Credit Suisse profit collapses by three quarters

Credit Suisse's third-quarter net profit tumbled 74% as sluggish equities trading halved investment banking earnings from the previous quarter.

Switzerland's second largest bank by market value said net profit fell to 609 million Swiss francs (£399.9 million), below a forecast for Swfr 980 million.

Investment banking pre-tax income halved to Swfr 395 million (£259.4 million) from an already subdued Swfr 784 million (£514.8 million) the previous quarter, as chief executive Brady Dougan's strategy to hire investment bankers in the second quarter failed to pay off with markets flattening.

Credit Suisse was the first big European bank to report third-quarter numbers after American rivals such as Goldman Sachs posted higher than expected profit despite low trading volumes in the US equity market - although Morgan Stanley, which has derisked its trading operations since the credit crisis, surprised with a disappointing loss.

Shares in Credit Suisse were trading 2.8% lower as markets opened. They have fallen around 15% this year, against a 3% dip in the Stoxx 600 European banks index and a 10% rise in the stock of rival UBS, which is playing catch-up to Credit Suisse's strong rally last year.

Earnings at Credit Suisse's private bank outstripped the normally more lucrative investment banking segment for a second quarter running.

"We believe the prospects for growth remain very attractive and our private bank is poised to capitalise as markets improve," Dougan said.

The private banking segment attracted Swfr 12.6 billion (£8.37 billion) in net new client assets, against Swfr 13.1 billion a year earlier.

Turgid equity markets ate into investment banking earnings, though the fixed income, underwriting and advisory operations performed well, Dougan said.

The two big Swiss banks have cut back on proprietary trading as local regulators urge a stronger focus on traditional wealth management than riskier investment banking, making earnings less volatile but less spectacular than many American counterparts. Credit Suisse maintained a strong Tier 1 capital ratio of 16.7% - one of the highest in the industry - versus 16.3% at the end of the first half and was on track to meet new international and local capital requirements aimed at reducing bank risk-taking.

"We are well placed to meet these new requirements and at the same time compete and deliver attractive returns to our shareholders," Dougan said.