Credit Suisse reports reduced profits for 2012

Credit Suisse's net profit for 2012 fell 24 percent to 1.4 billion francs ($1.5 billion) from the previous year despite a return to profit for its investment bank unit.

Credit Suisse reports reduced profits for 2012

The result, announced by Switzerland's second-biggest bank on Thursday, fell below the 1.7 billion francs pencilled in by analysts surveyed by the Swiss financial news agency AWP.

In the final quarter of 2012, however, the bank posted a net profit of 397 million francs, compared to a loss of 637 million francs in the same period the previous year.

The bank, which is in the middle of a massive restructuring, also raised the amount it aims to save by the end of 2015 to 4.4 billion francs from its previous target of four billion.

In 2012, Credit Suisse lowered its costs by two billion francs, the bank said in a statement, adding that at the end of the year it had about 47,400 employees, a reduction of around 1,000 jobs from the third quarter.

The private banking and wealth management division posted an operating profit of 3.7 billion francs for 2012, up from 2.9 billion the previous year.

The bank also slashed total pay expenses by five percent compared to 2011, but provided no details Thursday on where the specific cuts had been made.

The investment bank unit, which posted a loss of 593 billion francs in 2011, rebounded in 2012 with an operating profit of two billion francs.

In the last quarter of the year, this division meanwhile saw its net revenues slide 16 percent compared to the previous three-month period as its fixed-income sales and trading activities dwindled.

In the fourth quarter, Credit Suisse also said it had strengthened its capital position, reaching its targeted ratio of 9.4 percent, and said it was on track to pass the 10-percent mark this year — five years ahead of schedule.

 Chief executive Brady Dougan said "2012 was a year of transition," in a statement.

"We took significant steps to adapt our businesses and our organization to new regulatory requirements, changing client demands and the current market environment," Dougan said.

These measures should lead to an improvement this year, he said.

"Going into 2013, revenues have so far been consistent with the good starts we have seen to prior years, with profitability further benefitting from the strategic measures we took in 2012, including our strengthened capital position and our significantly reduced risks and cost base," said Dougan.

The bank's board recommended keeping the annual dividend unchanged at 75 cents per share.

Credit Suisse's results received mixed reviews from analysts.

"Results were in line with expectations," said Theresa Nielsen, from Vontobel, highlighting the bank's improved margins in its asset and wealth management units, but pointing out that it "still needs to work on its capitalization, and we expect asset sales and derisking to continue."

Rainer Skierka, from Bank Sarasin, meanwhile noted the progress the bank had made in its restructuring efforts.

But he said that, due to its continued commitment to its investment bank, its revenues remained more volatile than those of its main competitor UBS.

The analyst also noted that Credit Suisse's fixed-income revenues were lagging about 15 percent below those of its US competitors.

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Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site 

Holders of other, temporary or conditional permits are not accepted.

READ MORE: ‘A feeling of belonging’: What it’s like to become Swiss

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.