Swiss bank Credit Suisse Group eked out a small first-quarter profit, as cost cuts and a better-than-expected showing from its fixed income arm cancelled out a 1.5 billion Swiss franc ($1.6-billion U.S.) charge on its debt.
Credit Suisse posted a net profit of 44 million Swiss francs on Wednesday, down from 1.13 billion last year and compared with a forecast for a 436 million franc loss.
The quarter’s profits were helped by 178 million francs from the selling down of its stake in Aberdeen Asset Management.
The first quarter is typically the strongest for investment banks and can set the tone for the coming year.
Credit Suisse financial head David Mathers was at pains to avoid drawing that upbeat conclusion, however.
Instead, he echoed comments from U.S. investment banks, such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. , saying April market conditions had dropped off from healthier first-quarter activity levels when they reported recently.
Much like the U.S. banks, Credit Suisse’s fixed-income sales and trading bolstered the quarterly net profit which was 1.355 billion Swiss francs without the debt effect.
“Credit Suisse’s improvement against what 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. He rates the stock at neutral.
The Swiss bank did not add to ongoing job cuts of 7 per cent of its workforce, or roughly 3,500 staff, as some analysts had expected, but said it was ahead of a target to cut costs by 1.2 billion francs, when extrapolating the first quarter to 2012.
Credit Suisse said it was “encouraged” by the first quarter performance overall, especially the aggressive spending cuts, but that it was too early to lift the cost target.
“We are very confident that by executing our strategy consistently, we will be able to deliver our target return on equity of 15 per cent or more over the cycle,” chairman Urs Rohner and Chief Executive Brady Dougan said in a joint letter to shareholders. First-quarter ROE was 0.5 per cent, or 15.9 per cent when stripping out the debt loss.
Credit Suisse’s private bank, while attracting 8.4 billion Swiss francs in net new money, continued to struggle with sluggish client activity as well as under a strong Swiss franc, which hits assets and revenues.
Clariden Leu, one of Switzerland’s oldest bank brands which was integrated into Credit Suisse earlier this month, shed 4.1 billion Swiss francs in assets in the first quarter.
Overall at the private bank, “slightly higher transaction revenues were offset by lower fees due to mix shifts in customers and assets, which is a negative read-through for other private banks,” Nomura analyst Jon Peace said.
Hometown rival UBS AG reports next Wednesday.
Credit Suisse recorded an overall withdrawal of 7.1 billion Swiss francs in assets, because the private bank’s fresh assets were offset by the loss of large fixed-income mandate in asset management.
The results could give Credit Suisse Chief Executive Brady Dougan some breathing room ahead of the bank’s shareholder meeting on Friday. Detractors accuse Dougan of failing to scale back Credit Suisse’s investment banking unit decisively enough.
Credit Suisse made no comments on its attempt to settle a U.S. tax probe over allegations it helped wealthy Americans hide their money through hidden Swiss offshore accounts.
Noting it is involved in a number of proceedings, Credit Suisse said it took net litigation provisions of 68 million francs in the quarter, but estimated the range of possible losses not covered by provisions at zero to 2.3 billion francs.
Credit Suisse took a 295 million franc provision last year in connection with the U.S. probe, adding the final settlement might exceed the current provision.