Credit Suisse trims toxic asset exposure

Thu, Oct 23, 2008, 01:00

Swiss banking heavyweight Credit Suisse said it had further cut its exposure to illiquid US assets as it confirmed its hefty third-quarter loss today, but warned the rest of the year would be tough.

Credit Suisse Group AG said it had cut risk exposures to leveraged finance by 17 per cent to 11.9 billion Swiss francs (7.9 billion), a slower reduction than in previous quarters, while exposure to commercial mortgage-backed securities (CMBS) fell by 15 per cent to 12.8 billion francs (€8.5 billion).

Credit Suisse has fared better than its domestic peer UBS and other rivals and has so far declined state help. But shares fell 2.2 per cent earlier as investors feared the investment banking division would continue to struggle.

"The pace of risk reduction has slowed down. The further you go the tougher it gets," said Andreas Venditti, a bank analyst with ZKB. "There will be more writedowns on these positions as the spreads are widening."

The bank confirmed its 1.3 billion Swiss franc third-quarter loss, which it announced last week along with 10 billion Swiss francs of fresh capital from three investors.

"We expect the market to remain very challenging and we are cautious with regard to the outlook for the fourth quarter," Chief Executive Brady Dougan said in a statement.

The loss followed 2.4 billion Swiss francs of writedowns and a poor performance at Credit Suisse's key investment banking division, which suffered trading losses of 1.7 billion, although its profitable private banking business continued to see strong inflows.

The bank also saw billions of francs being drained out of its asset management division.

"The results are clearly disappointing," Chief Financial Officer Renato Fassbind told reporters in a conference call.

Yet last week's capital injection has boosted Credit Suisse's Tier 1 ratio, a measure of financial strength, to 13.7 per cent, making it one of the world's best-capitalised banks.

Although Credit Suisse' shares are down 32 per cent since the start of the year the bank has outperformed the DJ Stoxx index of European bank shares, which is down about 50 per cent.