Swiss bank set to post Q1 loss
Credit Suisse Group, Switzerland's second-largest bank, probably will post its first quarterly loss since 2003 after writing down debt securities that were deliberately mispriced by traders.
Credit Suisse fell as much as 11 percent in Swiss trading after the bank said it will take $2.65 billion of writedowns spread over the fourth quarter and first three months of 2008. The markdowns and "difficult" market conditions in March may lead to a first-quarter loss, the Zurich-based company said.
An internal review found that the pricing errors, first announced last month, were made intentionally "by a small number" of traders who have since been fired or suspended. The episode is the biggest setback for Chief Executive Officer Brady Dougan since he took over from Oswald Gruebel in May after heading the investment banking unit for three years.
"This is clearly embarrassing for Credit Suisse and further damages the reputation that it had worked so hard to improve after years of reckless risk taking," said Peter Thorne, a London-based analyst at Helvea Ltd, in a note. He has a "neutral" rating on the shares.
Credit Suisse fell 5.22 francs, or 10 percent, to 46.58 francs by 11:53 am, bringing the drop this year to 32 percent.
The markdowns led the bank to reduce fourth-quarter net income by 789 million francs ($788 million) to 540 million francs. Profit for 2007 declined to 7.76 billion francs.
"This is quite disappointing," said Dirk Sebrechts, a fund manager KBC Asset Management SA. "Apart from writedowns, we've seen earnings come down and they will come down further."
The announcement of writedowns as a result of pricing errors came as a surprise last month, just a week after the bank said its risk management systems helped it sidestep the worst of the US subprime mortgage market crash in 2007. The incident follows revelations of unauthorized trades at Societe Generale SA, France's second-largest bank, and MF Global Inc, the largest broker of exchange-traded futures and options.
Societe Generale said in January that the bank lost 4.9 billion euros after 31-year-old trader Jerome Kerviel took unauthorized positions on European stock index futures. Last month MF Global said Evan Dooley lost $141.5 million with bets on the wheat market.
Agencies
(China Daily 03/21/2008 page17)
