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Credit Suisse cuts profit by US$1bn

Credit Suisse said yesterday it was writing down a further US$2.85 billion in assets linked to the US housing market because of adverse conditions in the first quarter.

The new writedown comes a week after Credit Suisse said it had broadly contained subprime losses last year, in contrast to its rival UBS, which lost US$18 billion through its exposure to the crisis.

The writedown will have a negative impact of about US$1 billion on net income for the first quarter, the bank said. However it still expects to post a net profit in the first quarter, without giving details.

"The final determination of these reductions will depend on further results of our review and continuing market developments. We will also assess whether any portion of these reductions could affect 2007 results," Credit Suisse said in a statement.

Last week Credit Suisse reported a 3 percent gain in underlying net profit to 8.55 billion Swiss francs (US$7.75 billion) for last year despite huge commercial loan write-downs.

The bank said it had written down another SF1.3 billion in commercial mortgage-backed assets and leveraged finance in the fourth quarter. Such exposure had already forced it to write down SF2.2 billion in the three months to September.

Credit Suisse said it had managed to contain the impact of the crisis in the US subprime mortgage sector. Nonetheless, operating earnings from investment banking activities showed a 19 percent decline last year to SF4.8 billion.

In the fourth quarter, the residential mortgage-backed securities business had net writedowns of SF480 million. Within this business, net US subprime exposure was SF1.6 billion at the end of the quarter, down from SF3.9 billion at the end of the third quarter, the bank said.

Credit Suisse shares plunged in opening trading on the Zurich stock exchange, down 6.7 percent at SF52.90.
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