Credit Suisse records worse than expected loss

Credit Suisse has reported worse-than-expected full-year results after volatility in financial markets in December left its investment banking division with a SwFr7.8 billion (£4.7 billion) quarterly loss.

Switzerland’s second-biggest bank posted a record net loss for 2008 of SwFr8.2 billion, against forecasts of a SwFr6.3 billion deficit.

The fourth-quarter loss alone was SwFr6 billion, about 50 per cent more than expected

The culprit was investment banking, where Credit Suisse was wrong-footed by a faulty hedging strategy and credit market volatility in December, two months after the most extreme price swings in the capital markets.

The bank said that it incurred “significant losses” because of index-hedge positions rising and cash market positions falling, which made its efforts to protect its trading book ineffective.

It was also hit by adverse movements in credit markets and writedowns of leveraged loans and other instruments.

But the Swiss bank said that it had a made a strong start to 2009 and was profitable across all divisions in the year to date.

“While our full-year results are clearly disappointing, we entered 2009 with a very strong capital position, a robust business model, a clear strategy and well-positioned businesses,” Brady Dougan, the chief executive of Credit Suisse, said.

“We have positioned our businesses to be less susceptible to negative market trends if they persist in the coming months and to prosper when markets recover.”

Credit Suisse’s results come a day after UBS, its compatriot, announced a full-year net loss of nearly SwFr20 billion, the biggest in Swiss corporate history.

Unlike UBS, Credit Suisse has not sought a bailout from the Swiss Government.

Credit Suisse said in December that it would eliminate 5,300 jobs after making a net loss of about SwFr3 billion in October and November.

It confirmed today that it had achieved about half of its targeted job cuts to bring staff numbers down to 47,800 by year end.

It repeated its target of paring its investment bank to 17,500 staff by the end of 2009 from 19,700 at the end of 2008.

It said that it had cut its exposure to commercial mortgage-backed securities to SwFr8.8 billion.

Its exposure to leveraged finance had been reduced to less than SwFr1 billion.