Credit Suisse posts highest loss since 2008 after US tax settlement

Swiss banking giant Credit Suisse Group AG posted its biggest quarterly loss in six years after reaching a tax settlement with the US, according to latest quarterly figures released by the lender yesterday.

The bank's Q2 loss was CHF (Swiss franc) 700 million, ($776 million) compared to a healthy CHF 1.045 billion profit for the same quarter a year ago, and well above a Reuters' analyst poll of CHF581 million loss.

This was primarily due to the CHF1.618 billion the lender had to shell out as fine following the final settlement with the US authorities on charges of helping its clients to evade taxes. (Credit Suisse pleads guilty to US tax evasion charges, fined over $2.5 bn). 

Net revenue for the quarter was CHF 6.46 billion, down 7 per cent compared to CHF6.95 billion for the corresponding quarter last year.

"I want to reiterate that we deeply regret the past misconduct that led to this settlement and that we take full responsibility for it," Credit Suisse's chief executive Brady Dougan said.

Credit Suisse said that it would wind down commodities trading which is estimated to result in a saving of $75 million. Revenue from commodities trading was highly volatile in past years, varying from $10 million to $200 million.

Other large players such as Deutsche Bank, JP Morgan and Barclays are also either exiting or reducing their commodity trading activities in recent times.

Credit Suisse said that it would reassign resources to its private banking arm which reported 39 per cent fall in revenue due to the settlement fine.

The lender's private banking arm is believed to have been badly affected since the bank's guilty plea to the US charges, as wary investors were pulling money out of its wealth management business.

"It's hard to exactly estimate the impact but it certainly did have an impact," Dougan said in a news conference.

"There may have been clients who didn't do business with us who otherwise would have," he said.

Nevertheless, net fresh money inflow to the private bank, which is an indicator of future revenue, reached CHF10.1 billion in Q2.

Credit Suisse's investment bank reported pre-tax profit of 752 million, nearly unchanged compared to a year ago, as the bank resorted to cut back underperforming operations.

According to some analysts, overall, while the investment bank has outperformed, private banking and wealth management continued to disappoint.

Zurich-based Credit Suisse Group is a multinational financial services holding company that operates the Credit Suisse Bank and other financial services investments.