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Credit Suisse expects tough 2003
ZURICH, Switzerland (Reuters) -- Credit Suisse confirmed on Tuesday it had returned to profit in the first quarter after a dismal 2002, raising hopes the bank has seen the worst of a downturn that cost thousands of Swiss bankers their jobs. Europe's 11th-largest bank said it made a 652 million Swiss franc ($484 million) net profit in the January-March period, in line with its April 25 guidance of 650 million francs, as cost cuts took hold and a booming bond market boosted fee income. CS reiterated it expected financial markets to remain challenging but insisted it was on track for a profitable year after last year's record 3.3 billion franc loss. The loss was caused by a global market rout and big one-off expenses to cover U.S. lawsuits against its Credit Suisse First Boston investment bank. "Given the continued challenging market environment and global uncertainty, Credit Suisse Group remains cautious in its outlook for 2003,'' it said. CS still expected "solid profitability'' this year despite continued volatility in financial markets that could hurt the life and pensions business at insurer Winterthur in particular. CSFB returned to a first-quarter net profit of $161 million. CS Financial Services, which includes private banking and Winterthur insurance -- the group's biggest headache for much of the past year -- made a 666 million franc net profit. Write-offs on its stakes in loss-making insurer Swiss Life and Swiss International Airlines hurt once again, costing the bank 150 million francs in the quarter. PRIVATE BANKINGCS's private banking operations saw 1.5 billion francs in net new money inflows, signalling an upturn after the flagship division struggled to grow as fast as rivals late last year. The unit took in only 500 million francs in net new money in the fourth quarter of last year, when customers held off amid an avalanche of bad press over CS' strategic direction and mounting worries over its capital strength. Assets under management in the group as a whole fell to 1,160.5 billion francs at end-March from 1,195 billion at the end of 2002 as weak markets and a falling dollar weighed. Strong fixed income results at CSFB as well as lower bad loan provisions helped boost group results, as did a recovery in investment income and premium increases at Winterthur. CS has been shedding jobs, cutting 900 in banking and another 300 at Winterthur this year. Those cuts come on top of some 6,500 jobs slashed at CSFB and another 700 positions cut in the financial services division last year. The bank's so-called Tier 1 capital ratio, a measure of capital strength, rose to a comfortable 10.0 percent at the end of March from 9.7 percent at the end of last year, it said. Capital was stretched last year by a $2.5 billion cash injection into Winterthur, which saw investments sapped by the bear market. Fears of a cash call have eased after this year's $2 billion sale of clearing unit Pershing and last year's issue of 1.25 billion francs of mandatory convertible securities.
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