Dougan Says Faster Asset Reduction Will Benefit Credit Suisse
The “bulk” of risk-weighted asset reductions by European banks is still to come, Dougan told journalists at a press conference in Zurich today. Speeding up Credit Suisse’s asset cuts “will put us in a better position,” he said.
Credit Suisse, the second-biggest Swiss bank, earlier today reported its first quarterly loss since 2008 as measures taken to expedite a revamp of the investment bank hurt earnings. The investment bank cut risk-weighted assets by 35 billion Swiss francs ($38.4 billion) in the three-month period on a Basel III basis, and now aims to complete the reductions planned for 2012 by the end of the first quarter.
While acceleration of the cuts “cost us money” in the fourth quarter, it would probably have cost more if it were done later, Dougan said. That will give Credit Suisse an advantage on competitors that are seeking to trim assets as well, he said.
Twenty-two European lenders plan to cut risk-weighted assets by a combined 1.2 trillion euros ($1.6 trillion), or about 15 percent, Kian Abouhossein, an analyst at New York-based JPMorgan Chase & Co., estimated last year.
Credit Suisse said in November it will lower risk-weighted assets by 110 billion francs, including some 99 billion francs at the investment bank’s fixed-income unit, by the end of 2014. About 80 billion francs of risk-weighted asset cuts were planned for this year. The bank doesn’t plan to increase the total amount of reductions, Dougan said.
Risk-weighted asset reductions will help the bank boost its capital ratios under Basel III rules, which lag behind some rivals. Credit Suisse said today it expects to have a common equity ratio of 7.1 percent on fully applied Basel III rules by the end of this year and 9.9 percent by the end of 2013.
“Despite the effective deleveraging and the dividend cut, Credit Suisse’s Basel III look-through ratio still appears at the low end of global peers of 8 to 10 percent by the end of 2012,” said Huw van Steenis, a London-based analyst at Morgan Stanley.
The Zurich-based company will propose a cash distribution to shareholders of 75 centimes a share for 2011, down from 1.30 francs a share for the previous year.
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