Bank profits frustrate out of pocket clients

Not all Credit Suisse customers are happy Keystone

Some 50 Credit Suisse clients are pursuing legal claims for compensation for now worthless investments as the bank reported bumper first quarter profits on Thursday.

The plaintiffs claim they were poorly advised on being sold Lehman Brothers products before the United States bank collapsed. Credit Suisse pointed out that it made an SFr150 million ($140 million) settlement last year.

Credit Suisse reported on Thursday net income of SFr2.1 billion for the first three months of 2010, on top of a SFr6.7 billion profit for the full year in 2009.

At the same time, a Zurich arbitration judge was hearing complaints from 50 clients who feel they were unfairly treated by the bank as they lost a combined SFr5 million when Lehman Brothers went under.

The dispute has been running since the bankruptcy of Lehman Brothers in September 2008. In April of last year, Credit Suisse completed a SFr150 million voluntary settlement with 3,400 clients without admitting liability.

However, not all customers met the requirement of having at least 20 per cent of their total investments at the bank in 100 per cent capital protected Lehman Brothers products. Many of these people, who lost on the main part between SFr30,000 and SFr100,000, are still pursuing compensation from the bank.

“Three tier class system”

“We did not fully understand the risks of the investment when it was sold to us,” one couple, aged 76 and 75 who lost SFr50,000, told swissinfo.ch.

“The first we heard that Lehman Brothers was in trouble was when we heard of its collapse on the radio.”

Another woman, a 55-year-old freelance English teacher who lost SFr114,000, said she felt pushed into taking out the investment by her Credit Suisse advisor. She also feels bitter that she and others missed out on last year’s compensation package.

“This is like a three tier class system: the rich and the poor get their money back, but the people in the middle get nothing. I feel cheated,” she told swissinfo.ch.

Zurich lawyer Daniel Fischer, representing the 50 clients, said he could not understand why Credit Suisse was now taking such a hard line when it had been more flexible last year.

“Most of the cases have been satisfactorily resolved, but I do not see why Credit Suisse has changed its attitude in the last 50 metres,” he told swissinfo.ch.

“My clients were relying on this lost money to pay for their retirement years. If we only recover SFr4 million it would represent one eighteenth of [Credit Suisse chief executive] Brady Dougan’s recent bonus payment.”

Bonus debate

Earlier this month it was announced that Dougan would receive SFr71 million worth of shares from the bank from a long running incentive scheme. The scheme paid out a total of SFr3 billion to top executives at the bank.

The amount of pay and bonuses being paid to bankers in Switzerland is still at the centre of an impassioned debate, as it is in several other countries.

But Credit Suisse responded that it believes it has been generous in the settlement it made last year.

“We were the first bank to compensate clients voluntarily on such a broad scale, even though we were not obliged to do so. We have tried hard to find solutions,” spokesman Georg Sontgerath told swissinfo.ch.

“We understand that some people are not happy, but these cases did not fulfill the criteria of our offer.”

All 50 clients had been assessed to see if they fell under “hardship cases” the bank would still consider for compensation, but none met these criteria either, Söntgerath added.

If the arbitration process, that got underway in Zurich on Wednesday, fails then some aggrieved clients indicated that they might pursue their case further in the courts.

Matthew Allen in Zurich, swissinfo.ch

CS Q1 2010 results

The Credit Suisse group made a SFr2.1 net profit ($1.96 billion) for the first three months of this year, the bank announced on Thursday.

This represents a slight increase on profits for the same period in 2009, but a substantial increase on the SFr793 it made in the previous quarter.

Credit Suisse, which employs 48,300 people, made a net profit of SFr6.72 billion for the whole of 2009.

In Q1, 2010, the bank witnessed an inflow of SFr26 billion in net new assets, double the amount received in the previous three months.

Other global banks are also reporting strong results in the first quarter of 2010. Swiss rival UBS has forecast a pre-tax profit of at least SFr2.5 billion.

US banking giant Goldman Sachs reported a $3.46 billion (SFr3.7 billion) profit for the same period. JP Morgan Chase made $3.3 billion while Bank of America racked up $3.2 billion.

However, all of them were dwarfed by a massive $4.4 billion first quarter profit by US bank Citigroup.