GENEVA - Credit Suisse Group posted its first fourth-quarter net loss since 2008, as Switzerland's second-biggest bank continued its drive to reduce its exposure to potentially-risky investment banking at a time when Europe's economy is facing problems related to a raging debt crisis.
The bank said Thursday that its net loss in the fourth quarter amounted to 637 million Swiss francs ($698 million), way down on analysts' expectations for a more modest loss of 431 million francs. In the equivalent period in 2010, Credit Suisse posted a 841 million francs profit.
Credit Suisse's share price took a hit despite a bigger than anticipated increase in the dividend to 0.75 franc a share. The company's shares price closed 3.49 per cent lower at 24.35 francs ($26.66) on the Zurich exchange.
Brady W. Dougan, chief executive officer of a bank that has some 50,000 staff around the world and manages more than $1 trillion in assets, blamed the loss on tough market conditions and aggressive cuts in costs and risks, including the need to meet new requirements that it hold more capital.
"Our performance for the fourth quarter 2011 was disappointing," Dougan said. "It reflects both the adverse market conditions during the period and the impact of the measures we have taken to swiftly adapt our business to the evolving market and regulatory requirements."
Dougan said an acceleration in its restructuring program cost the bank 981 million francs in the last quarter.
One of the most important changes stems from Credit Suisse's attempt to cut the risk profile of it investment bank division. In November, Credit Suisse had said that by the end of 2014 it would cut risk-weighted assets by 110 billion francs, mostly from the investment bank's fixed-income unit.
Its investment bank saw revenues decline 64 per cent in the fourth quarter, and that pushed the unit to its second consecutive quarterly loss.
Following confirmation of its quarterly loss, David Mathers, the bank's chief financial officer, told reporters the bank in April will propose a dividend payout of 75 centimes a share for 2011, down from 1.30 francs a share for the previous year.
"The fourth-quarter results are massively below expectations, with all key figures disappointing," said analysts at Zuercher Kantonalbank. "In order to sweeten this weak result, a higher-than-expected dividend .... is being proposed."
Credit Suisse faces similar structural problems as crosstown rival UBS AG and has yet to close the book on a U.S. tax evasion probe that also extends other Swiss banks.
In its latest financial report, Credit Suisse said "a limited number" of current or former employees have been indicted and one arrested. The bank said it set aside 478 million francs to handle litigation "for the U.S. and the German tax matters." In September, Credit Suisse agreed to settle charges in a German tax evasion case.
Mathers said "there really weren't any facts available to us" in the fourth quarter to change its outlook on the litigation.
The bank said it also is cutting its 2011 bonus pool by 41 per cent to about 3 billion francs from 5 billion francs awarded in 2010, after its securities unit posted a second consecutive quarterly loss. The bonuses are to be deferred into future years and half of the pool is to be paid in cash.
Credit Suisse is in the middle of a job-cutting drive that will see 3 per cent of staff gone by the end of 2013 and 2 million francs taken out of the business. That amounts to the elimination of 1,500 jobs on top of earlier plans to trim 2,000 jobs.
Mathers said the bank's losses were "clearly disappointing" soon after its moves to cut risk and shift the balance sheet to client-focused growth businesses.
"In particular, we aggressively reduced risks and costs from mid-2011 onwards," he said. "We did this in a very challenging market environment with a high degree of uncertainty, low levels of client activity and periods of extreme market volatility driven by concerns about the European sovereign debt crisis and its effect on the global economy."
On Tuesday, UBS AG, Switzerland's biggest bank, reported that its profit fell 76 per cent in the fourth quarter. The bank was hurt by a $2 billion trading scandal last year and has been downsizing its investment bank to meet stricter capital requirements as Europe's debt crisis hits the financial sector.