LONDON — Credit Suisse on Tuesday posted a steep loss after settling an investigation with the authorities in the United States in May for $2.6 billion and pleading guilty to helping Americans hide their money in Swiss accounts.
The Swiss bank posted a loss in the second quarter of 700 million Swiss francs, or about $779 million, which was 93 percent less than the 1.05 billon francs it earned in the same quarter a year ago. A survey of analysts by Reuters had expected a net loss of 581 million francs.
It was the largest loss for the bank since 2008 when the financial crisis leveled Lehman Brothers and hammered bank results around the world. Credit Suisse shares fell about 1.7 percent in early trading in Switzerland.
"Our reported results for the second quarter and the first half of 2014 were impacted by the resolution of our most significant legacy litigation issue," said Chief Executive Officer Brady Dougan in a statement. He said during the quarter "we continued to see good momentum with clients, while at the same time making further progress in winding down our non-strategic units."
In May, Credit Suisse pleaded guilty to one count of conspiring to aid tax evasion in a scheme that prosecutors said "spanned decades." In addition to paying the $2.6 billion in penalties, Credit Suisse, which has a significant investment bank in New York and whose chief executive is an American, agreed to hire an independent monitor for up to two years.
The settlement's impact was reflected in the company's capital ratio, a measure of its financial strength: It fell to 9.5 percent from 10 percent in the second quarter. Mr. Dougan said he intended to get back to above 10 percent by the end of the year.
Credit Suisse posted a 749 million franc loss in its private banking and wealth management group, reflecting the tax evasion charge. The group is an area of strategic focus for the bank, and posted pretax profits of 917 million francs in the same period a year ago.
The bank attracted 10.1 billion francs in net new money, a key figure that analysts will scrutinize to gauge clients' response to the bank's historic settlement. That figure is down 26.3 percent from the first quarter and up nearly 33 percent from a year ago.
Average assets under management in private banking and wealth management remained relatively unchanged at 1.31 billion francs, down 0.6 percent in the second quarter of 2013.
The bank has been hit repeatedly by high regulatory and legal costs. The bank posted a loss in the fourth quarter of 2013 of 476 million francs after revising its fourth-quarter results twice to reflect increased legal costs.
It first revised the results downward in March to reflect an $885 million settlement to resolve claims that it had sold questionable loans to the mortgage finance giants Fannie Mae and Freddie Mac, then again to reflect a charge of 468 million francs in increased legal provisions, primarily related to the tax investigation. The bank took a charge of 1.6 billion francs in the second quarter when it pleaded guilty to tax evasion.
Results in its investment bank for the second quarter were mixed. The unit posted a pretax profit of 752 million, roughly flat from the same period a year earlier, while net revenuefell 6 percent to 3.4 billion francs.
Credit Suisse is the first European bank with a large investment bank to report earnings. UBS, Deutsche Bank and Barclays all report earnings at the end of the month.
Compensation and net benefits, the most expensive cost item, rose 2 percent to 1.5 billion francs. Net revenue fell 2 percent to 3.3 billion francs, with strong results in equity underwriting – up 30 percent. The bank reported weaker debt underwriting and advisory work, down 10 percent and 4 percent respectively.
Fixed income sales and trading, a major revenue and profit contributor for many banks that has been weak in recent quarters, increased 4 percent to 1.5 billion francs due to investor demand for higher yielding products in the credit and securitized product arena in response to continued low interest rates.
The bank said its results in the area were hurt by a "significant decline in trading activity due to rising rates and widening credit spreads" from the United States Federal Reserve's announcement to reduce its bond-buying program.
Emerging markets revenues improved substantially, the bank said.
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