July 24 (Bloomberg) -- Credit Suisse Group AG, Switzerland's second-biggest bank, said earnings dropped 62 percent, less than analysts estimated, as the securities unit returned to profit and the company attracted new investments from wealthy clients.

Second-quarter net income fell to 1.22 billion Swiss francs ($1.18 billion), or 1.12 francs a share, from 3.19 billion francs, or 2.82 francs, a year earlier, the Zurich-based company said in a statement today. The shares rose the most in four months after earnings were almost double what analysts estimated.

Chief Executive Officer Brady Dougan cut leveraged loans and real estate assets by 68 percent over the past nine months to limit second-quarter writedowns to 22 million francs and said he will continue to manage the bank ``conservatively.'' Credit Suisse's wealth management unit got a net 15.4 billion francs in the quarter, after the 48-year-old American stepped up hiring of money managers while larger Zurich rival UBS AG reels from the biggest subprime mortgage losses of any European bank.

``Brady Dougan has been able to limit the ongoing deterioration of the business,'' said Guy de Blonay, who helps oversee about $41 billion at New Star Asset Management Group Ltd. ``Credit Suisse has been able to cut risky positions a bit faster than probably the average in the sector.''

Credit Suisse gained as much as 8.6 percent in Swiss trading and was up 3.45 francs, or 6.9 percent, at 53.35 francs by 9:05 a.m. The stock has lost 22 percent this year, compared with the 48 percent slump at UBS, the sixth-biggest loser in the 71-member Bloomberg Europe Banks and Financial Services Index.

`Challenging'

The bank follows New York-based Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. in reporting a profit for the second quarter. New York-based Citigroup Inc., the biggest U.S. bank by assets, had a net loss of $2.5 billion.

UBS said earlier this month that earnings were ``at or slightly below break-even,'' including about 3 billion francs of tax credits. Deutsche Bank AG, Germany's biggest bank, may report a second-quarter net income of 518 million euros ($814 million) on July 31, according to the median estimate of 13 analysts surveyed by Bloomberg.

``We anticipate that the current challenging market conditions will persist over the near to medium term and we will continue to manage our business conservatively,'' Dougan said in the statement today.

Writebacks

The investment bank reported a pretax profit of 281 million francs, compared with 2.5 billion francs a year ago and a loss of 3.46 billion francs in the first quarter. Corporate and retail banking saw a 2.6 percent increase in pretax profit to 390 million francs. Profits at the wealth and asset management units fell 17 percent to 830 million francs and 44 percent to 167 million francs, respectively.

The investment bank wrote down the value of leveraged loans and commercial mortgage-backed securities by 86 million francs and 477 million francs, respectively, while booking gains on residential mortgage-backed securities and collateralized debt obligations of 33 million francs and 508 million francs. Credit Suisse had a fair-value loss of 503 million francs on its own debt as credit spreads narrowed.

``I wouldn't say market prices have improved, but we were rightly positioned in the quarter,'' Chief Financial Officer Renato Fassbind said on a conference call. The positions are now close to ``normal,'' and the bank accrued ``significant'' dividend, albeit below last year's level, he said.

Winning Assets

Subprime losses at UBS, which holds more assets for affluent clients than any other bank, and Merrill Lynch are helping private banks that haven't been hit as much. Growth in assets from affluent clients at UBS and Merrill slowed last year, while smaller private banks saw stronger growth, according to an annual survey released last month by Scorpio Partnership.

Julius Baer Holding AG, Switzerland's biggest independent money manager, said yesterday that wealthy clients added 8 billion francs in the first half of this year. Merrill reported $5 billion of net outflows in the second quarter and Citigroup suffered $11 billion of redemptions at its global wealth management unit.

Credit Suisse said in January that it aims to hire about 1,000 wealth management advisers through 2010. The bank added 120 advisers at the unit in the second quarter.

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

Last Updated: July 24, 2008 03:11 EDT