Gianluca Colla/Bloomberg NewsCredit Suisse’s Zurich headquarters.
LONDON — Credit Suisse, the second-largest Swiss bank, said on Tuesday that its third-quarter net profit rose 12 percent, to 683 million Swiss francs, even as the bank announced a further 1,500 jobs cuts as a result of the weak global economy and continued volatility in the financial markets.
The announcement missed market expectations. Analysts surveyed by Reuters had predicted a net profit of 1.1 billion francs ($1.2 billion).
Earnings were bolstered by a 1.4 billion franc accounting gain on Credit Suisse’s own debt, which helped offset falling returns from its investment banking, asset management and private banking operations.
Credit Suisse had already announced 2,000 job reductions in July as part of a cost-cutting effort. The new layoffs are expected to contribute to a one-time overall cost savings of 2 billion francs by the end of 2013, the bank said.
“During the third quarter we experienced a challenging environment with a high degree of uncertainty, low levels of client activity across businesses and extreme market volatility,” Credit Suisse’s chief executive, Brady W. Dougan, said in a statement. “We believe subdued economic growth and the low-interest-rate environment and increased regulation that we are seeing may persist for an extended period.”
Mr. Dougan said the 1,500 additional job cuts were a result of a reorganization of the bank’s operations, including a reduction in its investment banking operations and an expansion of its wealth management business.
The markets reacted negatively to the company’s earnings announcement. In early morning trading in Europe on Tuesday, Credit Suisse’s share price had fallen more than 7 percent.
Credit Suisse is the latest European bank to report less-than-impressive earnings linked to the Continent’s sovereign debt crisis.
Last week, Banco Santander of Spain reported a 13 percent drop in nine-month net profit, and UBS said earnings fell 39 percent in the third quarter from the period a year earlier, weighed down by a trading scandal that cost the bank $2.3 billion.
Other banks have fared slightly better. On Monday, Barclays of Britain said its profit rose 5 percent in the third quarter, helped by lower provisions for bad loans.
And Deutsche Bank of Germany reported a quarterly profit last Tuesday that exceeded analysts’ expectations, though it warned of future job reductions in its investment banking unit after a drop in trading revenue.
Credit Suisse’s investment banking division is expected to shrink after the bank announced a 50 percent reduction in its risk-weighted fixed-income assets by 2014. The move comes as the division reported a 190 million franc loss in the third quarter. That compares with a 394 million franc gain in the period a year earlier.
“The results are disappointing, but almost all the disappointment comes from investment banking,” analysts at J.P. Morgan Cazenove said in a report issued Tuesday.
The bank also said it had set aside 478 million francs in its private banking operations to offset legal costs related to tax evasion charges in both the United States and Germany. Third-quarter net profit in Credit Suisse’s private banking division dropped 78 percent, to 183 million francs, from the period a year earlier.
Mr. Dougan said the bank was focusing on new markets, particularly in the Asia-Pacific region, to expand its private banking business. Credit Suisse plans to increase revenue from emerging markets to 25 percent of the bank’s total by 2014. That compares with just 15 percent from countries like China, India and Brazil this year.
Like the rest of the European banking sector, Credit Suisse has been hit by volatility in the Continent’s financial markets and ongoing uncertainty related to the sovereign debt crisis.
The bank’s core Tier 1 ratio, a measure of the bank’s ability to withstand financial shocks, was 10 percent at the end of September. Banks in the euro zone are being required to raise their ratio to 9 percent to protect against exposure to the debt of countries at risk.
Article source: http://dealbook.nytimes.com/2011/11/01/credit-suisse-announces-job-cuts-profit-rose-12-in-third-quarter/?partner=rss&emc=rss