January 20, 2022

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

DealBook: Credit Suisse Expects Profit in Second Quarter

Credit SuisseArnd Wiegmann/ReutersCredit Suisse will announce its quarterly figures on July 26.

LONDON – Credit Suisse moved to calm investors’ fears on Friday by announcing it expected to report a second-quarter profit.

The European financial giant did not provide specifics on its quarterly figures, which will be announced on July 26.

The statement comes a week after Credit Suisse responded to calls from Switzerland’s central bank that the Swiss firm should increase its capital reserves this year because of Europe’s debt crisis.

The Swiss National Bank had singled out Credit Suisse in its annual financial stability report as a bank that needs to “significantly expand its loss-absorbing capital during the current year.” The country’s central bank said Credit Suisse’s local rival, UBS, should just continue with its efforts to strengthen its capital, the central bank said.

Credit Suisse dismissed the regulator’s calls to strengthen the bank’s cash buffers.

“The Board is confident that management’s plans will continue to ensure that Credit Suisse not only fulfills, but exceeds its regulatory capital requirements,” the bank said in a statement on June 22.

In early afternoon trading, the bank’s share price rose 5.5 percent, as investors reacted positively to Credit Suisse’s announcement that it was profitable in the second quarter of 2012.

Like many of Europe’s largest banks, Credit Suisse has suffered from a reduction of trading activity and a fall in consumer and corporate spending amid the global financial crisis.

The Swiss bank’s profit in the first three months of the year fell to 44 million Swiss francs,or $46 million, from 1.1 billion francs in the first quarter of 2011, mostly because of charges on the value on its own debt.

Article source: http://dealbook.nytimes.com/2012/06/29/credit-suisse-expects-profit-in-second-quarter/?partner=rss&emc=rss

Swiss Central Bank Chief Resigns After Uproar

FRANKFURT  — The head of the Swiss central bank unexpectedly resigned Monday, saying that doubts about currency trades he and his wife made last year threatened to undermine his ability to focus solely on steering the bank through a global financial crisis.

The resignation of Philipp M. Hildebrand, who had an international reputation as an advocate for tougher bank regulation, came as a surprise. Just last week, he offered a detailed defense of his conduct and appeared to have the support of the council that oversees the Swiss National Bank.

Speaking at a news conference in Bern, Mr. Hildebrand said he still does not believe he did anything wrong. “I stand by my word that I never lied,” he said.

But, he said, he came to the conclusion that he could not prove to doubters that he had not known about a $500,000 currency transaction his wife made days before the S.N.B. stepped up its intervention in currency markets. “I can’t once and for all prove that it was the way I said it was,” he said.

“Credibility is a central banker’s most valuable asset,” Mr. Hildebrand said. The accusations might have been a burden “during a time when total focus is needed on the duties” of the office, he said.

Mr. Hildebrand wil be replaced at least temporarily by Thomas Jordan, vice president of the S.N.B. He could face market challenges to the bank’s attempt to enforce a limit on the value of the franc against the euro.

“We do not expect any change in the conduct of the Swiss monetary policy,” Julien Manceaux, an analyst at ING Bank, said in a note to clients. The exchange rate floor “is here to stay, with or without Philipp Hildebrand.”

For much of the last three years, the S.N.B. has been engaged in a battle to keep investors from bidding up the value of the Swiss franc, which is seen as a haven from global turmoil. The rise of the franc against the euro and other currencies threatened to make Swiss exports too costly on world markets.

Mr. Hildebrand said he would also step down from several other posts that have made him an influential voice in the debate about how to limit risk-taking by banks and avert future financial crises.

He is vice president of the Financial Stability Board, a group of central bankers and regulators who advise the Group of 20 nations on measures to make the global banking system safer.

Mr. Hildebrand said he would also step down as a member of the board of the Bank for International Settlements, an institution based in Basel, Switzerland, that acts as a clearinghouse for national central banks.

He said he would also resign as one of two Swiss representatives on the board of governors of the International Monetary Fund.

“This is a step which saddens me greatly,” Mr. Hildebrand said. “I depart on good terms and I would like to think I have been a damn good central banker.”

Mr. Hildebrand faced accusations that he or his wife bought and sold large amounts of dollars last year at the same time that the S.N.B. was intervening in currency markets.

