Strong franc hits Credit Suisse

Credit Suisse, Switzerland's second-largest bank, reported record first-quarter investment banking revenue as it gained market share and client activity rose, although the strong Swiss franc hit profits.

Credit Suisse said investment bank revenues rose to a record $5.4 billion (€3.69 billion) from $5 billion a year ago, although in Swiss francs they slipped 6 per cent to 4.9 billion francs ($5.57 billion) as the dollar fell against the Swiss currency.

Chief executive Brady Dougan said in a statement he was particularly pleased that his investment in fixed income trading had begun to bear fruit in the quarter.

"We have substantial momentum across all of our client based businesses and we remain well prepared to continue to capitalize on our improved market position," he said. "Our pipeline in underwriting and advisory remains strong and we are well positioned to capture increases in issuance levels and M&A activity."

Mr Dougan's bold strategy to hire investment bankers aggressively early in 2010 initially backfired as markets flattened but the bank was expected to benefit from an upturn in trading longer term.

"The results are slightly ahead of expectations," said Cheuvreux analyst Christian Stark. "The main strength is investment banking, which is about 8 per cent ahead of expectations on a strong fixed income performance."

Swiss rival UBS said yesterday its struggling investment bank fared better than expected in the quarter, helping lift its shares over 5 per cent and tugging Credit Suisse up 2 per cent.

The first quarter is typically the strongest period for investment banking and can set the tone for the year. As well as tough comparisons from a year ago, activity has been hampered by North African political turmoil, Japan's earthquake and economic wobbles in the euro zone.

Investors will be watching to see if Barclays also bucks the trend set by their US peers who reported investment banking results lagged well below the bumper levels of a year ago after regulations and economic issues bit.

Credit Suisse's first-quarter net profit fell 45 per cent as it took a big expected charge on its own debt after it issued so-called CoCo bonds.

Under strict new capital rules drawn up after the crisis, Switzerland has encouraged its two biggest banks to issue contingent convertible (CoCo) bonds which boost capital by converting into equity if a bank runs into trouble.

Credit Suisse issued its first CoCos in February in a positive sign for the nascent market for the bonds, which had initially received a cool reception from traditional fixed income investors.

The private banking business pulled in net new assets of 18 billion francs, mirroring a strong performance at UBS, which yesterday reported its biggest inflow of client money since the financial crisis.

Reuters