Credit Suisse said its Wealth Management clients contributed net new assets of $4.4 billion in the fourth quarter, even as its investment banking business took a steep plunge that led to a loss for the company as a whole.
The Wealth Management business, though, had mixed results. The business recorded income before taxes of $311 million in the fourth quarter. That was down from $664 million in the prior year, but a swing from the third quarter, when it reported a loss after litigation expenses of $523 million.
Net revenues of $498 million in the quarter were 14 percent below the fourth quarter of 2010 and flat against the third quarter of 2011.
Results were hurt by “substantially lower contribution from transaction-based revenues” from a tougher regulatory environment, low interest rates and low customer activity.
The flow of new assets from its Wealth Management clientele was driven by business in emerging markets, the firm said.
Meanwhile, Credit Suisse’s investment banking business shrunk dramatically in the fourth quarter as the company adopted a new conservatism.
The Swiss financial services firm reported a $1.4 billion loss in investment banking in its fourth quarter, leading to a $697.5 million loss for the firm as a whole.
Credit Suisse cut risky assets in its bond business by $38 billion. Revenue, though, was down 64 percent from a year earlier – and 50 percent from the previous quarter. Revenue fell to $1.4 billion in the fourth quarter, in the investment banking business.
The bond business almost hit bottom. The company reported fixed-income sales and trading revenue of $39 million. That is down from $972 million a year earlier – and $834 million in the prior quarter.
This reflected “continued challenging trading conditions, subdued client activity levels and unfavorable market movements on related hedges,’’ the company said. The bond business lost $514 million.
Stock trading was also way down. Equity sales and trading recorded $830 million in revenue, down from $1.5 billion a year earlier and $1.3 billion in the previous quarter.
Trading in options and other derivatives results were related to “reduced customer flow and losses on hedges,’’ the company said, it took a “conservative risk position. “
The fourth-quarter loss almost wiped out earnings at the investment banking business for the entire year. After a third quarter loss of $208.1 million as well, the investment banking business only cleared $86.5 million on revenue of $12.6 billion for the year. That is about seven-tenths of a cent on each dollar of revenue.
The loss included about $1.1 billion of charges. These came from “realignment costs, strategic exits from businesses and the accelerated Basel III risk-weighted assets reduction” that the company has undertaken, Credit Suisse said.
"Our performance for the fourth quarter 2011 was disappointing," said Chief Executive Brady Dougan. "It reflects both the adverse market conditions during the period and the impact of the measures we have taken to swiftly adapt our business to the evolving market and regulatory requirements."
Its Asset Management business also shrank and saw its bottom line crunched. In Swiss francs, the company reported income before taxes of CHF 87 million in the fourth quarter. That was down 52 percent from a year earlier and 5 percent from the prior quarter.
Net revenues of CHF 455 million were down 26 percent from the fourth quarter of 2010 and 3 percent from the third quarter of 2011.
Investment-related gains were CHF 6 million compared to CHF 101 million, a year earlier.
The company said it recorded a net asset outflow of CHF 9.6 billion in asset management in the fourth quarter, tipping the year to a net outflow of CHF 900 million.
Tom Steinert-Threlkeld writes for Securities Technology Monitor.