Credit Suisse in profit despite £1bn debt fee

A RETURN to profitability for its investment bank helped Credit Suisse to narrowly avoid a loss in its first quarter despite a SFr1.5bn (£1bn) accounting charge on its own debt.

The Swiss bank yesterday posted a net profit of SFr44m – a 96 per cent fall from SFr1.13bn last year – but a marked turnaround from its grim fourth quarter and a better result than analysts had expected.

Pre-tax profit at the investment bank was down 33 per cent to SFr993m compared to the same period a year ago, as revenue declined on the back of a drop in corporate lending and the sale of structured products. Nonetheless, the performance beat the division’s SFr1.44bn pre-tax loss of the fourth quarter.

The investment bank benefited from a favourable showing from interest rate products, foreign exchange trading, emerging markets and debt products, Credit Suisse said.

Credit Suisse’s fixed-income sales and trading also bolstered the quarterly net profit which was SFr1.355bn without the debt effect.

Despite the better than expected performance, chief executive Brady Dougan was cautious on the year ahead, saying market conditions so far in April had been less favourable than the January to March period. Brady, however, said he was confident it would deliver its target return on equity (ROE) of 15 per cent or more. First-quarter ROE was 15.9 per cent when stripping out the debt loss.

“Credit Suisse’s improvement against what the market expected is largely due to the investment bank and fixed-income sales and trading, which dampens enthusiasm somewhat because it’s not what I see as sustainable long-term profits,” Bank Sarasin analyst Rainer Skierka said.