Investment banking lifts Credit Suisse profit

Thu Jul 25, 2013 4:23am EDT
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By Katharina Bart

ZURICH (Reuters) - Credit Suisse's CSGN.VX investment bank drove a one-third jump in second-quarter group earnings, while higher interest rates should help future profits at its private bank, the lender said.

The Zurich-based bank's normally stable wealth management arm has been rattled by a global crackdown on Swiss bank secrecy with European clients withdrawing money to avoid being snared by tax-evasion probes.

For the second straight quarter, Credit Suisse's more risky investment bank lifted group net profit, which rose to 1.05 billion Swiss francs, a touch above the 1.02 billion francs forecast by analysts in a Reuters poll.

Like Wall Street rivals including Goldman Sachs (GS.N: Quote) and JP Morgan (JPM.N: Quote), Credit Suisse benefited from strong trading in stocks and bonds, more than doubling pretax investment bank profit from a year ago. Compared with the previous quarter, typically the strongest period for capital markets, pretax profit was down 42 percent.

Credit Suisse shares, which have climbed 13 percent in the last three weeks on expectations of a strong investment banking performance, dropped over 2 percent to around 27.8 francs in early trade, underperforming the European banking index .

A spike in bond yields in June, sparked by fears the U.S. Federal Reserve would cut back its quantitative easing efforts, put clients off issuing debt and equity. But Credit Suisse said it has seen recent signs of its major markets stabilizing, and an expected rise in interest rates should help profit margins.

"In the longer term, the transition to higher rates will benefit our business," Chief Executive Brady Dougan said in a statement.

Domestic rival UBS UBSN.VX on Monday disclosed a profit for the quarter that will beat estimates, even after charges to settle a lawsuit with the U.S. housing regulator over the mis-selling of mortgage-backed bonds.   Continued...

The logo of Swiss bank Credit Suisse (CS) in seen in front of an office building at the Bahnhofstrasse in Zurich April 18, 2013. REUTERS/Arnd Wiegmann