Profit leaps to a record at Credit Suisse

The CS Group turns in a solid first-half performance (Credit Suisse) Credit Suisse

The Credit Suisse Group has reported a record first-half net profit of SFr4.8 billion ($3.9 billion), 68 per cent more than for the same period in 2005.

The second-quarter results, released on Wednesday, showed a net profit of SFr2.16 billion, driven by a boom in investment banking and wealth management.

This compared with net profit of SFr919 million for the same period last year.

Switzerland’s second-largest bank also reported a net inflow of SFr16.5 billion in its wealth management business, far above the average of SFr10.8 billion forecast by analysts.

The bank said net new money inflows were particularly strong in the United States and Europe.

However, it noted that total assets under management fell 1.8 per cent in the second quarter, which it attributed to adverse market and foreign exchange-related movements, offset in part by net new assets.

Credit Suisse said net revenues in its investment banking business grew 30 per cent from the second quarter of 2005 and were at the second highest level ever.

A statement said this reflected increased revenues in all key business areas and robust deal activity.

Strong result

“We achieved a strong result in a market that experienced higher volatility and increasing investor caution,” commented Credit Suisse chief executive Oswald Grübel.

“This shows that our efforts to build a powerful integrated organisation are gaining momentum, while our business has proved its resilience in the face of a demanding environment.”

However, the bank said it would cut about 300 jobs in its asset management division in the US and take a SFr152 million charge to realign the business.

Despite the record figures, analysts were not that enthusiastic about the performance.

“I was impressed [with the net new money]. But I think it was the highlight in a rather mixed bag set of results,” commented Claudia Meier at Bank Vontobel.

“Despite the good net new money in wealth management and asset management, the earnings did not meet our estimate which is disappointing,” she added.

Winterthur proceeds

The results are the first to be reported since Credit Suisse announced the sale of its Winterthur insurance arm to French insurer AXA for SFr12.3 billion in June.

Renato Fassbind, the bank’s chief financial officer, told a conference call that Credit Suisse planned to invest proceeds of the sale in all its main business operations, including wealth and asset management, and investment banking.

But he said no major acquisitions were planned and the bank was sticking firmly to its profit target of SFr8.2 billion for the year as a whole.

Credit Suisse has been emerging strongly from a long spell of restructuring and uncertainty that led to a corporate shake-up and rebranding at the start of the year.

In its outlook, the bank said it was “very well positioned” to benefit from further wealth creation and increased corporate activity, particularly in the emerging markets.

It added that revenue and operational synergies from its integration process, together with a firm focus on costs, would also contribute to further improvements in profitability.

swissinfo with agencies

Key facts

Results for first half of 2006
Net revenues: SFr19.713 billion
Net income: SFr4.762 billion
Net new assets: SFr57.5 billion
Basic earnings per share: SFr4.25
Number of employees at end of June: 63,040

In brief

Chief executive Oswald Grübel has said the long-term growth prospects for the integrated bank are “excellent”.

But he said Credit Suisse was well aware that effective risk control and strict cost management had to remain a priority to “protect the value we have created and to generate an enhanced return for our shareholders”.

The Credit Suisse Group expects interest rates to remain stable over the next three months. It also feels that the equity markets will recover and the currency markets will remain calm.

Switzerland’s largest bank, UBS, is due to report its first-half figures on August 15.