The accusations came to light in late December after a former information technology worker at Bank Sarasin, a Swiss private bank, gave information from Mr. Hildebrand’s personal account to the right-wing Swiss People’s Party.

The party, which has substantial popular support, has been sharply critical of the monetary policy pursued by Mr. Hildebrand, as well as his efforts to constrain risk-taking by Swiss banks.

Mr. Hildebrand’s stands on banking regulation have made him some enemies in the industry, something he alluded to Monday. He said he received an e-mail from a friend quoting Woodrow Wilson: “If you want to make enemies, change some things.”

The Bank Sarasin employee who passed on the information about Mr. Hildebrand’s accounts faces criminal charges for violating bank secrecy laws. The 39-year-old man, who has not been identified, is in a psychiatric clinic after attempting suicide, the newspaper Sonntagszeitung and other Swiss media reported.

 

Article source: http://feeds.nytimes.com/click.phdo?i=a647f1d01f9626b667f306803d0c7992

Markets Surge on Action By Several Central Banks

As the crisis has worsened over the last 18 months, pronouncements of plans to fix the euro zone debt problems have led to more than a half-dozen rallies that just as quickly withered as the proposals fell short of hopes.

Wednesday’s rally was among the biggest yet, with the three main indexes on Wall Street rising 4 percent or more, and the Dow Jones industrial average rising 490.05 points, its largest gain since March 23, 2009. Still, some analysts warned that the central banks’ action addressed only some symptoms of the euro financial crisis, so this rally, too, could evaporate.

“It helps to prop up the banks for a while which is going to buy time for Europe to fix the problem,” Burt White, the chief investment officer for LPL Financial, said. “This is basically a Band-Aid.”

Financial shares in particular were lifted by the news.

Bank of America shares, which on Tuesday fell more than 3 percent, to $5.07, their lowest closing level since March 2009, were up 7.3 percent, at $5.44, on Wednesday. JPMorgan rose more than 8 percent to $30.97. Morgan Stanley was up more than 11 percent at $14.79.

On Wednesday, the Federal Reserve, the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Canada and the Swiss National Bank, trying to bolster financial markets as the euro zone debt crisis grinds on, announced that they would reduce by about half the cost of a program under which banks in foreign countries could borrow dollars from their own central banks, which in turn get those dollars from the Fed. The banks also said that loans would be available until February 2013, extending a previous deadline of August 2012.

The move is intended to free up liquidity and ensure that European banks have funds during the sovereign debt crisis. But some analysts saw it as a stop-gap measure to avoid a looming crisis that some compared to that set off by the collapse of Lehman Brothers in 2008.

“What it does do is take off some of the pressure from this boiling pot,” Mr. White said.

As the exuberance set in and funding pressures appeared to ease, bond prices fell, commodity prices rallied and financial shares soared as investors bought shares on the hope that the central banks had smoothed the way for Europe to take more forceful action in advance of a European summit meeting Dec. 9. The jump in stocks was also an extension of the turmoil and volatility that have characterized global markets for more than a year.

It was unclear even after Wednesday’s move whether banks would loosen up lending or whether the market enthusiasm would last.

Some noted sharp gains in equities in previous trading sessions have often failed to carry through, as European leaders had tried many times over the last two years to stave off a deterioration in the debt crisis. A recent attempt was on Oct. 27, when the broader market as measured by the Standard Poor’s 500-stock index rallied 4 percent on the hope that a new European plan could solve its problems. But it failed to sustain its gains.

That rally was one of eight times that the S. P. had spiked up at least 4 percent since the end of 2008, while in the same period it experienced 10 declines of that size.

In addition, a summit meeting in July caused a global stock rally that collapsed in the subsequent days, with the S. P. eventually sinking to its lowest level for the year.

Analysts were skeptical about whether Wednesday’s market enthusiasm would endure, and they also warned that the central banks’ move addressed only some symptoms of the euro zone financial crisis. Stanley A. Nabi, chief strategist for the Silvercrest Asset Management Group, said the coordinated action on Wednesday signaled that the problem had reached a crisis point, and that the central banks recognized there was a “lot of danger” in letting the current situation continue.

Steve Blitz, the senior economist for ITG Investment Research, said the central banks “are going to do what they can to ring-fence the European financials’ problems and keep them inside Europe.”

“They are trying to prevent them from seizing up global liquidity and capital flows and impacting banks and financial institutions throughout the world,” he said.

