Credit Suisse profits latest to be felled by trading fall

Swiss institution is the latest bulge bracket bank to report a decline in investment banking revenues

A SLUMP in investment revenues yesterday passed over from the US banks to Credit Suisse, as the Swiss bank said group income had slumped by 62 per cent over the third quarter of the year.

Credit Suisse said net income fell to 609m Swiss francs (£401.3m), from 1.59bn Swiss francs in the second quarter of 2010, over a period chief executive Brady Dougan admitted was “characterised by challenging conditions with low market volumes and subdued client activity”.

The bank’s performance was even worse when compared to last year, falling almost three quarters from the 2.34bn Swiss francs it posted in the third quarter of 2009.

The group’s investment banking pre-tax income halved over the quarter to just 395 Swiss francs as the seasonal summer slowdown exacerbated declining client volumes.

Underwriting and advisory revenue held up well, in line with Credit Suisse’s US peers, thanks to healthy levels of capital issuance and a strong M&A deal flow. Fixed income sales and trading results also strengthened from the previous quarter, though it was offset by weakness in the equity market business.

The investment bank also took a 57m Swiss franc hit from net fair value losses on its debt, as well as debt valuation adjustment losses of 172m Swiss francs.

Analysts also signalled concern over the bank’s underlying compensation ratio, which was up to 51 per cent in the third quarter from 46 per cent in the second quarter, despite the poor performance over the third quarter of the year.

Earnings at Credit Suisse’s private banking operations outstripped the normally more lucrative investment banking segment for a second quarter running. “We believe the prospects for growth remain very attractive and our private bank is poised to capitalise as markets improve,” Dougan said.

The bank gained client money from emerging markets and from the super rich in its Swiss onshore business, making up for shrinking private banking in mature European markets.

Dougan also said that a resolution of Switzerland’s spat with Germany over its role as a tax shelter for wealthy Germans would be positive for Credit Suisse, whose offices were raided by German authorities after they bought client data stolen from the bank.