Credit Suisse profit boosted by private banking, asset management

Credit Suisse Group posted a fourth-quarter net profit of 793 million Swiss francs ($746 million) on Thursday, blaming writedowns and a hefty U.S. legal settlement for failing to meet expectations.

Still, the results were a significant improvement from the same period the previous year, when the Swiss bank reported a net loss of 6 billion francs.

Analysts had expected a quarterly net profit of 1.16 billion francs.

Credit Suisse said net profit would have been 1.4 billion francs but for a 300 million francs impairment due to tightening credit spreads and a 500 million francs pretax charge to settle a U.S. investigation into allegations it helped clients make transactions involving countries under U.S. sanctions between 2002 and 2007.

Credit Suisse didn’t specify which countries were involved. The bank’s chief financial officer, Renato Fassbind, said in a conference call that the case related to “the sanctions countries in general.”

“All of them,” he added. Countries subject to U.S. sanctions include Iran, North Korea, Syria, Zimbabwe, Myanmar and Cuba.

Fassbind said Credit Suisse believes “we have the issue behind us.”

Asked about reports in Germany that the government there has acquired a disk containing details of German customers alleged to have cheated on their taxes, Fassbind said the bank had no indication that its clients were involved.

“We don’t know if there is a CD, we don’t know what is on there, we don’t know if it concerns our institution,” he said.

A court in neighboring Liechtenstein last week ordered a former subsidiary of the principality’s biggest bank, LGT, to pay millions of euros (dollars) compensation to a client for failing to inform him that his confidential details had been stolen and handed to German authorities. The ruling surprised many in the banking community, as it appeared to make financial institutions partly responsible for protecting their clients from criminal prosecution for tax evasion.

Unlike cross-town rival UBS AG, Credit Suisse saw a considerable fourth-quarter net increase in new deposits, a closely watched indicator of future business in the banking industry.

The Zurich-based bank saw net new asset inflows of 12.5 billion francs, despite seeing client withdrawals amounting to 5.6 billion francs due to a tax amnesty in Italy. Credit Suisse said it was able to retain two-thirds of those funds within its banking group.

Analysts at private bank Vontobel had predicted inflows of 15 billion francs during the quarter. UBS earlier this week revealed it had net asset outflows of 56.2 billion francs, a figure that shocked analysts and investors alike.

Credit Suisse’s investment bank recorded a pretax profit of 1 billion francs — far below expectations.

Private banking earned some 900 million francs. Income from its asset management division was 200 million francs.

Analysts at Zuercher Kantonalbank noted that Credit Suisse released set-asides worth 40 million francs during the quarter, rather than increasing its reserves by 250 million francs as predicted.

Operating costs including staff pay also increased beyond expectations, they said.

For the full year, Credit Suisse recorded a net profit of 6.72 billion francs compared with a net loss of 8.22 billion francs in 2008.

Chief Executive Brady Dougan said the bank was confident in its outlook for 2010.

“Our transaction pipelines and net new asset inflows are the best we have seen since the crisis,” he said in a statement.

Credit Suisse is proposing a dividend of 2 francs a share for 2009.
Unlike cross-town rival UBS AG, Credit Suisse saw a considerable fourth-quarter net increase in new deposits, a closely watched indicator of future business in the banking industry.