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Credit Suisse Posts Higher Profit, Beating Estimates

Credit Suisse Group AG, Switzerland’s second-largest bank, said profit rose 1.4 percent in the second quarter, beating estimates after the company booked a tax credit and gains on its own debt.

Net income rose to 1.59 billion Swiss francs ($1.51 billion) from 1.57 billion francs a year earlier, the Zurich- based bank said in a statement today. Earnings compare with the 1.23 billion-franc median estimate of analysts surveyed by Bloomberg News.

Trading revenue fell 27 percent from the previous quarter as swings in bond and stock markets and concern about the strength of the economic recovery in the U.S. led clients to trade less, also hurting results at Goldman Sachs Group Inc. and Citigroup Inc. Chief Executive Officer Brady Dougan, who cut risk-taking at Credit Suisse to make earnings at the investment bank less volatile, described the economic and market situation as “uncertain and challenging.”

“Revenue generation has suffered from the market dislocations around the sovereign debt crisis in April and May,” Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, said in a note before the release.

The company recorded a tax credit of 522 million francs and gains of 922 million francs on its own debt, more than offsetting the costs of a U.K. bonus tax and provisions related to litigation.

Credit Suisse declined 14 percent in Swiss trading this year, compared with a 5.3 percent drop in UBS AG, the largest Swiss bank. The 54-company Bloomberg Europe Banks and Financial Services Index shed 7 percent in the period.

Investment Banking

New York-based Goldman, Citigroup, JPMorgan Chase & Co. and Morgan Stanley, as well as Bank of America Corp. of Charlotte, North Carolina, on average reported a 35 percent drop in trading revenue in the second quarter from the first. The total revenue decline at their investment banks averaged 28 percent.

Credit Suisse’s investment bank saw pretax profit more than halve to 784 million francs from a year earlier, missing analysts’ estimates for 1.01 billion francs, as revenues slumped 32 percent.

The bank said credit-trading revenue was affected by “difficult market conditions, including widening credit spreads,” while emerging markets and corporate lending were hurt by client risk aversion.

Attracting Funds

The private bank attracted 13.8 billion francs in net new funds in the quarter. Pretax profit at the division fell 6.5 percent to 874 million francs, almost matching analysts’ estimates for 893 million francs.

Credit Suisse’s offices in Germany were searched last week in a probe into allegations that employees may have helped clients evade taxes. Investigators seized substantial amounts of data, according to Johannes Mocken, a spokesman for the Dusseldorf prosecutors’ office.

The raids came after German authorities obtained a disk with data that prompted probes against some 1,100 customers of Credit Suisse. The bank said it is cooperating with the authorities.

The bank booked costs of 447 million francs in the second quarter related to the U.K. tax on bankers’ bonuses and 216 million francs in litigation provisions.