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Credit Suisse Q3 Profit Falls 63% On Own Debt Charge

Credit Suisse Q3 Profit Falls 63% On Own Debt Charge
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10/25/2012 5:25 AM ET

Credit Suisse Group (CS: Quote) Thursday reported a 63 percent drop in third-quarter profit, reflecting an accounting charge related to a significant tightening of its own credit spreads. Detailing its cost reduction measures, the Swiss banking giant said it expects to deliver savings in excess of its earlier target for full year 2013 and plans to deliver additional cost savings in subsequent years.

Brady Dougan, chief executive officer of the company stated, "We are successfully executing on the strategic measures we began last year, while maintaining strong momentum with our clients....At the same time, we have significantly cut costs and improved efficiencies across the bank."

The company said it expects to exceed its target of 3 billion francs in total cost savings in the full year 2013. The Group now targets annual savings in excess of 3.5 billion Swiss francs during 2014 and savings of 4.0 billion francs by the end of 2015.

In the third quarter, net income attributable to shareholders of the company plunged to 254 million francs or 0.16 francs per share from 683 million francs or 0.53 francs per share reported last year.

Third-quarter results included fair value losses from movements in own credit spreads of 1.05 billion francs, compared to fair value gains of 1.82 billion in the prior-year quarter. Results also reflected gains of 382 million francs from sale of real estate and gains of 140 million francs from sale of remaining ownership interest in Aberdeen Asset Management.

Reported core pre-tax income was 359 million francs and net income attributable to shareholders was 254 million francs. Return on equity was 2.9 percent, down from 8.7 percent a year earlier.

Adjusted for accounting-driven fair value losses on own debt and other significant non-operating items, the Group reported underlying core pre-tax income of 1.20 billion francs and underlying net income of 891 million francs and underlying return on equity was 9.6 percent for the recent quarter.

In the prior-year third quarter, the company had posted underlying core pre-tax loss of 34 million francs.

Net income margin was 4.4 percent, compared to 10 percent in the preceding year.

Net revenues fell 13 percent to 5.84 billion francs. Core revenues dropped 15 percent to 5.77 billion francs from 6.82 billion francs in the same quarter last year.

In Private Banking, net revenues were stable at 2.59 billion francs, but declined 4 percent compared to the previous quarter. Investment Banking net revenues were 3.3 billion francs, up 13 percent from the second quarter. In Asset Management, the company posted net revenues 607 million francs, an increase of 10 percent from the sequential second quarter.

As of the end of the quarter, Credit Suisse reported a Basel II.5 core tier 1 ratio of 14.7 percent and a Basel II.5 tier 1 ratio of 18.5 percent, up 2.2 percentage points and 2.0 percentage points, respectively, compared to the preceding second quarter. The company had a total capital ratio of 21.2 percent at the end of the quarter.

In Zurich, Credit Suisse shares are currently trading at 21.75 francs, up 0.42 francs or 1.97 percent, on a volume of 2.63 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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