May 3 (Bloomberg) -- Credit Suisse Group, Switzerland's second-largest bank, may say first-quarter profit dropped 14 percent because of lower revenue at its securities unit and declining fees for managing millionaires' investments.

The Zurich-based company probably will report tomorrow that net income fell to 1.59 billion Swiss francs ($1.34 billion) from 1.86 billion francs a year earlier, according to the median estimate of eight analysts surveyed by Bloomberg News. Estimates ranged from 1.35 billion francs to 2.01 billion francs.

Profit at the Credit Suisse First Boston securities unit probably declined 27 percent as the fixed-income business failed to match its performance of a year ago, when revenue almost doubled as interest rates declined, analysts estimate. Chief Executive Officer Oswald Gruebel is combining CSFB with the rest of the company's banking operations to lower costs. He also plans to build up the wealth-management business.

``They still have the last leg to go on their restructuring and we will be waiting for top-line growth now,'' said Son Nam Nguyen, an analyst who helps manage about $61 billion at Union Bancaire Privee in Geneva, including Credit Suisse stock.

Credit Suisse's stock is up 5.2 percent this year, outperforming the 80-member Bloomberg Europe Banks and Financial Services Index, which is down 0.4 percent. Shares of UBS AG, Europe's biggest bank and Credit Suisse's larger Swiss competitor, are up 1 percent.

UBS may report later today that first-quarter profit reached a record 2.41 billion francs as $1 billion of acquisitions in the past year led to increased fees from managing money for the wealthy, analysts estimate. Earnings at Credit Suisse's private bank probably declined as stiffening competition led to lower fees, according to the analyst survey.

Exceeding Estimates

Gruebel, 61, who became sole CEO last July when the bank decided against renewing John Mack's contract, declined to be interviewed. His pay isn't disclosed by Credit Suisse. Chairman Walter Kielholz, 53, received 12 million francs last year, up 50 percent as profit surged to 5.63 billion francs from 770 million francs in 2003.

Credit Suisse's earnings exceeded analysts' estimates by 24 percent on average during the past four quarters. The company switched to U.S. generally accepted accounting principles from Swiss standards in the first quarter of 2004.

Of 22 analysts who've rated Credit Suisse stock in the past three months, 15 have ``buy'' recommendations, five have ``holds'' and two have ``sell'' ratings, data compiled by Bloomberg show.

CSFB Reorganization

Gruebel in December told investors the bank's reorganization should increase profit to more than 8 billion francs in 2007 from 5.63 billion francs last year. CSFB is expected to contribute 3 billion francs to Gruebel's 2007 goal.

As part of the plan, Credit Suisse said in December it would sell the Winterthur insurance unit, which it bought in 1997 for about $10 billion, in a share sale. The company said it isn't under pressure to sell Winterthur soon.

Gruebel and CSFB Chief Executive Brady Dougan announced plans in December to risk more money on trading and combine the firm's equities and fixed-income trading units. Dougan, 45, said he would focus on the corporate clients that generate the most fees.

Trading revenue helped boost quarterly profit to a record at Wall Street firms including Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Bear Stearns Cos. in the three months ended Feb. 28.

For CSFB, ``the first quarter of last year was almost an historical high'' for debt sales and trading, Nguyen said. ``I doubt that will be recurrent.''

Deutsche Bank AG CEO Josef Ackermann said in a statement last week that ``conditions in the international financial markets became more challenging in mid-March.''

Increased Competition

Earnings at Credit Suisse's private bank, led by 43-year-old Walter Berchtold, probably dropped 6.8 percent to 635 million francs, according to the analyst survey. The business, which caters to people with at least $1 million to invest, accounted for 44 percent of Credit Suisse's net income last year.

The unit's fees, among the industry's highest because of an emphasis on tailor-made investments called structured products, may be falling as competitors offer similar services, said Heinrich Wiemer, an analyst at Bank Sal. Oppenheim Jr. & Cie. in Zurich.

The private bank's high fees and profits ``depend critically on the continued ability to place ever more high-margin products,'' wrote Wiemer, who has a ``neutral'' rating on Credit Suisse shares, in an April 28 investor report. ``Such products are increasingly commoditized.''

Fees at the private bank, which reached an average 14.60 francs for every 1,000 francs invested in the year-earlier quarter, may have declined to about 13.37 francs, the average for all of last year, the analysts surveyed said.

To contact the reporter on this story: Philipp Goellner in Zurich at pgoellner@bloomberg.net

Last Updated: May 2, 2005 18:10 EDT