“So far in April market conditions haven’t been as favorable as they were in the first quarter,” Dougan said in an interview with Bloomberg Television in Zurich today. “We’re pretty constructive about what we hope we’ll see for the rest of the year. We certainly have to be prepared for volatility in the markets.”

Dougan said the bank benefited from an “improved environment” in the first quarter and cut risk-weighted assets at the investment bank by more than previously targeted. Credit Suisse decided to scale down its securities unit last year as the European sovereign-debt crisis led to losses. The division reported a pretax profit of 993 million francs ($1.09 billion) for the quarter after a loss of 428 million francs in 2011.

“I’m relatively impressed with what they’ve achieved in the first quarter,” Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets who rates the bank “reduce,” said in an interview. Still, “the challenges are really huge for Credit Suisse” going forward, in both investment banking and in wealth management, he said.

First-quarter net income fell to 44 million francs from 1.14 billion francs in the year-earlier period after accounting charges related to Credit Suisse’s own debt and costs for 2011 bonuses. Nine analysts surveyed by Bloomberg on average estimated a 297.9 million-franc loss for the quarter.

Fixed-Income Rebound

Credit Suisse fell 1.6 percent to 23.18 francs by 1:48 p.m. in Zurich trading. The stock has gained 5 percent this year, compared with a 4.1 percent increase in the 43-company Bloomberg Europe Banks and Financial Services Index and a 1.5 percent advance in UBS AG, its larger Swiss competitor.

Pretax profit at the investment bank fell 33 percent in the quarter from 1.48 billion francs a year earlier, while earnings from private banking dropped 27 percent to 625 million francs. The asset management division had a 43 percent increase in profit to 250 million francs, driven by a 178 million-franc gain from the sale of part of the bank’s stake in Aberdeen Asset Management Plc.

The firm benefited less from the rebound in debt markets in the quarter than U.S. competitors. Revenue from fixed-income sales and trading fell 21 percent to 2 billion francs from a year earlier, compared with the average 12 percent increase excluding valuation adjustments reported by Citigroup Inc. (C), JPMorgan Chase & Co., Goldman Sachs Group Inc. (GS), Bank of America Corp. and Morgan Stanley, according to data compiled by Bloomberg.

Equities Trading

The bank’s deleveraging efforts contributed to the decline in revenue, Dougan said in the interview, adding that he’s “happy” with the diversity of revenue.

The bank cut risk-weighted assets in the quarter by 45 billion francs to 294 billion francs on a Basel III basis, exceeding the accelerated targets announced in February.

Equities sales and trading fell 12 percent to 1.4 billion francs, compared with the average 9 percent decline reported by the U.S. companies. Revenues from underwriting debt and equity sales and advising clients on mergers fell 18 percent to 761 million francs, compared with the average 15 percent drop reported by U.S. competitors, the data show.

The bank restated some figures for the division after it decided to record valuation adjustments on structured notes in the corporate center instead of the investment bank.

Job Cuts

Credit Suisse booked a 1.55 billion-franc charge related to an increase in the price of its own debt in the first quarter. The accounting charge stems from a rule tied to the theoretical cost of buying back the bank’s debt as market prices fluctuate. The bank also had 534 million francs in costs related to bonds linked to derivatives, which were awarded as part of 2011 bonuses to more than 5,500 bankers.

The firm, which announced 3,500 job cuts last year, said it’s on track to save about 2 billion francs in annual costs by the end of 2013. Dougan said the bank doesn’t have “any plans for any other major reductions in headcount beyond that.”

Credit Suisse intends to boost the private bank’s pretax profit by 800 million francs by 2014 as sluggish client activity squeezes margins. The gross margin at the wealth management business, which shows how much the bank earns on assets under management, remained unchanged from the fourth quarter at 109 basis points - a level Dougan called a “cyclical low.” A basis point is one hundredth of a percentage point.

Inflows Shrink

Credit Suisse reported net new money of 5.8 billion francs in wealth management in the quarter. That compared with 15.7 billion francs a year ago, after an outflow of 4.1 billion francs from Clariden Leu clients as the company integrated the private bank with the rest of its business.

The bank is a target of a criminal probe by the U.S. Department of Justice over former cross-border private-banking services to American customers, the company said in July. Eight bankers, including Credit Suisse’s former head of North America offshore banking, were charged with conspiring to help American clients evade taxes through secret bank accounts. Credit Suisse continues to “work hard” to resolve the U.S. probe, Dougan said.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net;

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

http://www.bloomberg.com/news/2012-04-25/credit-suisse-chief-says-april-market-conditions-less-favorable.html

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