Credit Suisse Posts Record Loss

ZURICH (Reuters) – Credit Suisse (CSGN.VX) posted its biggest ever annual loss after a poor fourth quarter hit by trading losses and restructuring charges, but expressed cautious optimism for 2009 even as it cut some financial targets.

The Swiss bank said 2009 had started relatively well and each of its divisions was showing a profit in the year to date, echoing upbeat comments from rival UBS (UBSN.VX) (UBS.N), which on Tuesday reported the biggest annual net loss in Swiss history.

“We are well positioned going into 2009 … (but) this is not a ‘light at the end of the tunnel’ message,” Chief Executive Brady Dougan told a news conference.

Switzerland’s second-largest bank said on Wednesday that its net loss for the full year was 8.2 billion francs, worse than the average analyst forecast of 6.3 billion from a Reuters poll but in line with predictions from some Swiss newspapers and less than half the loss posted by UBS.

Credit Suisse racked up a fourth-quarter loss of 6 billion Swiss francs ($5.2 billion), missing an average analyst forecast of 4 billion while further reducing its exposure to risky asset classes as it slashed its dividend and staff bonuses.

The bank also cut some of its long-term targets, including its core goal for an annual return on equity which was pared back to “above 18 percent” from a previous 20 percent.

It proposed a 2008 cash dividend of just 0.10 francs, compared to 2.50 francs in 2007.

CEO Dougan said the bank had “made mistakes” but now had a stronger capital base than most of its peers and was still managing to attract client inflows at its private bank.

Shares in Credit Suisse were down 1.9 percent at 30.30 francs at 1038 GMT, while UBS shares, which gained strongly on Tuesday, rose 1 percent to 13.76 francs, compared with a 1.6 percent weaker DJ Stoxx European banking index .SX7P.

The 2008 loss prompted Credit Suisse to slash bonuses by 60 percent on average across the bank, with managing directors getting no unrestricted cash. The overall bonuses payout for 2008 was 2 billion Swiss francs, mostly for junior staff.

Credit Suisse had already warned in December that it made a net loss of about 3 billion francs in October and November and would take restructuring charges of about 900 million in the quarter as it moves to cut 5,300 jobs, or 11 percent of staff.

Analysts were also anticipating the 538 million franc loss it booked in the quarter for selling part of its fund management arm to Aberdeen Asset Management (ADN.L), but said they were surprised by the extent of trading losses in December.

The bank was hit by a trading loss of 6.7 billion francs in the quarter, of which about 1.7 billion francs came in December.

“Results are negative and not much better than UBS in Q4. But there were lots of extraordinary items impacting,” West LB analyst Georg Kanders said. “Toxic assets are now less of an item. They have confirmed they have been significantly reduced.

“Overall I would say that wealth management did much better than UBS. They have also had a positive start in January and just confirmed they have new inflows in the period.”

Credit Suisse’s results come a day after UBS announced a full-year net loss of nearly 20 billion francs, but also said 2009 had started better and it had stopped outflows from its wealth and asset management units in January.

DELEVERAGING PAIN

Credit Suisse, like other Swiss banks, has benefited from an exodus of clients from crisis-hit UBS, which said on Tuesday it had net new money outflows of 58.2 billion francs from its wealth management unit in the fourth quarter.

Credit Suisse said its private bank recorded net new assets of 50.9 billion francs in 2008, but only 2 billion in the fourth quarter, as strong net client inflows of 13.8 billion francs were offset by deleveraging.

“Inflows in the private bank look disappointing. A good aspect is that they have said January was positive, but the first impression is that the report is weak,” said Citibank analyst Jeremy Sigee.

Credit Suisse said it had achieved about 50 percent of its targeted job cuts to bring headcount down to 47,800 by the end of 2008. It reiterated a target of paring its investment bank to 17,500 staff by the end of 2009 from 19,700 at the end of 2008.

As it downsizes its investment bank like other players, Dougan said Credit Suisse will focus more on private banking, where he sees the best growth environment in a generation. The other area of focus would be asset management.

Credit Suisse made combined writedowns of 3.2 billion francs on risky assets in the fourth quarter, bringing total writedowns since mid-2007 to 14.1 billion francs.

It cut to 8.8 billion Swiss francs its exposure to commercial mortgage backed securities (CMBS) and its exposure to leveraged finance to 0.9 billion.

Credit Suisse said there was no reason to think it would need any government support like UBS, noting its tier 1 ratio rose to 13.3 percent at the end of 2008 from 10.4 percent the previous quarter.

By Lisa Jucca and Emma Thomasson

(Additional reporting by Martin de Sa’Pinto, Emma Thomasson, editing by Will Waterman, John Stonestreet)