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Credit Suisse downsizes 2007 earnings

Swiss banking giant Credit Suisse took another hit to earnings yesterday from its exposure to the US subprime loan crisis and warned there could be no profit in this year's first quarter.

Credit Suisse, revising figures released last month, reduced its net profit for last year to 7.76 billion Swiss francs (US$7.76 billion) due to the subprime loan collapse.

That showed a 6 percent fall, as opposed to the 3 percent increase when it posted a net profit for last year of SF8.55 billion last month.

At that time, the bank had sought to reassure investors it had largely weathered the collapse in the US property market after making huge write-downs on its exposure to the subprime or higher risk mortgage sector.

Credit Suisse said yesterday that "because of difficult market conditions in March ... it is unlikely that the company will be profitable in the first quarter."

The announcement added to concerns about the health of the banking sector as a whole and hit the stock price, dealers said.

In early Zurich trade, Credit Suisse shares were down 8.9 percent at SF47.2 while the market overall lost 1 percent.

"I don't think that many people expected Credit Suisse to publish a profit for the first quarter," said Dirk Becker, a Landsbanki Kepler analyst.

"It is to be expected that the banking sector as a whole will publish further bad news," the Zuercher Kantonalbank said in a note.

Although the group had said last month that it expected to be profitable in the first quarter, it now expects to swing to a loss, marking the first time in four years when the group will post a quarterly loss.

"That is a situation that we cannot tolerate," chief executive Brady Dougan said in a press conference by telephone.

Credit Suisse also confirmed that price fixing errors discovered in its structured credit business were in part due to "intentional misconduct by a small number of traders" who it said had since been suspended or dismissed.

"Certain individuals did not follow procedures," Dougan said.

Controls put in place to prevent or detect this activity had proved ineffective, the bank said.

A source said this should not be seen as in anyway similar to the massive rogue trading scandal at French bank Societe Generale which in January had to take a hit of 4.9 billion euros as a result.

The source added that there were no indications of intentions by the individuals to cheat the bank or to profit from the action.

Dougan also said the incident was "unacceptable and does not meet the standards" required by the bank.

"Credit Suisse continues to be well positioned through the challenging and volatile markets that have existed since the middle of 2007 ... Our private banking business continues to perform well," Dougan said.
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