Swiss bank Credit Suisse reported yesterday a 45 per cent drop in first-quarter net profit, saying it suffered a valuation loss of 617 million Swiss francs (€477 million) on debt and derivative liabilities.
Net profit attributable to shareholders reached 1.1 billion francs in the first quarter, the banking group said in a statement, largely in line with an average forecast by analysts polled by Swiss business news agency AWP.
Credit Suisse experienced a decline in the growth of net new money flows, which reached 19.1 billion francs, a 26.5 per cent decline from the equivalent figure last year when it was partly profiting from the weakness of Swiss rival UBS.
However, overall assets under management rose by 1.3 per cent, the bank said.
First quarter net revenues grew by 13 per cent year-on-year to 7.8 billion francs, while the bank said its results were weakened by the strength of the Swiss franc against the euro and the dollar.
The bank reported a six per cent drop year-on-year in revenues from investment banking, although it marked a substantial recovery from the final months of 2010.
Credit Suisse also booked “fair value losses of 617 million francs on own debt and stand-alone derivatives relating to own funding liabilities.”
Chief executive Brady Dougan said: “We have continued to work with regulators to help build a more robust financial system, spearheading the creation of a market for contingent convertible capital.”
Contingent convertible capital is a new form of bond accounting that the financial community believes will reinforce banks during crises.
Credit Suisse said it had brought its Tier One capital ratio, a measure of its capital foundations, up to 18.2 per cent, by the end of the first quarter – one per cent up on the end of 2010.
Mr Dougan called the bank an “early adopter” of more stringent bank capital requirements and supported planned tougher measures for Switzerland’s systemically important “too big to fail” banks – Credit Suisse and UBS – compared to upgraded international Basel III rules.
“We support the Expert Commission’s proposals and believe they can be implemented without a large impact on our competitive position under Basel III,” he added.
“We are encouraged that measures proposed by regulators outside of Switzerland suggest that progress toward a more level playing field is being made,” he added.
Analysts at Wegelin private bank described the results as “reasonably solid,” noting that the charges were expected, although it cautioned that moves to meet capital requirements would weaken margins.