Credit Suisse posted a surprise fourth-quarter net loss as business at its investment bank slumped and it took almost 1 billion Swiss francs ($1.1 billion) of charges for slashing costs and risky assets to meet tough new 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 2.7 percent to 24.54 francs by 1229 GMT, underperforming the European banking sector <.SX7) which rose 1.2 percent.
Total revenue at Credit Suisse's loss-making investment bank shrank to half on the previous quarter as the bank eked out a meager 36 million francs from fixed income sales and trading, the focus of cutbacks of risky assets and jobs. Equities fared almost as badly, dropping more than a third on the quarter.
We wonder when Credit Suisse will start to generate and surprise us, JPMorgan analyst Kian Abouhossein said. We feel Credit Suisse is six to 12 months behind UBS in restructuring.
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.
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.
Other investment banks like UBS , Goldman Sachs , JPMorgan and Deutsche Bank have also reported a poor fourth quarter as clients stopped doing deals and pulled back from markets due to the euro zone debt crisis.
CUTTING RISK, COSTS
In preparing 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 cut risky assets by 80 billion francs in the first quarter, compared with its original target of the end of 2012. The bank will exceed the target for the year-end by $39 billion.
The bank also said it was on track to cut costs by 2 billion francs by the end of next year. It said its total bonus pool would drop 41 percent to 3 billion francs, from 5 billion in 2010.
Credit Suisse finished the year with 20,900 investment bankers, 200 more than a year ago, and far more than Deutsche Bank's 15,184. At the same time, Credit Suisse lagged Deutsche in fixed income and equities league table rankings, according to data compiled by Thomson Reuters.
Credit Suisse said it did not have imminent plans for further staff reductions, adding 40 percent of investment banking staff let go had been senior bankers -- typically the most expensive hires.
At the same time, Credit Suisse is trying to promote junior and entry-level investment bankers to lower costs, unit head Eric Varvel said.
Credit Suisse said the fixed income unit in particular was set for more job cuts this quarter, part of an ongoing 7 percent reduction of its workforce disclosed last year.
The poor fourth quarter overshadowed a more upbeat outlook from Credit Suisse than the cautious tone struck by UBS earlier this week.
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. CFO David Mathers said on Thursday the bank did not have any new information that had compelled it to change that provision.
Rival Julius Baer 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, Mike Nesbit and Sophie Walker)