Credit Suisse bank plunged into its first quarterly loss for five years yesterday, reporting heavy extra writedowns because of the subprime home-loan crisis in the US.
But the bank’s chief executive assured reporters that the situation had “stabilized” this month, and that the group was well-positioned to navigate in difficult market conditions.
The bank reported a net loss of 2.148 billion Swiss francs (US$2.11 billion) for the first three months of the year.
PHOTO: AFP
Writedowns in leveraged finance and structured products reached SF5.3 billion for the three months, the bank said.
The bank had already written down SF3.2 billion, but posted a profit for last year of SF7.76 billion.
It has so far fared better than fellow Swiss banking giant UBS, which has posted writedowns exceeding US$37 billion as well as its first-ever full-year loss last year.
UBS is the biggest Swiss bank, Credit Suisse is the second biggest.
A writedown is a reduction of the previously estimated value of an asset because prospects for its performance are acknowledged to have been seriously reduced for the foreseeable future.
However, Credit Suisse said there had been a “continued significant reduction” in its risk exposure.
“Our first-quarter results are clearly unsatisfactory,” the bank’s chief executive officer Brady Dougan said.
“However, during the quarter, we substantially reduced our exposures to affected areas and we will continue to do so in a disciplined fashion,” he said.
In a conference with journalists, Dougan said: “March was very difficult, things have stabilized in April, hopefully things will improve from here.”
Dougan said the group is “well-positioned to navigate in difficult market conditions.”
While reiterating that the bank has cut its risk exposures, Dougan said it remains “hard to predict” if further write-downs would be made.
The bank’s investment banking unit, which has been most exposed to the subprime crisis, posted losses before taxes of SF3.46 billion for the quarter.
“This decline was due in large part to the impact of the mortgage and credit market dislocations on the fixed income businesses,” the bank said.
Its asset management unit was also affected, as it posted a loss after securities that it bought from its money market funds fell in value.
Analyst and trader of Zuercher Kantonalbank Claude Zehnder pointed out that Credit Suisse still has some risk on its books and that further writedowns would depend on market conditions.
“Lower house prices could still affect some of these exposures,” Zehnder said.
“It could easily still write down another [SF] 2, 3 or 4 billion,” the analyst said.
However, he went on to say that the “general mood seems to be that the worst is over for financial stocks.”
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