Credit Suisse's Profit Shrinks

By KATHARINA BART

ZURICH—Credit Suisse Group said Thursday its third-quarter profit shrank as earnings at its securities unit were hit hard by a lull in activity and wealthy private clients held back from investments.
The Zurich-based bank said net profit for the three months fell to 609 million Swiss francs ($627.8 million) from 2.35 billion francs a year earlier. The bank's core revenue slid 30% to 6.28 billion francs from 8.42 billion francs due to a sharp drop in investment-banking revenue.

Credit Suisse financial head David Mathers flagged an improvement in securities markets, saying October was continuing in the same manner as September, which saw a pick-up from very low levels experienced in July and August. The bank also said it had braced for tougher Swiss capital rules, and for changes to banking secrecy in Switzerland.
"This means that we are well placed to meet these new requirements and at the same time compete and deliver attractive returns to our shareholders," Chief Executive Brady Dougan said in a statement.
Mr. Dougan is likely to be pressed for the bank's dividend payout plan this year when he faces investors on a conference call later. The bank has already said it's setting funds aside for a dividend, and that it won't have to crimp shareholder payouts due to a Swiss top-up of Basel III international capital rules for banks. In 2009, Credit Suisse paid investors two francs a share.

Analysts termed the result poor, particularly for the investment bank, and even after factoring in the higher-than-expected losses on own debt.

"The Credit Suisse results may not be as bad as they appear at first sight when allowance is made for own-credit losses, which are meaningless in economic terms, but there are some disturbing aspects, notably at the investment bank," said Peter Thorne, London-based analyst with independent brokerage Helvea. He singled out the unit's lower return on equity, combined with a higher pay ratio for investment bankers and a 10% increase in staff on the year. "It looks like business has simply over-expanded and needs to contract, and quickly given the low level of client activity," Mr. Thorne said.

The earnings came in against a backdrop of better-than-expected profit from U.S.-based rivals such as J.P. Morgan & Co Inc. and Goldman Sachs Group Inc. Credit Suisse is likely to be taken as a bellwether for investors in other European investment banks such as Swiss peer UBS AG, which reports the quarter Tuesday, Germany's Deutsche Bank AG, scheduled for Wednesday, and the U.K.'s Barclays PLC, on Nov. 9.
Credit Suisse's private bank, which is being investigated by German officials, who obtained a compact disk with data on alleged tax dodgers, continued to pick up fresh assets at a brisk clip. The private-banking arm recorded 12.6 billion francs in net new money for the quarter, which is a key indicator of future revenue.

Credit Suisse shares, which have fallen 15% so far this year amid a 3.6% slip in the Stoxx Europe 600 bank index, closed Wednesday at 43.34 francs, giving the company a market capitalization of $53.06 billion. (Fonte: Wall Street Journal)