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GENEVA — Credit Suisse Group shares slumped on Thursday after Switzerland's second-largest bank lowered its earnings targets and reported a 6 percent rise in fourth-quarter profit, less than analysts were expecting.
The profit of 841 million Swiss francs ($876 million) was up from the previous year's 793 million francs but below market forecasts, as debt charges and the strong franc hurt earnings from private banking.
Shares slumped 5.8 percent to 42.10 francs in early afternoon trading.
Credit Suisse lowered its profit outlook and cut its dividend to 1.30 francs a share for 2010, down from 2 francs a share in 2009.
The bank said it will now aim for an annualized return on equity of more than 15 percent, from 18 percent previously. The return in 2010 — a measure of how efficiently a company uses equity to generate profit — was 14.4 percent.
The bank also is stowing away capital to meet stricter rules for capitalization.
Credit Suisse managed to avoid the worst of the financial crisis, and unlike its larger cross-town rival, UBS, did not take government assistance during the global financial crisis. By cutting its risk, the bank was more reliant on client revenue, but benefited from some improvement in that area in the fourth quarter.
UBS AG, which underwent a radical restructuring after heavy losses and getting a bailout, on Tuesday reported fourth-quarter earnings of 1.29 billion francs ($1.35 billion), only a modest improvement from a year earlier.
Credit Suisse had stumbled in the third quarter, blaming challenging market conditions for results far below expectations. But in the fourth quarter pretax income from investment banking rose to 558 million francs from 395 million francs in the previous quarter. Overall, the bank's wealth management division attracted 9.6 billion of net new client money.
"Credit Suisse has continued to execute on its client-focused, capital-efficient strategy with an industry-leading return on equity of over 14 per cent," Credit Suisse CEO Brady Dougan said of last year's performance. "This has served us well through 2010, a year of transition toward the new regulatory environment."
For all of 2010, the Zurich-based bank generated 5.1 billion francs ($5.3 billion) net profit, about a quarter less than last year.
In a note to investors, analysts at Zuercher Kantonalbank said the fourth-quarter net profit was below expectations but the dividend was cut more sharply than predicted.
"In addition, the financial targets, which in any case were regarded as too ambitious, have been partly reduced to a more realistic level," the analysts said.
Analysts at Evolution Securities Ltd., led by Piers Brown, noted that although the bank had generally been perceived to have emerged from the credit crisis as one of the winners, that didn't translate into the expected market share gains last year.
