Credit Suisse Profit Below Expectations

ZURICH--Credit Suisse Group AG's delivered a disappointing profit figure for the first quarter, as the Swiss lender was weighed down by the performance of its investment bank.

Zurich-based Credit Suisse, like its larger Swiss rival UBS AG, is in the process of trying to squeeze more profit from a slimmed-down operation. The bank has steadily shed assets and employees, while shuttering some businesses it deemed were too risky or not worth the costs involved.

Overall, first-quarter profit at the bank fell to 859 million Swiss francs ($975.47 million) from the 1.3 billion francs it reported for the same period a year earlier, as net revenues fell 8% to 6.47 billion francs. Analysts had expected the bank to report a profit of 1.13 billion francs for the period.

Credit Suisse said total assets on its balance sheet fell 7% in the quarter compared with the same period last year, to 878 billion Swiss francs.

Credit Suisse's investment bank relies to a significant degree on debt-trading businesses, which can be particularly volatile. The bank said Wednesday that while its debt trading and underwriting businesses were strong during the period, its diminished interest rate-trading unit and performance in emerging markets contributed to net revenues declining 13% compared with the same quarter last year. Pretax income slipped 36% to 827 million francs.

The private banking & wealth management business saw 13.7 billion francs in net new assets during the quarter, Credit Suisse said, though clients from Western Europe with Swiss accounts continued to pull money out of the bank as tax authorities in their countries crack down on undeclared assets. Net revenues were flat at 3.2 billion francs, while pretax income rose 15%.

Credit Suisse has taken some significant hits to its reported results lately because of legal travails in the U.S. Earlier this month the bank said it had taken a charge of 468 million francs primarily related to a continuing criminal investigation by the U.S. Justice Department into assistance the bank may have provided to American tax evaders. Last month, the bank disclosed a charge of 275 million francs related to allegations made by the U.S. Federal Housing Finance Agency that it was one of several banks that misrepresented mortgage-backed securities it sold in the run-up to the financial crisis.

Credit Suisse executives, including Chief Executive Brady Dougan, were called to testify at a Senate hearing in February, where they were criticized for making little progress in helping the U.S. Justice Department track down the identities of American clients who used accounts at the bank to evade taxes. Credit Suisse is one of about a dozen Swiss banks under Justice Department investigation for allegedly helping Americans evade taxes, and is expected to reach a related settlement.

Credit Suisse and UBS are also under significant pressure from regulators at home in Switzerland, who are eager to see the country's two big banks increase stability and shed risk. Credit Suisse earlier this year said discussions with the country's financial regulator, Finma, resulted in it adding 6.9 billion francs in so-called operational risk-related assets to its balance sheet to buffer against unforeseen negatives in the future such as costly litigation. On Wednesday the bank said its operational risk-related assets stood at 5.3 billion francs.

The bank said its leverage ratio, a measure of capital held relative to assets such as loans, reached 3.7% and is on track to meet Switzerland's requirement of about 4% by 2019.

Write to John Letzing at [e-mail]

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