By Elena Logutenkova July 23 (Bloomberg) -- Credit Suisse Group AG, the biggest Swiss bank by market value, said second-quarter profit rose 29 percent as revenue from trading stocks and bonds doubled. Net income increased to 1.57 billion Swiss francs ($1.47 billion), or 1.18 francs a share, from 1.22 billion francs, or 97 centimes, a year earlier, the Zurich-based company said in a statement today. Credit Suisse advanced as much as 5.2 percent in Swiss trading as investment banking earnings exceeded analysts’ estimates. Chief Executive Officer Brady Dougan cut 4,900 jobs since December, closed unprofitable businesses at the investment bank and reduced risk-taking to return the bank to profit this year. Earnings at the securities unit rose fivefold in the second quarter, while profit declined less than analysts predicted at the wealth management unit. “The results are good across the board,” said Christian Stark, a Zurich-based analyst at Credit Agricole Cheuvreux with an “outperform” rating on the shares. “In investment banking they’ve been gaining market share on the back of their capital strength. On the private banking side, margin development has been good and inflows are better than expected.” Credit Suisse rose 2.29 francs, or 4.7 percent, to 51.25 francs by 12:25 p.m. in Switzerland, bringing the gain this year to 80 percent. The stock is the sixth-best performer on the 63- company Bloomberg Europe Banks and Financial Services Index. Swiss competitor UBS AG, which said in June it will probably report a second-quarter loss, has declined 5 percent in 2009. Goldman Sachs “We expect the global economic environment to remain challenging and uneven business conditions to persist,” Dougan, 49, said in a statement. “If markets continue to improve we expect to see further momentum across our businesses, and if markets become more difficult we believe that Credit Suisse is positioned to perform well.” The bank may consider acquisitions to expand in wealth and asset management businesses, Dougan said. Chief Financial Officer Renato Fassbind told journalists on a conference call that “the momentum of our client and flow- based businesses has continued” in July, although volumes may be lower this quarter because of seasonal declines. Business conditions have so far remained “unchanged” from the second quarter, Dougan said. Bank of America Corp., JPMorgan Chase & Co. and Citigroup, the three biggest U.S. lenders, last week reported a total of $10.2 billion in profits for the second quarter, relying on investment banking and asset sales to counter widening losses on consumer loans. Goldman Sachs Group Inc., which gets almost none of its revenue from retail banking, had a record quarter, reporting earnings of $3.44 billion. Trading Revenue Morgan Stanley, the biggest U.S. brokerage, reported yesterday a second-quarter loss from continuing operations of $159 million, a bigger shortfall than analysts estimated, on costs to repay the U.S. government and charges from an improvement in the firm’s own debt. At Credit Suisse, all units except for retail banking reported earnings that exceeded analysts’ estimates. The bank’s profit was reduced by a 1.1 billion-franc charge on the company’s own debt and 483 million francs to settle a lawsuit by Huntsman Corp. Those costs were cushioned by about 400 million francs in tax benefits. Cutting Risks Credit Suisse’s securities unit had a pretax profit of 1.66 billion francs, compared with 304 million francs a year earlier. Sales and trading revenue more than doubled to 5.37 billion francs, while fees from advising companies and underwriting stocks and bonds fell 12 percent to 704 million francs. Earnings at the wealth management and retail banking division fell 23 percent to 935 million francs. Asset management saw a 56 percent drop in profit to 55 million francs. The investment bank, led by Paul Calello, won market share in prime services, cash equities, algorithmic and electronic trading, global rates, foreign exchange and high grade bond trading, Dougan said. The bank is now done cutting jobs at the securities unit. Credit Suisse cut risk-weighted assets at the securities unit by 35 percent in the 12 months through June to $139 billion. The company aims to lower that number to $135 billion by the end of 2009. By comparison, New York-based Goldman lowered risk-weighted assets by 5 percent between May 2008 and the end of June. Deutsche Bank increased them at its investment bank by 0.8 percent in the 12 months through March. “The sustainability of Credit Suisse earnings is highly probable simply because what we have seen is a reduced risk profile,” said Rainer Skierka, senior analyst at Bank Sarasin in Zurich, in a Bloomberg Television interview. ‘Old Days’ Dougan said the significant changes in the banking landscape will probably endure. “Our view seems to be in contrast to some who believe the industry will quickly go back to the old days,” he said. “We don’t agree with this.” Deutsche Bank, based in Frankfurt, may report on July 28 a 56 percent increase in second-quarter net income to 1.01 billion euros ($1.43 billion) because of a rebound in debt trading and fewer writedowns, according to the median estimate of nine analysts surveyed by Bloomberg News. UBS, the biggest Swiss bank by assets, said last month its quarterly loss was mainly tied to reorganization costs and charges on the company’s own debt, while clients withdrew funds from all its money-managing units. No Government Help Unlike UBS, Credit Suisse declined to accept government assistance when credit markets froze following the collapse of Lehman Brothers Holdings Inc. last year, and instead raised 10 billion francs from investors in October. The bank’s Tier 1 capital ratio rose to 15.5 percent in the second quarter from 14.1 percent in the first. The bank has also increased its dividend accrual, Fassbind said. Credit Suisse’s wealth management unit saw a net inflow of 8.5 billion francs in the quarter, compared with 15.4 billion francs in the year-earlier period. Analysts had estimated net new money of 6.5 billion francs. Gross margins at the division improved to 119 basis points from 116 basis points a year ago. A basis point is 0.01 percentage point. To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

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