Credit Suisse reveals fresh Write-down's that Cut Profit by $1 Billion (Bloomberg) (19-02-2008)

Feb. 19 (Bloomberg) -- Credit Suisse Group, Switzerland's second-largest bank, has stated it has discovered pricing errors on bonds in an internal review. Consequently this will cut first-quarter profit by about $1 billion. It said that falling debt markets and “mismarkings and pricing errors by a small number of traders” led to $2.85 billion of write-down's on asset-backed securities. The bank is also assessing whether 2007 earnings may also be affected.

Coming right after Qatar said it was buying shares in Credit Suisse and a week after the Zurich-based company reported net write-down's on debt and loans for all of last year of 2 billion Swiss francs ($1.8 billion), it creates fresh turmoil in already fragile financial markets and puts the whole sector under pressure.

Credit Suisse fell 4.85 francs, or 8.6 percent, to 51.90 francs by 9:26 a.m., cutting the company's market value to 60.3 billion francs. The stock is down 24 percent this year. UBS AG, the biggest Swiss bank, dropped 2.1 percent.

The bank didn't specify which securities it's writing down. Last week, Credit Suisse said it reduced holdings of commercial mortgage-backed securities to 25.9 billion francs during the fourth quarter from 35.9 billion francs. The bank also held 8.7 billion francs in residential mortgages as of Dec. 31, down from 16.3 billion francs; and 2.7 billion francs in collateralized debt obligations, compared with 2.3 billion francs.

“They were supposed to be one of the banks least affected,” by the subprime debacle, said Andreas Venditti, an analyst at Zuercher Kantonalbank. “They've built up some confidence, which is bound to take a blow now.”

Source: Bloomberg