Credit Suisse’s earnings hurt by legal costs

/ Source: The Associated Press

Credit Suisse Group said Wednesday that its second-quarter profit fell 37 percent because it set aside funds for future legal action involving the fallen energy trader Enron Corp. and other proceedings.

The bank earned $720 million (919 million Swiss francs) for the April-June quarter compared with 1.46 billion francs a year earlier. It set aside $489 million (624 million Swiss francs) for future legal charges. That comes on top of a 702 million franc provision taken in 2002.

Sales for the second quarter rose 3 percent to $11.04 billion (14.1 billion francs).

“Following a strong start to 2005, the second quarter was affected by the anticipated slowdown in market activity and our banking businesses experienced low levels of client activity in April and May,” said Chief Executive Oswald Gruebel.

The bank called its profit figure “respectable.” Besides legal provisions, a slowdown in trading activity also brought down second-quarter earnings, although Credit Suisse noted a pickup in its investment banking sector.

The second-quarter profit figure was slightly lower than analysts’ expectations, particularly in the group’s private banking business. Private banking profits fell 13 percent from the same period in 2004, to $455 million (581 million francs).

First-half net profit came to $2.2 billion (2.8 billion francs), down 15 percent from 3.3 billion francs in the first six months of 2004. Sales rose 2 percent to $24.4 billion (31.2 billion francs).

Gruebel said he expects equity markets to improve later in the year, adding that the bank was “well positioned to benefit from this economic environment.”

In light of CSB’s ongoing restructuring, the CEO also noted he was “convinced we will create compelling new opportunities for revenue growth and management.”

Last December, the bank announced that it would combine Credit Suisse First Boston, its U.S.-based investment unit, with its retail and private banking business within two years. In the long run, the move is expected to save money and improve services for clients.