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Credit Suisse Profit Tumbles on Writedowns

Reuters
Thursday, 1 Nov 2007 | 11:31 AM ET

Credit Suisse reported a 31 percent fall in group net profits to 1.302 billion Swiss francs ($1.12 billion), with profit at its investment banking unit all but wiped out by mortgage-linked writedowns.

Investment banking income was hit by writedowns of over 2.2 billion Swiss francs ($1.9 billion) in leveraged loan commitments, residential mortgages and collateralised debt obligations. The division barely broke even, making a net profit of 6 million francs.

Banks worldwide have taken charges totalling more than $20 billion on holdings in mortgage-backed securities which have been hit by rising defaults in U.S. subprime mortgages -- loans extended to borrowers with patchy credit histories.

"The extreme market conditions that characterised the third quarter affected many of our businesses," Chief Executive Brady Dougan said in a statement on Thursday.

"It is too early to predict when all of the affected markets will return to normal levels," he added.

Net new money in wealth management was 9.7 billion Swiss francs, the Swiss bank said, down from 10.9 billion francs in the third quarter of 2006 and compared with an average forecast by analysts of 10.7 billion francs.

But the group on the whole, which includes its massive asset management divsion, reported an outflow of 9.7 billion francs.

The Swiss bank had said at the beginning of October it expected third-quarter net profit to fall within a range of plus or minus 20 percent of 1.30 billion francs.

The average forecast given in a Reuters poll of 14 analysts was for a net profit of 1.268 billion francs.

Earlier this week CS's local rival UBS reported a wider than expected third-quarter loss, and warned of more writedowns in the fourth quarter. Last week, Merrill Lynch

reported an unexpected $8.4 billion in writedowns.

But Deutsche Bank heartened investors on Wednesday when it reported a higher than expected quarterly group profit even though its investment bank, the driving force behind the bank's recent expansion, lost money.

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