Oct. 3 (Bloomberg) -- Credit Suisse Group Chief Executive Officer Brady Dougan, the former derivatives trader who took over in May, predicts the market for mortgage credit will be ``problematic'' for as long as 18 months.

``U.S. mortgage credit will remain problematic through this year and perhaps through 2008,'' Dougan told investors at a conference organized by Merrill Lynch & Co. in London. The Zurich-based bank doesn't see a return to stability ``any time soon'' after a surge in subprime mortgage defaults sparked a seize-up in credit markets in the third quarter, Dougan said.

Credit Suisse said Oct. 1 that profit from continuing operations will be between 1.04 billion Swiss francs ($890 million) and 1.56 billion francs, compared with 1.47 billion francs a year earlier. While the bank has sufficient access to cash, mortgage markets have suffered ``severe investor pull-back'' and ``origination has all but dried up,'' Dougan said today.

Deutsche Bank AG, Germany's biggest bank, said today third- quarter profit rose at least 13 percent as gains from tax credits and asset sales helped offset as much as 2.2 billion euros ($3.1 billion) of credit-related writedowns. UBS AG said Oct. 1 that it had a pretax loss of as much as 800 million francs after bad mortgage bets. CEO Marcel Rohner said he expects ``more normal performance'' for the rest of the year.

Job Cuts

Credit Suisse said yesterday it's eliminating about 170 jobs at its investment bank, with about half of the cuts in fixed- income. It said last week it will eliminate 150 jobs, mostly from its mortgage-based securities department. The bank ``will continue to adjust proportionately'' to market changes, Dougan said today.

Citigroup, the biggest U.S. bank, said yesterday that third- quarter profit fell because of ``weak'' credit markets and losses on leveraged loans and mortgage-backed securities. CEO Charles Prince said profit will return to ``normal'' in the fourth quarter.

New York-based Morgan Stanley, Bear Stearns Cos. and Lehman Brothers Holdings Inc. all said last month earnings were hurt by the U.S. mortgage market.

``The shakeout has left the business far less crowded,'' Dougan said, adding that there are `` opportunities'' in longer- term, prime mortgages.

Credit Suisse will target cost savings of 600 million francs this year, compared with 250 million francs last year, Dougan said today. The bank benefited from wealth-management fees to post a record 3.19 billion-franc profit in the second quarter.

``We have more work to do to reduce income volatility at the investment bank,'' including diversifying the sources of revenue, Dougan said today. ``We still expect first nine months of 2007 to be at a record level.''

Credit Suisse rose for a fifth day in Zurich trading, gaining 1.1 percent to 81.55 francs. The shares have fallen 3.9 percent this year, outperforming Zurich-based UBS, the biggest Swiss bank, and Frankfurt-based Deutsche Bank.

To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.net

Last Updated: October 3, 2007 12:01 EDT