CS profit below expectations — UBS results above

Credit Suisse boss, Lukas Mühlemann, said he was pleased with the results Keystone Archive

The Credit Suisse financial services group reported on Wednesday a net profit of SFr368 million ($227.86 million) for the first quarter.

Although the profit reversed two consecutive quarterly losses, the figure fell way short of analysts’ expectations. They had predicted an average result of SFr563 million.

The profit compares with income of SFr1.428 billion made during the comparable period last year.

On Tuesday, Switzerland’s largest bank UBS reported a first quarter net profit of SFr1.363 billion ($850 million), down 14 per cent on its profit for the comparable period last year.

In a statement from CS headquarters in Zurich, Switzerland’s second-largest bank said it remained “cautious” in its outlook for the remainder of the year, despite some signs of improving market conditions.

It commented that the groups continued to expect revenues at investment bank Credit Suisse First Boston to be lower than in 2001 and earnings at Credit Suisse Financial Services not to exceed 2001 levels.

Confident about the long-term

However, the statement added that the group was confident about the long-term prospects for its core businesses and would continue to focus on controlling costs and achieving growth in key markets.

During the period under review, lowered securities valuations in the group’s insurance business were a key element behind the modest earnings, reducing group net profit by SFr455 million compared with a year ago.

The group’s insurance businesses reported a net operating loss of SFr147 million, reflecting lower investment income.

CSFB reported a net loss of SFr32 million in the first quarter, much smaller than the SFr1.6 billion loss posted in the fourth quarter of 2002, when it took several one-off charges.

The CSFB result took into account amortisation for the group’s purchase in 2000 of United States broker Donaldson, Lufkin and Jenrette (DLJ).

Credit Suisse commented that excluding goodwill and related amortisation, CSFB would have shown a profit of SFr259 million.

The group also announced that it had made a SFr154 million write-down on its investment in the Swiss Life insurance company.

Pretty disappointing

Commenting on the CS figures, senior European banks analyst David Hussey at Barclays in London described them as “pretty disappointing”.

“The insurance division at Credit Suisse (Winterthur) has certainly harmed profits and investors are focussing on that,” he told swissinfo.

“At a group level, the UBS figures were far more impressive. They actually came in above the consensus level at the net profit line and the revenues were much higher than at Credit Suisse.”

“The costs, however, were far better at Credit Suisse. They actually fell by six per cent,” he added.

Mühlemann satisifed with results

The chairman and CEO, Lukas Mühlemann, expressed his satisfaction with the results.

“Credit Suisse group performed well in the first quarter of 2002, reporting a return to profitability despite difficult market conditions and the income statement recognition of lower securities valuations in the insurance businesses,” he said.

CS reported that its asset gathering business maintained healthy growth momentum in the first quarter, with net new assets of SFr13.5 billion or 0.9 per cent of assets under management.

It added that it expected a tax amnesty granted by the Italian government to tax evaders to lead to a net loss of assets under management of no more than SFr2 to SFR3 billion.

Increasing pressure

The Credit Suisse group and Mühlemann in his dual function have come under increasing pressure over the past year.

Last week, the US rating agency Standard and Poor’s downgraded its long-term debt for the first time in five years, citing the group’s continuing weak earnings performance.

CS shares have fallen by more than 20 per cent over the past year over concerns about the challenges at CSFB and Winterthur, the group’s insurance arm.

A group of shareholder activists has tabled a number of issues to be discussed at the group’s annual meeting on May 31, including calls for Mühlemann’s removal and an audit of his role in the collapse of the Swissair group, in which Mühlemann was a long-standing director.

However, it is considered that there will not be much support for the proposals because the Credit Suisse board had said that it stands “unanimously and unconditionally” behind him.



Robert Brookes with agencies