Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

PREVIEW-Investment bank seen helping C.Suisse shine in Q2

Published 07/21/2009, 09:12 AM
Updated 07/21/2009, 09:16 AM
CSGN
-
UBSN
-

* Bank net seen at $1.3 bln, down 30 percent q/q, up 15 y/y

* Investment banking performance to lift earnings

* Huntsman charge, narrowing CDS to dent bottom line

* Wealth management inflows seen continuing

* Outlook seen key driver for shares

By Lisa Jucca

ZURICH, July 21 (Reuters) - Swiss bank Credit Suisse is heading for another strong quarter driven by its investment bank, although one-off charges and accounting factors will dent its bottom line, analysts said on Monday.

It should also set a heady pace for European banks as the lender is the first large one in the region to publish second quarter results.

Analysts polled by Reuters expect Credit Suisse, which has overtaken UBS as Switzerland's biggest bank by market worth, to post net profit of 1.4 billion Swiss francs ($1.3 billion), up 15 percent from the same quarter last year.

But earnings are expected to be down 30 percent from a 2 billion franc net profit in the first quarter, when Credit Suisse blew away forecasts thanks to surprisingly robust trading profit and market share gains.

"The big driver is most certainly going to be again the investment banking," said ZKB analyst Andreas Venditti.

The bank will face fair value accounting charges on its own debt, which analysts see at around 300 million francs, and a one-off hit of $316 million linked to settling a Huntsman legal case in the United States.

Credit Suisse's credit default swap halved to 90 basis points at the end of June from around 185 basis points at the end of March, according to Markit data. Narrowing CDS could have forced the bank to an even higher accounting loss, but the bank has put in place hedges to minimise the impact, analysts said.

LEADING THE PACK

Stellar earnings from U.S. banks have raised the bar for European lenders and Credit Suisse is seen coming out strongly among its peers thanks to market share gains and a Tier 1 ratio expected to be well above 14 percent.

"Not only is Credit Suisse expected to post among the highest second-quarter earnings of European banks, but it is also likely to report a comfortable capital position," said Alain Tchibozo, an analyst with ING Wholesale Bank in London.

Analysts expect Credit Suisse to further cut its exposure to illiquid assets from 8 billion Swiss francs at the end of March. But they will also keep an eye on any indication of rising bad loans as the recession drags on.

The world's No. 5 wealth manager by assets will have attracted 6.8 billion francs of new client wealth according to the Reuters poll. The segment accounts for one third of revenues.

"We continue to see good gross margin resilience and healthy net new money flows," Commerzbank analyst Christian Stark said in a research note.

Credit Suisse has especially shone in comparison with domestic rival UBS, which has warned of a second quarter loss and has yet to recover from the subprime shock despite a state cash injection and a new chief executive.

Shares at Credit Suisse have risen 81 percent since the start of the year, outperforming a 29 percent rise in the European DJ Stoxx Banking Index.

"More important for the share price is the outlook, especially for the investment bank, to see how these numbers can be sustained and how long these margins can hold up so well," Venditti said.

(additional reporting by Nathalie Harrison in London; editing by John Stonestreet)

($1=1.074 Swiss Franc)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.