Credit Suisse recorded a “disappointing” net loss of SFr637 million ($700 million) in the last quarter of 2011, partly as a result of ditching risky business lines.
Chief executive Brady Dougan blamed “adverse market conditions”, but also admitted that the accelerated exit of certain investment banking operations cost the group nearly SFr1 billion.
Credit Suisse surprised observers by revealing on Thursday that it had managed to cut SFr35 billion of risky assets from its investment banking division in the last three months of 2011.
The bank said it was now well ahead of its original schedule to cut risk in order to meet new regulatory requirements.
Dougan said the decision to speed up the process partly resulted from expectations that selling such assets would become harder and more expensive later this year as rival banks also joined in the exercise.
If we do it [selling risky assets] up front then we will have a clearer field that makes it more cost effective,” Dougan said. As more banks add their risky assets to the market nearer to regulatory deadlines, buyers would be able to demand better deals at the expense of sellers.
Credit Suisse’s first fourth quarter loss since 2008 was also hit by a massive 64 per cent reduction in investment banking revenues as the division completely got out of some forms of trading.
The bank’s profit for the year as a whole was SFr1.95 billion, in comparison with SFr5.1 billion in 2010. Net income distributable to shareholders for 2011 was down by 62 per cent. In April the bank will propose a dividend of 75 centimes per share, down from SFr1.30.
The results are far below what analysts had predicted. For the fourth quarter they had expected a loss of SFr 431 million.
The share price fell 2.3 per cent on the news.
Switzerland’s two big “universal” banks were both savaged by the financial crisis that started in 2008.
Credit Suisse got its fingers burned, but avoided the worst by spotting the warning signs earlier than its rival.
UBS, on the other hand, became Europe’s worst hit bank, writing down more than $50 billion in losses. The group had to be bailed out by the government and the Swiss National Bank in 2008.
The fiasco led many Swiss politicians, the media and public to attack the banks’ plan of expanding investment banking operations in the build up to the crisis. Many observers have voiced concerns that traditional Swiss wealth management activities had been smothered by a new breed of aggressive Anglo-Saxon banking.