UPDATE 4-Credit Suisse Q2 profit hit by weak fixed income

* Net profit 1.6 billion francs, vs poll average 1.23 bln

* Investment banking pretax slumps to 800 mln sfr

* Net new assets in private banking slow to 13.8 bln francs

* Tier 1 ratio at 16.3 percent, says would pass stress test

* Shares fall 2.4 pct, sector up 2 pct

(Updates with more details, shares)

By Lisa Jucca

ZURICH, July 22 (BestGrowthStock) – Credit Suisse (CSGN.VX: ) saw its
second-quarter profit (Read more your timing to make a profit.) dragged down by the bank’s fixed income
business as sovereign debt fears hit markets, despite beating
forecasts on strong equities, and tax and accounting gains.

Stripping out one-time gains, Credit Suisse’s (CS.N: )
performance looked broadly in line with a string of weak U.S.
bank earnings published in recent days, analysts said.

The Swiss bank’s shares fell nearly 3 percent as investors
worried that current market conditions, described by Chief
Executive Brady Dougan as “challenging”, may persist.

“It is pretty fair to say that the third quarter has been
not dissimilar in terms of market conditions than the second
quarter,” said chief operating officer David Mathers, the head
of finance of the investment banking division who will take over
as chief financial officer on Oct. 1.

Switzerland’s No.2 bank by market value behind UBS (UBSN.VX: )
(UBS.N: ) reported net profit fell 22 percent to 1.6 billion Swiss
francs ($1.52 billion), beating an average estimate of 1.23
billion Swiss francs in a Reuters poll. [ID:LDE66I1GK]

Credit Suisse was the first large European player to report.
Its results came on the heels of an 82 percent drop in quarterly
earnings at Goldman Sachs (GS.N: ) earlier this week.

“Credit Suisse results were mixed, with a good bottom line
which was, however, impacted by some one-off items,” Vontobel
analyst Teresa Nielsen said.

The company benefitted from fair value gains on its debt of
nearly 1 billion francs and a tax credit of 522 million.

“Although the second quarter had a very difficult environment
our performance within that was resilient,” Dougan said.


For a graphic on earnings forecasts click on:


For Breakingviews, click on: [ID:nLDE66L0K5]



Credit Suisse continued to attract money from wealthy
clients but at a slower pace than in the previous quarter and
their cautious investment approach hit the bank’s gross margins.

The bank is now expecting gross margins, a key indicator for
a wealth manager’s profitability, to be at the lower end of a
125-135 basis point range in 2010.

Pretax income from private banking was 874 million francs,
for the first time in several quarters higher than investment
banking profit, which halved to 784 million francs.

“The clean equities trading figure rose 2 percent
quarter-on-quarter, the best performance in the sector to date,
but the clean Fixed Income, Currency and Commodities trading
decline of 38 percent was not much better than the 44 percent
average decline of peers,” Nomura analyst Jon Peace said.

The bank said its pipeline of investment banking was up 20
percent, but execution would depend on market conditions.

Although Credit Suisse has made an effort to keep a lid on
its costs, operating expenses rose due to a 447 million franc
charge the bank booked on the UK bonus tax and unspecified
litigation provisions of 216 million francs.

The bank’s shares were down 2.4 percent at 1330 GMT, lagging
a 2.3 percent rise in Europe’s STOXX 600 banking index (.SX7P: ).


Credit Suisse was able to retain its strong Tier 1 capital
ratio of 16.3 percent, one of the strongest in the industry.

Chief Financial Officer Renato Fassbind noted the stress
tests carried out by Swiss regulator FINMA were more than twice
as severe than those done in the European Union and said the
bank would remain “one of the best capitalised banks in the
world” if it were subject to an EU-type stress test.

“With a strong capital position, Credit Suisse should be
well positioned to comply with the new regulatory environment,”
Vontobel analyst Nielsen said.

With regards to the higher-end wealth management segment,
Credit Suisse was able to attract 11.9 billion in net new client
assets, 1 billion less than in the previous quarter.

Fassbind said a German probe into possible tax evasion by
some 1,100 Credit Suisse clients prompted some German customers
to pull money from the bank in Switzerland. These modest
outflows were offset by strong inflows in Europe, he added.

German officials searched Credit Suisse’s offices in Germany
in search of evidence bank employees may have helped clients to
dodge taxes. [ID:nLDE66F1HT]

In asset management, risk aversion meant net new inflows
shrunk to 1.3 billion from 11.2 billion the previous quarter.

Stock Investing

(Additional reporting by Rupert Pretterklieber; editing by
Michael Shields and Samia Nakhoul)
($1 = 1.052 Swiss francs)

UPDATE 4-Credit Suisse Q2 profit hit by weak fixed income