(BN) Credit Suisse Profit Rises 29% on Gains From Trading (Update2)

By Elena Logutenkova
July 23 (Bloomberg) -- Credit Suisse Group AG, the biggest Swiss bank by market value, said second-quarter profit rose 29 percent as revenue from trading stocks and bonds doubled.
Net income increased to 1.57 billion Swiss francs ($1.47 billion), or 1.18 francs a share, from 1.22 billion francs, or
97 centimes, a year earlier, the Zurich-based company said in a statement today. Credit Suisse advanced as much as 3.8 percent in Swiss trading.
Chief Executive Officer Brady Dougan announced 5,300 job cuts in December, closed unprofitable businesses at the investment bank and reduced risk-taking to return the bank to profit this year. Earnings at the investment bank rose fivefold in the second quarter, while profit declined less than analysts estimated at the wealth management unit.
"The results are good across the board," said Christian Stark, a Zurich-based analyst at Credit Agricole Cheuvreux with an "outperform" rating on the shares. "In investment banking they’ve been gaining market share on the back of their capital strength. On the private banking side, margin development has been good and inflows are better than expected."
Credit Suisse rose 1.39 francs, or 2.8 percent, to 50.35 francs by 9:15 a.m. in Switzerland, bringing the gain this year to 77 percent. The stock is the eighth-best performer on the 63- company Bloomberg Europe Banks and Financial Services Index.
Swiss competitor UBS AG, which said in June it will probably report a second-quarter loss, has declined 5 percent in 2009.

Goldman Sachs

"We expect the global economic environment to remain challenging and uneven business conditions to persist," Dougan, 49, said in a statement. "If markets continue to improve we expect to see further momentum across our businesses, and if markets become more difficult we believe that Credit Suisse is positioned to perform well."
Chief Financial Officer Renato Fassbind told journalists on a conference call that "the momentum of our client and flow- based businesses has continued" in July, although volumes may be lower this quarter because of seasonal declines.
Bank of America Corp., JPMorgan Chase & Co. and Citigroup, the three biggest U.S. lenders, last week reported a total of
$10.2 billion in profits for the second quarter, relying on investment banking and asset sales to counter widening losses on consumer loans. Goldman Sachs Group Inc., which gets almost none of its revenue from retail banking, had a record quarter, reporting earnings of $3.44 billion.

Trading Revenue

Morgan Stanley, the biggest U.S. brokerage, reported yesterday a second-quarter loss from continuing operations of
$159 million, a bigger shortfall than analysts estimated, on costs to repay the U.S. government and charges from an improvement in the firm’s own debt.
At Credit Suisse, all units except for retail banking reported earnings that exceeded analysts’ estimates. The bank’s profit was reduced by a 1.1 billion-franc charge on the company’s own debt and 483 million francs in costs to settle a lawsuit by Huntsman Corp., which was cushioned by about 400 million francs in tax benefits.
Credit Suisse’s securities unit had a pretax profit of 1.66 billion francs, compared with 304 million francs a year earlier.
Sales and trading revenue more than doubled to 5.37 billion francs, while fees from advising companies and underwriting of stocks and bonds fell 12 percent to 704 million francs. Earnings at the wealth management and retail banking division fell 23 percent to 935 million francs. Asset management saw a 56 percent drop in profit to 55 million francs.

Wealth Management

The investment bank won market share in products such as prime services, cash equities, algorithmic and electronic trading, global rates, foreign exchange and high grade bond trading, Dougan said in the statement.
The bank increased its market share in cash equities trading in Europe and the U.S. to 11 percent in the first quarter from 9 percent in 2008, investment-banking head Paul Calello told investors in May. Credit Suisse also boosted market share in prime services to about 10 percent in 2008 from about 6 percent the previous year, he estimated.
Deutsche Bank AG, based in Frankfurt, may report on July 28 a 56 percent increase in second-quarter net income to 1.01 billion euros ($1.43 billion) because of a rebound in debt trading and fewer writedowns, according to the median estimate of nine analysts surveyed by Bloomberg News.
UBS, the biggest Swiss bank by assets, said last month its quarterly loss was mainly tied to reorganization costs and charges on the company’s own debt, while clients withdrew funds from all its money-managing units.

No Government Help

Unlike UBS, Credit Suisse declined to accept government assistance when credit markets froze following the collapse of Lehman Brothers Holdings Inc. last year, and instead raised 10 billion francs from investors in October.
Credit Suisse’s wealth management unit saw a net inflow of
8.5 billion francs in the quarter, compared with 15.4 billion francs in the year-earlier period. Analysts had estimated net new money of 6.5 billion francs. Gross margins at the division improved to 119 basis points from 116 basis points a year ago. A basis point is 0.01 percentage point.