April 23 (Bloomberg) -- Credit Suisse Group AG, the biggest Swiss bank by market value, reported first-quarter profit that exceeded analysts’ estimates on record trading revenue.

Credit Suisse rose 8.8 percent in Swiss trading after reporting net income of 2 billion Swiss francs ($1.7 billion), twice the median estimate of analysts surveyed by Bloomberg News. The Zurich-based bank rebounded from a 2.15 billion-franc loss in the year-earlier period.

Chief Executive Officer Brady Dougan said he’s “optimistic” about the bank’s prospects, after cutting 5,300 jobs and eliminating money-losing businesses at the investment bank. Zurich-based UBS AG, which hired Dougan’s former boss Oswald Gruebel as CEO this year, reported a first-quarter loss of almost 2 billion francs last week.

“These results give the strong impression Credit Suisse is winning share in private banking and investment banking as competitors are in disarray,” said Huw van Steenis, an analyst at Morgan Stanley who rates the company “overweight.”

Credit Suisse rose 3.5 francs to 43.20 francs in Zurich, giving the bank a market value of 51.2 billion francs. The stock is the third-best performer in the 65-company Bloomberg Europe Banks and Financial Services Index this year, with a 52 percent gain. UBS fell 6.9 percent in 2009, cutting its market value to 40.5 billion francs.

‘Prudent Approach’

Thirteen analysts rated Credit Suisse “buy” in the past three months, while 12 rated it “hold” and five “sell,” data compiled by Bloomberg show. The shares are trading at about 1.5 times book value, double the level of the Bloomberg banks index.

Credit Suisse’s stock “is looking a bit expensive,” said Dirk Becker, an analyst at Kepler Capital Markets in Frankfurt. “But I expect lots of earnings upgrades in the coming days.”

The bank’s securities unit had a pretax profit of 2.4 billion francs, the highest in almost two years, following a 3.4 billion-franc loss in the first quarter of 2008. Earnings at the wealth management and retail banking division fell 25 percent. The asset management unit had a loss of 490 million francs, after a 544 million-franc loss a year earlier.

“Our prudent approach in the new market environment has served us well,” Dougan said in a statement. “While we may still be affected by continued volatility and market disruptions if difficult conditions persist, we believe that we are in a position to weather the storms and perform well when market opportunities arise.”

Dougan told analysts on a conference call that business in April has been “consistent” with the first three months.

Return to Profit

Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. reported first-quarter results last week that beat analysts’ forecasts as trading revenue surged. Barclays Plc said today it made “good profits” in the quarter, “well ahead” of the same period in 2008. UBS’s first-quarter loss stemmed mainly from a 3.9 billion-franc writedown on hard-to-trade assets.

Financial institutions worldwide have amassed $1.3 trillion of losses and shed more than 307,000 jobs since the U.S. subprime mortgage market collapsed. UBS, the European bank with the highest losses, has taken writedowns of about $50.6 billion, triple those at Credit Suisse, data complied by Bloomberg show.

Not Without Challenges

Credit Suisse said businesses including emerging markets trading, U.S. leveraged finance, equity trading strategies and convertibles returned to profitability, generating total revenue of 1.4 billion francs in the quarter and offsetting a writedown on commercial mortgage-backed securities of the same amount.

Total sales and trading revenue was 6.25 billion francs, compared with a 256 million-franc loss a year ago. Earnings at the securities unit also included a 365 million-franc fair value gain on Credit Suisse’s own debt, a 413 million-franc increase in the value of residential mortgage-backed bonds and subprime collateralized debt obligations, and a 50 million-franc gain on leveraged finance commitments.

“It’s just one quarter and we don’t expect 2009 to be without challenges,” Paul Calello, head of the investment bank, told analysts on a conference call. The company will continue to reduce risk-taking and costs, while aiming to increase market share in client businesses, he said.

‘Volatile’ Markets

Credit Suisse attracted 9 billion francs in net new money at its wealth management business and 2.4 billion francs at the corporate and retail banking unit, compared with 13.5 billion francs and 3.6 billion francs in the first quarter of last year, respectively. Asset management reported its seventh consecutive quarterly outflow of funds, which slowed to 3.5 billion francs from 21.2 billion francs a year ago.

The bank’s tier 1 capital ratio, a measure of its ability to absorb loan losses, strengthened to 14.1 percent in the first quarter from 13.3 percent at the end of December. Credit Suisse said it has a “strong” liquidity position and intends to redeem its two upper tier 2 bonds callable in July.

Credit Suisse said Tobias Guldimann will assume sole responsibility for risk management on the executive board starting June 1, as Wilson Ervin steps down to become a senior adviser reporting to Dougan.

To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

Last Updated: April 23, 2009 11:45 EDT