ZURICH (Reuters) - Credit Suisse CSGN.VX posted a surprise fourth-quarter net loss as its investment bank struggled and it took almost 1 billion Swiss francs ($1.1 billion) of charges as it slashes costs and risky assets to meet stiffer capital rules.
“Our performance for the fourth quarter 2011 was disappointing,” said Chief Executive Brady Dougan.
“It reflects both the adverse market conditions during the period and the impact of the measures we have taken to swiftly adapt our business to the evolving market and regulatory requirements.”
Credit Suisse shares, which had risen 14 percent this year, were down 2.1 percent to 24.71 francs by 0924 GMT, underperforming a 1.0 percent firmer European banking sector .SX7P.
The bank said the charge of 981 million francs was due to the accelerated implementation of a risk reduction plan, steps to exit unprofitable businesses and expenses due to the rapid execution of cost cutting programs.
“We were keen to get this done and clear the decks in terms of the trading for 2012,” Credit Suisse financial chief David Mathers told journalists.
The charge pushed Credit Suisse into a quarterly net loss of 637 million francs - its first quarterly loss in three years - missing average analyst expectations for a profit of 430 million. Credit Suisse also proposed nearly halving its dividend to 0.75 Swiss francs per share, from 1.30 francs in 2010.
Stripping out the charge, analysts said underlying performance was still disappointing, particularly the slump in revenues from fixed income sales and trading in the investment bank as well as lower profitability in private banking.
“On an underlying basis the investment bank reported a poor result with over a 300 million franc loss, higher than for UBS or Deutsche Bank. We need to see whether the downsized strategy will work in the future,” said Kepler analyst Dirk Becker.
Other investment banks like UBS UBSN.VX, Goldman Sachs (GS.N), JPMorgan (JPM.N) and Deutsche Bank (DBKGn.DE) have also reported a poor fourth quarter as clients stopped doing deals and pulled back from markets due to the euro zone debt crisis.
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As they position for stricter capital regulation, investment banks are often taking losses as they exit riskier business lines. Credit Suisse is leaving commercial mortgage-backed securities issuing and slashing areas such as long-dated interest rates and emerging market currency trading.
Dougan said Credit Suisse would meet a goal to slash risky assets by 80 billion francs in the first quarter, compared with its original target of by the end of 2012. The bank will exceed the target for the year-end by $39 billion.
The bank also said it is on track to cut costs by 2 billion francs by the end of next year. Mathers said no new job losses were planned on top of 3,500 already disclosed last year, which translates to roughly 7 percent of the bank’s workforce.
The bank said its total bonus pool will drop 41 percent to 3 billion francs, from 5 billion in 2010.
“We feel Credit Suisse is six to 12 months behind UBS in restructuring,” said JP Morgan analyst Kian Abouhossein.
“In addition, we see continued structural headwinds on an inflexible cost base considering no profit generation in the investment bank despite variable incentive compensation being reduced.”
Credit Suisse said it had got off to a good start to the year, with encouraging signs of more client activity and the bank’s underlying return on equity around its 15 percent target, when including the effect of cost and risk cut programs.
But analysts noted the bank still faced the prospect of a hefty fine as it seeks to settle a U.S. tax probe over allegations it helped wealthy Americans hide their money through hidden Swiss offshore accounts.
In November, Credit Suisse took a provision of 295 million francs for settling the U.S. investigation. Mathers said on Thursday the bank did not have any new information that had compelled it to change that provision.
Rival Julius Baer BAER.VX said on Monday it was prepared to pay a fine to escape the escalating crackdown, two weeks after Swiss private bank Wegelin was indicted by U.S. officials.
($1=0.9128 Swiss francs)
Additional reporting by Catherine Bosley, Editing by Emma Thomasson, Mark Potter and Mike Nesbit