The S. P. 500-stock index closed up 51.77 points, or 4.33 percent, at 1,246.96. The Dow was up 4.24 percent, to 12,045.68, and pushed into positive territory for the year and for the month of November. The Nasdaq composite index rose 104.83 points, or 4.17 percent, to 2,620.34.

Interest rates were higher. The Treasury’s benchmark 10-year note fell 24/32, to 99 12/32, and the yield rose to 2.07 percent, from 1.99 percent late Tuesday.

Ralph A. Fogel, head of investment strategy for Fogel Neale Wealth Management, said rates would probably remain low.

As for equities after the central bank announcement, Mr. Fogel said “the fear is off that there is going to be any sort of tremendous move down like there was in 2008,” referring to the financial crisis.

Analysts said they believed the central banks’ action targeted one of the symptoms, rather than the root or cause, of the euro zone problems.

Energy, materials and industrial sectors all powered ahead by more than 5 percent.

The dollar fell against an index of major currencies. The euro rose to $1.3433 from $1.3328.

The Euro Stoxx 50 closed up at 4.3 percent, and the CAC 40 in Paris ended up 4.2 percent, while the DAX index in Germany was up almost 5 percent. The FTSE 100 in London rose 3.16 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=889c015f4f575e78492b43186a11b6ee

Central Banks Act in Concert to Ease Fears on Europe Debt

The banks, in a coordinated action intended to restore market confidence, agreed to pump dollars into the European banking system in the first such show of force in more than a year.

The move, coming almost exactly three years after the collapse of the investment bank Lehman Brothers, sharply increased the value of shares in banks heavily exposed to debt from Greece and the other struggling members of the 17-nation euro zone.

The euro, which had been falling in recent days, rebounded, rising roughly 1 percent in European trading Thursday. But whether the central bank action would provide lasting relief remained to be seen.

The European Central Bank said it would allow banks to borrow dollars for up to three months, instead of just for one week as before. The E.C.B. said it was acting in cooperation with the Federal Reserve of the United States, the Bank of England, the Bank of Japan and the Swiss National Bank.

It was the first coordinated effort to provide dollars since May 2010, and seemed to go beyond just providing reassurance that European banks would not be cut off by U.S. lenders wary of their financial state. It also echoed a similar move undertaken just a few days after the Lehman Brothers bankruptcy nearly brought the world’s financial system to its knees.

The central banks seemed determined to demonstrate that they would not hesitate to deploy their combined weight to keep the European sovereign debt crisis from leading to a collapse of the euro zone.

“They are getting together and acting together,” Christine Lagarde, the president of the International Monetary Fund, said in Washington on Thursday. “To me, that is the most important message.”

But Ms. Lagarde also warned that policy makers had depleted their ammunition since the financial crisis of 2008, and suggested more action was needed.

“We have entered into a dangerous phase of the crisis,” she said. There is still a path to recovery, she said, but it is “a narrow one.”

The central bank action comes as European finance ministers and other key policy makers were gathering in Wroclaw, Poland, for meetings on Friday and Saturday. The U.S. Treasury secretary, Timothy F. Geithner, who was scheduled to attend, was expected to urge European officials to act more aggressively to contain the crisis, which has already begun to undercut growth in Europe.

An official forecast warned Thursday that growth in Europe would come “to a virtual standstill” toward the end of the year. The European Commission, the bloc’s executive, cut the growth forecast for the euro area to 0.2 percent for the third quarter and 0.1 percent in the fourth, down from 0.4 percent for both periods. It predicted, though, that Europe would just barely avoid a double-dip recession.

Analysts said they expected Mr. Geithner to press European ministers in Wroclaw to increase the resources available to their bailout fund for the euro zone countries. But among European leaders, and even within the E.C.B., deep disagreements exist over how to prevent the problems of Greece from undermining the common currency.

Members of the euro area are still struggling to ratify an expansion of the bailout fund that they agreed to in July. A further expansion of the fund has raised fears that the increased obligations could hurt some countries’ credit ratings.

“Part of the problem for policy makers is that they are still waiting for last big initiative to get off the ground,” said Peter Westaway, chief European economist in London for Nomura. “We’re all kind of on hold until then.”

Article source: http://www.nytimes.com/2011/09/16/business/global/borrowing-costs-stubbornly-high-at-spanish-auction.html?partner=rss&emc=rss