The Swiss bank attributed the decline in the division’s earnings to low interest rates and higher costs related to resolving legal matters. Last September, Credit Suisse agreed to pay EUR150 million to settle proceedings in Germany against employees probed for allegedly helping German clients evade taxes. The bank also set aside CHF295 million for US tax matters in the third quarter.
The division added CHF7.6 billion in net new money from clients in the quarter.
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The bank’s Wealth Management Clients business reported income before taxes of CHF284 million compared to CHF606 million in the fourth quarter of 2010. Net revenues were 14% below the fourth quarter of 2010.
Credit Suisse also said that total operating expenses at its Wealth Management Clients business decreased slightly (-3%) compared to the fourth quarter of 2010. Provisions for credit losses increased to CHF43 million compared to CHF14 million in the fourth quarter of 2010, driven by an isolated case.
The bank’s Corporate & Institutional Clients business reported income before taxes of CHF183 million in the fourth quarter of 2011, down 16% from the year ago period. Net revenues and total operating expenses were stable compared to the fourth quarter of 2010 and provision for credit losses were CHF32 million compared to a net release of CHF10 million in the year ago quarter.
Corporate & Institutional Clients business in Switzerland contributed strong net new assets of CHF3.6 billion in the fourth quarter of 2011, the Swiss bank said in a release.
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By GlobalDataHowever, Credit Suisse Group posted a loss in the fourth quarter for the first time since 2008, hurt by "adverse" markets and costs to reorganize the investment bank.
The group has reported a net loss of CHF637 million in the fourth quarter of 2011 compared with a profit of CHF841 million in the same period a year earlier and a net income of CHF683 million in the third quarter of 2011.
Credit Suisse’s problems stem from its investment bank, which capped a very poor year with a disastrous fourth quarter in which the unit lost CHF1.4 billion compared with a pretax profit of CHF558 million in the fourth quarter of 2010.
The chief executive of the bank, Brady Dougan called the performance of the bank disappointing. He said, "Both the adverse market conditions during the period and the impact of measures we have taken to swiftly adapt our business to the evolving market and regulatory requirements."
As a result, the bank has also slashed its bonus payments for 2011 by 41% across group and by 57% for members of the executive board.
Worse than expected quarterly results highlights how the bank is grappling with downbeat market sentiment and economic slowdown. WealthInsight believes that after the disastrous performance Credit Suisse may further move away from investment banking business and concentrate more on growing its private banking division.
The radical step may lead to further job cuts in the bank’s investment banking division globally we believe.
Credit Suisse may further invest in wealth management products and penetrate into newer geographies in emerging markets as it seeks to boost pretax profit in private banking unit by CHF800 million by 2014.
