Profits plunge at Credit Suisse

Mühlemann gestures during a press conference on Tuesday Keystone

The Credit Suisse Group has announced a 73 per cent drop in net profit for 2001 and has warned of "caution" for this year.

Net profit fell from SFr5.8 billion ($3.45 billion) in 2000 to SFr1.6 billion last year, Switzerland’s second-largest financial services group reported on Tuesday.

Lukas Mühlemann, chairman and CEO of the group, admitted at a news conference in Zurich that the past 12 months had been difficult for the company.

“Clearly, the global economic climate made 2001 a challenging year for the group, as well as for the entire financial services industry,” Mühlemann commented in response to the figures.

“However, our company’s fundamentals remain strong and our asset management business achieved solid profitability and growth,” he added.

Fall in net operating profit

Net operating profit for the group fell by 45 per cent to SFr4 billion in 2001 figures which Credit Suisse said were in line with forecasts made at the end of January.

CS said it would propose offering a par value reduction of SFr2 per share in lieu of a dividend at its annual shareholders’ meeting.

The group’s investment bank, Credit Suisse First Boston (CSFB), reported a net loss of SFr1.6 billion last year, with its results affected by losses linked to the ailing Argentine economy and the fall of the Enron corporation.

The group’s chief financial officer, Philip Ryan, told swissinfo that the situation at CSFB had been taken very seriously by the management. Last year, the group brought in Morgan Stanley executive John Mack as the unit’s CEO, with a mandate to cut costs and take CSFB out of the negative headlines.

In January, CSFB agreed to pay $100 million to settle charges by authorities in the United States that it mishandled allocation of stock offerings.

Bring down costs

“John Mack has made changes to bring down costs dramatically. We’ve reduced the headcount by 18 per cent or 5,000 since the acquisition of [US asset manager] Donaldson, Lufkin and Jenrette,” Ryan told swissinfo.

“We’re very focused on bringing down costs and making the cost base at CSFB more flexible,” he added.

In its outlook for this year, Credit Suisse said it expected revenue levels at CSFB to be lower than in 2001 and earnings at Credit Suisse Financial Services not to exceed 2001 levels.

“We’re cautious and everybody is cautious. I think you’ll find our outlook is similar to others,” Ryan told swissinfo.

“It’s only March 12 and there’s a lot of the year to go but the first quarter does look difficult. But we’re positioned to continue to grow market share and do the best job we can in our markets but at this point, it’s hard to be terribly optimistic.”

He added that benefits of cost reduction and efficiency programmes would be seen later this year and a return of more robust capital markets would also be a boost.

Mühlemann defends dual role

In remarks at the beginning of the news conference, chairman and CEO Mühlemann once again told journalists that he was not considering giving up one of his mandates, arguing that the group had the “right constellation” at the moment.

Mühlemann has come under fire for his dual mandate, which some consider hampers his oversight of the group. He announced last month his intention to step down from his post as a director of the Banco General de Negocios in Argentina, which is under investigation for allowing hundreds of prominent people to take money out of the country illegally.

It was announced at the weekend that he was also stepping down from his mandate as vice-chairman of the Swiss Reinsurance Company.

In February, Switzerland’s largest financial group, UBS, reported that its profit for 2001 was SFr4.973 billion, some 36 per cent less than the previous year.

by Robert Brookes with agencies