By Lisa Jucca
ZURICH (Reuters) - Credit Suisse <CSGN.VX> boss Brady Dougan said the Swiss bank was winning client money and transactions faster than at any point since the financial crisis began, putting a positive sheen on weak quarterly earnings.
Investors welcomed Dougan's upbeat comments after initial disappointment that fourth-quarter earnings missed forecasts on Thursday as investment banking slowed and came in below arch-rival UBS' <UBSN.VX><UBS.N> fourth-quarter net profit.
Credit Suisse, which unlike UBS weathered the global crisis without state aid, has rebounded under the leadership of former investment banker Dougan. It posted a 6.7 billion Swiss francs ($6.3 billion) profit in 2009 from a 2008 record loss, mostly due to its best-ever investment banking performance.
"Perceptions on Credit Suisse have improved a lot, and it was clear things were better in January," said fund manager Helmut Hipper at Union Investments, which holds more than 3 million shares in Credit Suisse, or 0.28 percent of shares.
"The numbers were a little disappointing, very weak on sales and trading, in fixed income especially, although they made up some ground on costs," Hipper said.
Shares were up 1.3 percent 46.71 francs by 1224 GMT (7:24 a.m. EST) on Thursday, compared with a 0.72 percent fall in the DJ Stoxx European banking index <.SX7P> while UBS shares were up 0.44 percent.
Credit Suisse's fourth-quarter bottom line was hit by weaker results at its investment bank. Profit from the division nearly halved from the third quarter as trading profit in equities slowed and shrunk to a third in fixed-income due what division chief Paul Calello said was "low client activity."
That follows weaker trading profits at both JP Morgan <JPM.N> and Goldman Sachs <GS.N>, indicating conditions weakened at the end of 2009.
The bank's fourth-quarter net profit was the weakest of all quarters last year, but American-born Dougan was confident for 2010.
"We have a had a strong start to the quarter with strong client activity. Our transaction pipeline and net new asset flows are the best we have seen since the crisis," he said.
Despite a weakening of Swiss bank secrecy and attacks from foreign states on Switzerland's multi-trillion dollar offshore banking industry, Credit Suisse continued to attract cash from wealthy clients throughout the year, although inflows slowed in the fourth quarter after an Italian tax amnesty.
Dougan said Credit Suisse could loose a maximum of 25 billion francs if other major European countries were to conduct tax amnesties as aggressive as the Italian one.
Dougan also disclosed for the first time that the bank held around 100 billion francs of potentially undeclared tax money from Italian, German, French and British clients, or just over 10 percent of the 915 billion francs its private bank manages.
Credit Suisse, now Switzerland's largest by market value, has managed to raise private capital during the crisis, slash exposure to illiquid assets, boost its capital ratios and is exiting the most risk-prone segments of investment banking.
WEAK FOURTH QUARTER
Fourth-quarter profit of 783 million francs was below expectations of 1.3 billion in a Reuters poll.
UBS surprised the market on Tuesday when its first quarterly profit in more than a year came in at 1.2 billion francs, well above expectations, though the fourth-quarter figure was overshadowed by accelerating outflows from its core wealth-management division.
"Fourth-quarter results are definitely weaker than expected, but a very strong beginning of the year, including net new money, indicates they may be able to gain market share," said Georg Kanders, an analyst at WestLB Research.
Credit Suisse' net was hit by a 500 million franc pretax charge following a U.S. settlement for hiding transactions on behalf of clients from countries subject to U.S. sanctions like Iran. A recurring accounting loss on own credit to the tune of 300 million francs also took its toll.
Even though Credit Suisse continued to win client money in the fourth quarter, new client inflows of 6.5 billion francs were below analyst's expectations of 8 billion and lower than in all previous quarters of the year due to the Italian tax amnesty.
Credit Suisse has capitalized on its main rival's weakness and won market share, attracting more than 42 billion francs of new client money in private banking in 2009 against an outflow of nearly 150 billion francs UBS suffered in the same year.
January had been a record month for inflows, the bank said.
"We continue to see wealth management as an attractive growth market," Chief Financial Officer Renato Fassbind said.
(Additional reporting by Martin De Sa'Pinto; Editing by Jon Loades-Carter, Erica Billingham and Karen Foster)
($1=1.063 Swiss Franc)