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Credit Suisse profit plunges 62%, less than analysts said

“Credit Suisse has been able to cut risky positions a bit faster than probably the average in the sector.” — Guy de Blonay, New Star Asset Management Group

Credit Suisse Group AG, Switzerland’s second-biggest bank, said earnings dropped 62 percent, less than analysts estimated, as the securities unit returned to profit and the company attracted new investments from wealthy clients.

Second-quarter net income fell to 1.22 billion Swiss francs (US$1.18 billion), or SF1.12 a share, from SF3.19 billion, or SF2.82, a year earlier, the Zurich-based company said in a statement yesterday. The shares rose the most in four months after earnings were almost double what analysts estimated.

Chief executive officer Brady Dougan cut leveraged loans and real estate assets by 68 percent over the past nine months to limit second-quarter writedowns to 22 million francs and said he will continue to manage the bank “conservatively.”

Credit Suisse’s wealth management unit got a net SF15.4 billion in the quarter, after the 48-year-old American stepped up hiring of money managers while larger Zurich rival UBS AG reels from the biggest subprime mortgage losses of any European bank.

“Brady Dougan has been able to limit the ongoing deterioration of the business,” said Guy de Blonay, who helps oversee about US$41 billion at New Star Asset Management Group Ltd. “Credit Suisse has been able to cut risky positions a bit faster than probably the average in the sector.”

The bank follows Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & Co in reporting a profit for the second quarter. Citigroup Inc, the biggest US bank by assets, had a net loss of US$2.5 billion.

UBS said earlier this month that earnings were “at or slightly below break-even.”

Deutsche Bank AG may report a second-quarter net income of 518 million euros (US$814 million) on July 31, the median estimate of 13 analysts surveyed by Bloomberg indicated.

“We anticipate that the current challenging market conditions will persist over the near to medium term and we will continue to manage our business conservatively,” Dougan said.

Credit Suisse reported a pretax profit of SF281 million, compared with SF2.5 billion a year ago and a loss of SF3.46 billion in the first quarter. Corporate and retail banking saw a 2.6 percent increase in pretax profit to SF390 million.
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