By Thomas Atkins
ZURICH (Reuters) - Credit Suisse (CSGN.VX: Quote, Profile, Research) warned on
Thursday it could report its first quarterly loss in five
years, further eroding the bank’s credibility with investors
still shaken by February’s $2.85 billion trading scandal.
The bank’s shares dropped more than 11 percent after it
said unprecedented market conditions in March — with wild
swings in prices for stock and debt and emergency interventions
by major central banks — had introduced new uncertainty and
made any profit unlikely for the period.
“This is clearly embarrassing for Credit Suisse and further
damages the reputation that it had worked so hard to improve
after years of reckless risk taking. Whilst we suspect that the
bank has less suspect assets than UBS, our confidence in this
view has diminished considerably as a result of these recent
announcements,” said Helvea analyst Peter Thorne.
Brady Dougan, the American chief executive of the
Swiss-based group, said an investigation revealed “intentional
misconduct” by a handful of traders who have since been fired
or suspended and said that control mechanisms had failed — but
that the scandal involving debt derivatives had not spread
beyond one trading unit.
Dougan took pains to highlight how the group still faced
difficult market conditions in March, which investors took to
mean that more writedowns on the group’s portfolio of risky
assets were possible.
The group has already written down around 5.8 billion Swiss
francs ($5.73 billion) related to the trading scandal and the
credit crisis — far less than the $18 billion absorbed by
rival UBS AG (UBSN.VX: Quote, Profile, Research), Europe’s hardest-hit bank.
“We’re operating in extremely volatile markets. The stress
on the industry is evident,” Dougan said in a conference call.
CS shares pared losses to down 7.5 percent to 47.90 Swiss
francs by 1444 GMT, having hit 46.10. Credit Suisse shares have
shed around 50 percent since May last year. Continued…
