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Credit Suisse completes turnaround

Credit Suisse saw its fortunes improve in 2003

Switzerland’s second-biggest banking group, Credit Suisse, has announced a net profit of SFr5.2 billion ($4.2 billion) for 2003.

The result constitutes a turnaround in the bank’s fortunes, after it registered a record loss of SFr3.3 billion in 2002.

The group’s operating income was over SFr26 billion last year, four per cent less than in 2002, but costs were lower by one-fifth.

The Credit Suisse Financial Services unit was the main factor behind the group’s recovery, with a net profit of SFr4.3 billion and racking up SFr977 million in the fourth quarter alone.

The group’s other banking services were less profitable, although its investment arm, Credit Suisse First Boston, recorded a net profit of SFr1.2 billion, up nearly SFr2 billion over the previous year’s results.

CS Group’s insurance segment, Winterthur, recovered in 2003, due mainly to better investment performance, reduced administration costs and improved underwriting results and claims management, according to the bank.

Cost cutting

The insurance business was the source of much of the group’s woes in 2002, when it required a hefty capital injection of some SFr3 billion.

Last year, CS slashed costs and sold off businesses to recover from its 2002 losses. The group reduced the number of its employees to 60,837 worldwide, down 22 per cent.

In Switzerland alone, over 1,600 jobs disappeared in CS’s banking sector, while 637 others were cut in its insurance business.

While the bank’s management said it was optimistic about the company’s future earnings, analysts were less than enthusiastic about its prospects, pointing to a drop-off in the group’s earning power during the last quarter.

“There were [also] a number of extraordinary items, and if you adjust for those, it’s quite a mixed result,” said Christoph Ritschard, an analyst at Zurich Cantonal Bank.

“For example, they had at Winterthur [the benefit] of a tax law change in Germany, which resulted in a tax credit of SFr650 million,” Ritschard told swissinfo.

“They also had income from certain divestitures, so overall there were certainly some elements in the results which we do not expect to re-occur in 2004.”

Europe’s tenth-largest bank by market value said it would pay shareholders a dividend of SFr0.50 per share.

UBS in front

The latest figures come just two days after UBS, Switzerland’s biggest bank, announced a net profit of SFr6.385 billion in 2003, up 81 per cent on the previous year.

Ritschard said UBS had done a better job of attracting new money – some SFr60 billion – versus the SFr4.8 billion achieved by CS.

“I think the big challenge for Credit Suisse this year, and management has acknowledged that, is that it needs to restore revenue power. Over the last two years the focus was on cost reduction, but that story is now over. And that’s the big difference with UBS,” Ritschard commented.

“[While] there is an upside potential for CS, it will be hard for them to catch their main competitor, because UBS is really in a very comfortable situation.”


The Credit Suisse Group reported a SFr5.2 billion ($4.2) profit in 2003.
In 2002 it had made a net loss of SFr3.3 billion.
The group said Credit Suisse Financial Services performed particularly well, making a profit of SFr977 million in the fourth quarter alone.
Overall the group made a profit of SFr1.15 billion in the fourth quarter.

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