Credit Suisse Q1 Write-Downs of $5.3B Drives $2.1B Loss

By: By Daniela Sigrist
By: By Daniela Sigrist

ZURICH, Switzerland (AP) -- Credit Suisse Group on Thursday posted a $2.1 billion loss for the first quarter as the global effects of the U.S. subprime mortgage crisis continued to spread.

Switzerland's second-largest bank said it also had net write-downs of 5.3 billion francs ($5.3 billion) for big buyout loans and mortgage securities.

It was the first time the bank, Switzerland's second largest, had posted a loss in the subprime crisis that has caused its crosstown rival UBS AG to write down $37.4 billion in assets because of bad investments in U.S. mortgage securities.

For the fourth quarter of 2007 Credit Suisse posted a revised net profit of $536 million.

"Our first-quarter results are clearly unsatisfactory," Credit Suisse Chief Executive Brady Dougan said, but he said other operations of the bank did well.

Credit Suisse is the first of the major European investment banks to report the quarter, but others have warned investors to brace for more writedowns.

Germany's Deutsche Bank AG has said it expects to post $3.98 billion in mark-downs for buyout loans and mortgage securities, while UBS expects a net loss of $12.36 billion because of its subprime exposure.

"You make assumptions about how low securitized assets can go, and yet what is bad can still get worse because the underlying assets are still falling," said Cubillas Ding, a London-based senior analyst at financial research firm Celent.

"As a whole, the industry will need to relook at pricing practices of complex derivatives," he said. "Something's obviously broken - the risks involved and the controls to address those vulnerabilities are not properly aligned."

Credit Suisse said it has continued to reduce exposure to risk in the market and that other areas of its operations performed well

The bank posted a net profit of 2.7 billion francs in the first quarter of 2007.

Credit Suisse shares, which have slid 43 percent in the last 12 months, rose 0.3 percent to 52.70 francs ($51.31.

"Other than the areas affected directly by the credit crisis, most of our businesses performed well, with revenues near, or in some cases above, those in the first quarter of 2007," Dougan said.

Credit Suisse's capital position is strong, Dougan said, adding that the bank would continue to manage its liquidity conservatively.

"I am confident that we will continue to serve as a safe haven for clients in uncertain and volatile markets, and to seize the opportunities that arise in times of market dislocation to create long-term value," Dougan said.

Credit Suisse took the bulk of its writedowns - $2.64 billion - for collateralized debt obligations.

Credit Suisse trimmed its exposures to the troubled areas during the quarter. Leveraged loans outstanding fell to 20.8 billion francs ($20.6 billion) from 35.1 billion francs at the end of last year. Subprime CDOs shrank to 700 million francs ($695 million) from 1.6 billion francs.

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