Swiss bank Credit Suisse is cutting about 2,000 jobs after a second quarter hit by weak trading activity and the strong Swiss franc.

Net profit fell to 768 million Swiss francs ($958.9 million), the bank said on Thursday, below average analyst forecasts for 1 billion. Net new assets in private banking were 11.5 billion, below average analyst forecasts for 14.2 billion.

Switzerland's second biggest bank said it planned to cut about 4 percent of its staff of 50,700, about the same number it added in a post-crisis hiring spree focused on fixed income, the area hit most by current sluggish markets.

"We have to recognize the likelihood that the current headwinds in the economic and market environment may be more persistent than we would have hoped," said Chief Executive Brady Dougan and Chairman Urs Rohner.

"We expect interest rates to remain low for an extended period of time and the strong Swiss franc to continue to have an impact on our results. We may also continue to see lower levels of client activity and a volatile trading environment."

Investment banks worldwide have been hit by slow trading due to the debt crises in the euro zone and United States as well as post-crisis regulations aimed at forcing banks to hold more capital to protect them from future shocks.

Rival UBS said on Tuesday it would cut costs by up to 2 billion francs and push back targets after reporting disappointing second-quarter profits due to slow trading in fixed income, currencies and commodities (FICC).

Credit Suisse shares, which had already slipped after the UBS results, fell 2.8 percent at 0709 GMT, compared to a 0.9 percent weaker European banking sector.

"Q2 results are far below market expectations. The main reason for the very disappointing Q2 result was the investment bank," said DZ Bank analyst Matthias Duerr.

COST CUTS TO TARGET INVESTMENT BANK

Credit Suisse Chief Financial Officer David Mathers told a conference call for journalists that the cost cuts would hit all divisions but particularly the investment bank, and all geographies, with 500 of the job cuts to come in Switzerland.

The job cuts are part of a cost savings program aimed at reducing 1 billion Swiss francs in the expense run-rate during 2012. Implementation costs in 2011 would be 400 to 450 million francs, of which 142 million were taken in the second quarter due to jobs already cut in investment banking.

Credit Suisse said it would cut most of the jobs in low-return areas and continue to invest in growth businesses, including serving the ultra wealthy, emerging markets and rates and foreign exchange flow sales.

UBS and Credit Suisse face the added burden of high cost bases in Switzerland as the safe-haven franc soars.

Credit Suisse said pretax profit in investment banking dropped 71 percent to 231 million, with fixed income sales and trading results significantly lower due to challenging market-making conditions and moderately weaker client flows.

"Volatility in FICC revenues (are) also likely to raise concerns," said Cormac Leech of Canaccord Genuity, adding that the earnings miss was worse than that for UBS and he expected downgrades to 2012 earnings forecasts of 5-7 percent.

The bank said it was conducting an internal investigation after it said earlier this month it was being targeted by a U.S. investigation following the indictment of several of its bankers for helping Americans dodge taxes.

"This is a very serious issue and we're working hard to try to get a resolution," CEO Dougan told Reuters Insider.

CFO Mathers said the appointment of Hans-Ulrich Meister as new chief executive of private banking in addition to his role as CEO Credit Suisse Switzerland had nothing to do with the probe but was part of succession plans.

He noted that Walter Berchtold, who moves to become chairman of private banking, remained a member of the executive board.

(Editing by David Holmes and Andrew Callus)