banking dropped 8% and wealth management declined 13%, with only corporate and retail banking showing an increase of 3%. Compensation also decreased, with operating expenses declining 38% as compared to the first quarter.
The bank scrambled to reduce its exposure to the mortgage crisis by dumping product at presumably fire sale prices. Exposure was down 41% from the end of the fourth quarter in 2007.
Asset management bailed out some money market funds by purchasing securities. The fair value of those securities decreased 1.7 billion Swiss francs from the end of 2007. Net revenues for this area plunged 92% as compared to last year. And while wealth management claimed net new assets in the first quarter, the group's total assets under management decreased 11% due to adverse foreign exchange and market movements.
Credit Suisse's results did not appear so bad in comparison to Swiss rival
UBS
(UBS) - Get Report
, which already fell on its sword with writedowns of $37.4 billion tied to subprime mortgages. Germany's
Deutsche Bank
(DB) - Get Report
also recently warned that it may record $3.98 billion in markdowns for buyout loans and mortgage securities.
U.S. rivals
Citigroup
(C) - Get Report
and
Merrill Lynch
(MER)
also reported losses last week and
Bank of America
(BAC) - Get Report
and
JPMorgan Chase
(JPM) - Get Report
posted dips in profits caused by writedowns.
Credit Suisse said it did not believe it would have to raise capital, like
Royal Bank of Scotland
(RBS) - Get Report
, Britain's second-largest bank,
. RBS said it was raising 12 billion pounds, or $23.9 billion to cover writedowns.
Separately, Standard & Poor's Ratings Services affirmed its AA-/A-1+ counterparty credit ratings on Credit Suisse after Thursday's announcement, but kept its outlook on all Credit Suisse entities negative.