Credit Suisse profits slump 73%
CREDIT Suisse Group warned that its investment banking subsidiary Credit Suisse First Boston would take less money this year than last and that the rest of the business would show no improvement in 2002.
The grim prediction came as the Swiss bank delivered a slump in profits of more than 70% last year, principally thanks to a sheaf of problems at CSFB.
'Credit Suisse Group remains cautious in its outlook for 2002 and expects revenue levels at CSFB to be lower than in 2001 and earnings at Credit Suisse Financial Services not to exceed 2001 levels,' said chairman Lukas Muhlemann.
The statement provoked fears of further redundancies at CSFB, where rumours of job losses have been rife in recent weeks. The firm has lost thousands of staff in the past year as it has tried to regain a competitive position under the direction of chief executive John Mack, known as Mack the Knife.
The group also admitted bonuses fell 49% on average at CSFB. The investment bank produced full-year net losses of Swfr1.6bn (£671m) against a profit of Swfr2.4bn in 2000. The result, announced at the end of January, dragged the parent group's net profits down 73% to Swfr1.6bn.
Muhlemann said: 'Credit Suisse First Boston exceeded initial cost reduction targets and succeeded in improving efficiencies during the year.'
The firm took a restructuring charge of $745m to cover the costs of laying off staff and persuading high-earning bankers to accept less money. Revenues at the firm were down 23% and expenses, excluding exceptional items such as the restructuring charge, were 32% lower.
Aside from paying workers to leave, CSFB was also forced to make a large settlement with US regulators the Securities and Exchange Commission and the NASDR over their investigations into hi-tech equity flotations.
Group operating income rose 5% to Swfr39.2bn as the company said the unfavourable market conditions were offset by higher business volumes on the back of the DLJ acquisition in 2000. The higher cost base resulting from the DLJ deal meant expenses were 20% higher at Swfr30.3bn. Return on equity was just 4.1%. Credit Suisse said: 'The group remains confident about its market position across all its core businesses.'
