Credit Suisse has written $2.85 billion off the value of its asset-backed investments and found mismarking and pricing errors on its books, it revealed on Tuesday, sending its shares plummeting.

The bank said the write-downs would wipe $1 billion from its first-quarter net income, after taking into account tax credits and cancelling some staff bonuses, but it still expected to stay in profit in the quarter, despite the charge.

The write-down and mismarking errors are the latest in a string of shock announcements by global banks and follow revelations of huge new subprime-related exposures at rival UBS

and a trading scandal exposed last month at Societe Generale.

This is a disaster, said Helvea analyst Peter Thorne. This could be the tip of the iceberg.

Unlike UBS, which has been hit by $18 billion of charges, and some major U.S. banks such as Citigroup and Merrill Lynch, Credit Suisse had until now been relatively unscathed by the credit crisis.

Those who thought that certain banks such as Credit Suisse were 'out of the woods' should exercise caution, said Bear Stears banking analyst Chris Wheeler in a note.

Credit Suisse said the charges reflected significant adverse first-quarter 2008 market developments.

A spokesman for Credit Suisse said he was unable to quantify the impact of the errors and mismarkings on the size of the write-downs.

Credit Suisse shares fell over 10 percent in early trading and were down 8.46 percent at 51.95 Swiss francs at 6 a.m. EST.

WRITEDOWNS ON RANGE OF EXPOSURES

The write-downs were across the range of Credit Suisse's exposures to commercial mortgage-backed securities (CMBS), retail mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs), the spokesman said.

CDOs are repackaged securities with substantial exposure to subprime mortgages, which have suffered a collapse in their value as borrowers have reneged on loans in record numbers.

Credit Suisse said it would hold a conference call with analysts and reporters at 9 a.m. EST.

It looks like the decline in market indices is accelerating in the first quarter, and that worries me more than the mistakes, said Simon Maughan, an analyst at MF Global.

If they reveal on the conference call that things are getting worse in the first quarter, that is bad for them and other like Barclays and Deutsche Bank.

Credit Suisse said last week that its gross exposure to CMBSs was 25.9 billion Swiss francs ($23.48 billion), its exposure to residential mortgages was 8.7 billion francs and to CDOs 2.7 billion francs.

The internal review that identified mismarkings and pricing errors by a small number of traders in its Structured Credit Trading business was continuing, said the bank.

The spooky bit is the mismarking, and the impression that the company is not on top of things, said another analyst at a U.S. bank in London.

Credit Suisse also said it was assessing whether any portion of the write-downs could affect its 2007 results. Only last week the bank unveiled fourth-quarter net profit of 1.329 billion francs, and trimmed its subprime-linked write-downs for last year to 2 billion Swiss francs.

BOND ISSUE TRIGGERS DISCLOSURE

The latest announcement was triggered by disclosure requirements relating to the listing of a $2 billion bond by Credit Suisse which closes on February 19.

Bear Stearns's Chris Wheeler said in a note that Credit Suisse's auditor, KPMG, discovered the mismarkings and errors during an audit that it was conducting for the bond issue and subsequently refused to sign off on the review.

In order to close the debt issuance today (Tuesday), Credit Suisse was required to make this disclosure, said the note. The traders involved in this situation have been suspended by the bank on full pay while the investigation continues.

Credit Suisse declined to comment on the Bear Stearns note but confirmed that KPMG is the bank's auditor.

The bank estimates it remained profitable in the first quarter to date, and the final determination of the reductions will depend on further results from its review and on market conditions.

(Additional reporting by Katie Reid and Sam Cage; Editing by Will Waterman)

Merrill Lynch Investment Credit Suisse