Credit Suisse Restates Fourth-Quarter Loss on U.S. Provision (1)
Credit Suisse Group (CSGN) AG, Switzerland’s second-biggest bank, said losses in the fourth quarter were larger than previously reported after it booked more charges for a probe into tax evasion by U.S. clients.
The net loss amounted to 476 million Swiss francs ($534 million), the Zurich-based bank said today, as it set aside an extra 468 million francs, primarily related to the U.S. investigation. Credit Suisse had restated results for the quarter last month, reporting a loss of 8 million francs after a 275 million-franc charge to settle lawsuits over mortgages sold to Fannie Mae and Freddie Mac.
Credit Suisse has been a target of a criminal investigation by the Department of Justice over former cross-border private-banking services to American customers. The additional reserves put the estimated cost of a settlement at more than the $780 million that UBS AG, Switzerland’s biggest bank, paid in 2009 to avoid criminal prosecution.
“That’s disappointing,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA. “They’re certainly further down the road than they were before. I think that’s not the full works yet.”
The company’s shares fell 0.1 percent to 29 francs at 9:16 a.m. in Zurich. The Bloomberg Europe Banks & Financial Services Index rose less than 0.1 percent.
Credit Suisse said today it set aside 425 million francs in provisions for the DoJ probe, in addition to 295 million francs for U.S. tax matters in 2011. It agreed to pay $196.5 million in February to settle a related investigation by the Securities and Exchange Commission.
Chief Executive Officer Brady Dougan, testifying at a Senate subcommittee hearing in Washington in February, apologized and deflected blame onto a small group of employees for helping clients evade taxes. The subcommittee said in a report that 1,800 Credit Suisse employees helped Americans open 22,000 accounts, most of which were hidden from the Internal Revenue Service.
The subcommittee indicated that Credit Suisse hid about $10 billion from the IRS, more than twice as much as claimed by the Justice Department in a 2011 indictment of seven of its bankers. Dougan disputed the report’s finding, saying the number was closer to $7 billion.
“This was a very small business from our point of view, less than 1 percent of the global profitability of the global bank,” Dougan said at the hearing.
UBS, which was accused by the subcommittee in 2008 for hiding as much as $17.9 billion for 19,000 Americans, in February 2009 avoided criminal prosecution by paying $780 million, saying it fostered tax evasion, and giving the U.S. data on more than 250 accounts. It later turned over data on another 4,450 accounts.
Credit: Business Week