April 15, 2024

DealBook: Credit Suisse to Bolster Capital Reserves as Profit Increases

A branch of Credit Suisse in Basel, Switzerland. The I.R.S. asked for help in locating information on American account holders.Arnd Wiegmann/ReutersA branch of Credit Suisse in Basel, Switzerland.

LONDON — Credit Suisse said on Wednesday that its net profit rose 2.6 percent in the second quarter, as the bank announced measures to increase its capital reserves in response to concerns from Switzerland’s central bank.

Credit Suisse said the steps to improve its capital base included issuing bonds to investors that convert into shares, as well as the sale of financial assets.

The measures will add 8.7 billion Swiss francs ($8.9 billion) to its capital reserves by the end of July. The bank expects to raise an additional 6.6 billion francs by the end of the year.

The Swiss bank said it was tapping several existing global investors, including the giant money manager BlackRock, as well as new investors including Singapore’s sovereign wealth fund, Temasek, to increase the bank’s capital position.

The steps come after the Swiss National Bank singled out Credit Suisse last month as a bank that needed to “significantly expand its loss-absorbing capital during the current year.” Credit Suisse’s local rival, UBS, should continue with its efforts to strengthen its capital, the central bank said.

At the time, Credit Suisse said it was “comfortable” with its progress toward increasing capital reserves. The bank said on Wednesday that it was responding to the calls from the Swiss central bank.

Credit Suisse’s chief executive, Brady W. Dougan, told investors in a conference call on Wednesday that he disagreed with the Swiss central bank’s statement about the firm’s capital position, but Credit Suisse had responded to calm concerns about its financial strength.

“The capital measures that we announced today take any question of the strength of our capitalization off the table,” Mr. Dougan said in a statement. “This is a robust and balanced set of capital initiatives.”

The Swiss National Bank said it supported the steps. “In an environment that remains particularly challenging for the international banking system, these measures substantially increase the resilience of Credit Suisse,” the central bank said in a statement.

Credit Suisse said the steps would increase its core Tier 1 capital ratio, a measure of ability to weather financial shocks, to 9.4 percent by the end of the year, compared with 7 percent at the end of the second quarter.

The bank’s share price closed up 4.5 percent in trading in Zurich on Wednesday. Stock in the firm has fallen 39 percent in the last 12 months.

Credit Suisse also said it had achieved 2 billion francs of savings during the first half of the year, and would look for an additional 1 billion francs of savings by the end of 2013.

Net profit in the three months ended June 30 rose to 788 million francs from 768 million francs in the period a year earlier, while net revenue dropped to 6.3 billion francs from 6.9 billion francs.

Despite market volatility caused by the European debt crisis, pretax profit in Credit Suisse’s investment banking unit rose 84 percent, to 383 million francs. Pretax profit at the firm’s private banking division fell 7 percent, to 775 million. The bank did not provide the net profit figures.

Article source: http://dealbook.nytimes.com/2012/07/18/credit-suisse-boosts-capital-reserves-as-profit-rises/?partner=rss&emc=rss