Credit Suisse results fail to wow market

CREDIT Suisse disappointed investors with declining margins in its private client business yesterday, even though net profit ticked up slightly, in line with expectations.

Group income in the first quarter was SwFr2.06bn (£1.27bn) – marginally higher than the SwFr2.01bn generated this time last year. The group, which has missed the bounce enjoyed by its American rivals due to its cautious approach, saw sales rise 11 per cent to SwFr9bn.

Chief executive Brady Dougan said the second quarter was shaping up in line with the three months to March. He said: “We are confident that our business model will enable us to continue to generate high-quality results in good as well as in more challenging market conditions.”

But shares in Credit Suisse dropped five per cent to €48.10 as the market expressed unhappiness with the state of the bank’s private client operation. Despite bringing in SwFr18.6bn net new money, the unit’s gross margin slipped, with customers unwilling to switch out of cash into more complex and higher-margin products.

Christian Stark of Switzerland-based brokerage Cheuvreux said: “One of the things investors are looking for is growth in operating leverage. Credit Suisse has inflows but its clients aren’t doing anything.”

Pre-tax profits from investment banking were up quarter-on-quarter but slumped from a bumper SwFr2.4bn in 2009 to SwFr1.8bn. The bank’s staff shared SwFr870m in pay and bonuses.

Analysts said the sparkling set of first quarter results from Wall Street investment banks this week made for an unfavourable comparison with Credit Suisse’s steadier, less racy numbers.

Nomura’s Jon Peace said: “With the peer group having set high expectations, Credit Suisse has failed to beat.”