(MENAFN- AFP) Swiss banking giant Credit Suisse said Wednesday its first quarter net profit took a heavy hit as its investment bank reeled from slumping trading in bonds.
The bank, the second-biggest in Switzerland after UBS, is facing a US probe over past practices of helping wealthy Americans dodge the US taxman.
It said its net profit plunged by 34 percent year-on-year to 859 million Swiss francs (705 million euros).
This number fell far short of the expectations of analysts polled by the AWP financial news agency, who had anticipated that Credit Suisse would report a net profit of 1.08 billion during the quarter.
Before taxes, the bank meanwhile made a 1.4-billion-franc profit, down 22 percent from the figure for the same quarter a year ago.
Following the news, the bank saw its stock price slide nearly two percent to 27.28 francs a pop in midday trading on the Swiss stock exchange, whose main SMI index rose 0.53 percent.
Credit Suisse's struggles were largely attributed to its investment bank, which saw its pre-tax profit plummet 36 percent to 827 million Swiss francs, "amid challenging market conditions," it said.
A 21-percent year-on-year slump in its bond-trading activities contributed to a large portion of that fall, but its stock-trading business also fell 8.0 percent.
- Wealth management does well -
Countering that downward drag, Credit Suisse's private banking and wealth management division saw its pre-tax profits jump 15 percent from a year ago to 1.01 billion Swiss francs.
That unit also raked in 13.7 billion francs in fresh assets, up more than 14 percent from the first three months of 2013.
Credit Suisse meanwhile said it had set aside 107 million francs for litigation during the first quarter.
The group is one of 14 Swiss banks facing possible litigation in the United States on suspicion they helped US clients stash money out of sight of US tax authorities.
Chief executive Brady Dougan apologised in February to US senators for the bank's actions, conceding it had undertaken elaborate efforts to gain new, secret American clients.
Dougan, who has blamed the wrongdoing on a small band of rogue employees, said on Wednesday that the bank had "made good progress toward resolving legacy litigation matters."
A damning Senate report found that the bank at its peak in 2006 had more than 22,000 US customers with Swiss accounts whose assets stood as high as $12 billion.
"It is important for us to resolve this issue," Credit Suisse finance chief David Mathers said in a conference call after the results were released, without providing more details.
Credit Suisse also agreed last month to pay $885 million to settle US charges that it sold shoddy mortgage bonds to Fannie Mae and Freddie Mac ahead of the 2008 financial crisis.
New York regulators have are also investigating whether the bank may have evaded taxes in that state.
Analysts expressed disappointment with the Credit Suisse results, especially in its investment bank, with Rainer Skierka of J. Safra Sarasin saying they did not bode well for other investment banks in Europe.
While expressing disappointment with the group's investment bank strategy, Tim Dawson of Helvea however meanwhile insisted "the results are not a disaster."
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