Credit Suisse Trims Subprime Writedowns
Credit Suisse trimmed total writedowns from the subprime crisis Tuesday and its CEO Brady Dougan told CNBC he saw many growth opportunities for the bank.
The bank's shares were trading more than 2 percent down one hour after European markets opened, as it reported a 49 percent fall in fourth-quarter net profit to 1.33 billion Swiss francs ($1.46 billion), slightly below analysts' expectations, because losses in its huge asset management business eroded results.
Shares recovered in late afternoon, and closed 2.5 percent up. Dougan stressed that Credit Suisse was different from its rivals, having benefitted from a flight to quality as investors look at its 11 percent tier one capitalization.
"I think we have been and continue to be one of the best capitalized banks in the industry," Dougan told "European Closing Bell".
"We see a lot of opportunities out there to use our capital to grow organically," he added.
The bank's statement announcing the results was transparent, but raised fears that Credit Suisse was exposed to more risks than previously thought, analysts said.
"I wasn't aware they had a lot of exposure to asset classes like subprime and CDS (credit default swaps). I would not rule out them reporting further writedowns in 2008," Dirk Becker, analyst at Kepler Landsbanki, told CNBC.com.
One of the few banks to avoid heavy subprime losses, Credit Suisse said hedging earlier in the year had helped it lower its full-year charges for bad credits from an estimate of 2.2 billion Swiss francs which the bank made in the previous quarter.
At a time when rivals like UBS are seeking to raise capital to plug holes in their balance sheets, Credit Suisse said it aimed to increase its cash dividend to 2.50 francs and maintain an 8 billion franc share buyback plan.
Dodging the Bullet
Credit Suisse unveiled 1.259 billion francs in write-downs on leveraged finance and structured debt and mortgage investments in the fourth quarter, confirming it has escaped almost unscathed from the debacle in U.S. subprime mortgages.
But the bank slipped up in its asset management business where it lost 247 million francs in the fourth quarter after it wrote down the value of a money market portfolio by 774 million francs after bringing it onto its own books.
The bank took the portfolio onto its balance sheet in the third quarter after a string of fund withdrawals by clients.
"Private banking was a very good performance but it is disappointing to see a loss in asset management," said Andreas Weese at UniCredit. "They said there was a high need for value adjustments."
"The net writedowns on exposures were not a negative surprise," said Weese. He said he had expected total writedowns of around 1 billion francs in the final quarter.
The bank's key investment banking division reported a steep fall in net income to 328 million francs in the final quarter.
Net new money in wealth management was far better than expected at 12 billion Swiss francs, up from 8.6 billion francs in the fourth quarter of 2006 and compared with an average forecast in a Reuters poll of 8 billion francs.
The bank also reported a steep decline in its funded and unfunded exposures to leveraged finance to 36 billion francs from 58.6 billion francs.
The average forecast for net profit in a poll of 16 analysts was 1.45 billion francs.
Credit Suisse has suffered limited fallout from the meltdown in U.S. subprime mortgages which have set off writedowns running to more than $100 billion by banks globally.
Bank UBS, Credit Suisse's chief rival, has taken charges of $18.4 billion on subprime exposures and Citigroup and Merrill Lynch have also taken huge charges.
-- Reuters contributed to this report