Credit Suisse beat expectations with second-quarter earnings of 1.2 billion Swiss francs ($1.16 billion) as it managed more funds for the world's wealthy and said it was coping well with a global credit crunch.
Shares in the Swiss bank jumped over 8 percent in early trading and were up 5.4 percent at 52.6 francs as profits easily beat analysts' forecasts, despite dropping 62 percent from a year ago, due to a smaller writedown than expected and as its investment bank, private bank and asset management business all posted profits.
A reduction in risk exposure, the small writedown and strong inflows for private banking were all positive news, said Javier Lodeiro, analyst at Sal Oppenheim.
"Those are good ingredients to really push the share price. It really looks strong," Lodeiro said.
Credit Suisse, which has reported billions of francs in losses stemming from the credit crunch and was forced to admit billions more from a trading scandal, said on Thursday volatile market conditions were set to continue but this also offered opportunities.
"At a time when many competitors are questioning their business models, our strategic direction is clear and consistent," said Chief Financial Officer Renato Fassbind, adding the credit crunch "is definitely still here" and volatility would last into the medium term.
"Given our strength, this period of change in our industry will provide Credit Suisse with unprecedented opportunities," he told reporters on a conference call.
The bank -- which has emerged less damaged from the turmoil than some big names, notably arch rival UBS -- said net new money in its wealth management unit rose to 15.4 billion francs, more than twice the forecast amount and up from 13.3 billion a year ago.
The inflow last quarter included about 3.5 billion francs in Switzerland, Fassbind said.
"The main positive within the result was the massive net new money inflow into the wealth management operation," Dirk Becker, analyst at Landsbanki, said in a note.
"Apparently, it was able to capitalize on the problems of its peer UBS and is winning market share in this highly attractive business," he added.
Investment Bank Back in Profit
Credit Suisse will continue to manage its balance sheet "prudently" and its focus remains on organic growth, Fassbind said.
This includes expanding in private banking -- it added 120 bankers during the second quarter -- diversifying its business mix and revenue streams and improving the financial performance of its asset management arm.
Credit Suisse also intends to improve the capital efficiency of its investment banking arm, Fassbind said.
That area is under increased scrutiny since Swiss regulators said earlier this month they could impose more stringent capital rules for its flagship banks UBS and Credit Suisse.
Credit Suisse's investment bank made a pretax profit of 281 million francs in the second quarter, sharply down from the record 2.5 billion a year before as revenues fell by half as the industry-wide credit crunch hit origination activity, particularly for structured products and leveraged finance.
Underwriting and advisory revenues also fell.
But investment bank revenues were up from the first quarter, the bank said, and expenses in the business dropped almost a third from a year before as bonuses fell.
Credit Suisse continued to reduce its exposure to risky assets, with net writedowns of 22 million francs in the quarter.
In the first quarter a 5.3 billion franc writedown led to a 2.1 billion franc loss, its first quarterly loss in five years.
But it has not had to turn to shareholders for cash, unlike UBS and other European rivals such as Royal Bank of Scotland and Credit Agricole, which have had to repair their damaged balance sheets.
Its tier 1 capital ratio improved to 10.2 percent at the end of June, from 9.8 percent at the end of March.
Credit Suisse shares trade at 7.6 times forecast 2009 profit, a small premium to the European banking sector due to its more limited exposure to debt linked to subprime mortgages.
Credit Suisse had been expected to post second-quarter net profit of 526 million francs, according to a Reuters poll.