Derivatives sale lifts CS Holding

JOHN EISENHAMMER

Financial Editor

CS Holding, one of the three Swiss banking giants and parent of Credit Suisse, reported a 3 per cent drop in underlying first-half net profit to Sfr 691m (pounds 373.5m).

This was in line with analysts' expectations and the bank said it was a "good result considering 1995's slow start".

First-half net profit showed a 2 per cent rise to Sfr749m thanks to the extraordinary gain from the sale of a 20 per cent stake in the derivatives business, CS Financial Products, to Swiss Re.

Sarah Manton, analyst with Smith New Court, said: "These are quite good results, with no real surprises. The 20 per cent gain in trading is perhaps disappointing given that Credit Suisse is the biggest Swiss trading house. They probably made some mistakes."

The increase in trading revenues to Sfr1.1bn largely helped to offset the 13 per cent drop in net commission income to Sfr1.7bn in the first half. Analysts were impressed by CS Holding's grip on costs, with a 1 per cent increase in staff costs and a significant 11 per cent fall in operating expenses. "They are being the most aggressive on costs of all the big banks reporting at the moment," Ms Manton said.

CS Holding said the return on equity fell to 8.7 per cent in the first half of 1995 from 8.8 per cent a year ago.

The tight control on overall costs was maintained despite restructuring charges in the US-based investment banking business, Credit Suisse First Boston. CS Holding management has come under increasing pressure, particularly in the light of recent consolidation in the global investment banking sector, to tackle the problems associated with its structure of relatively autonomous regional operations. There have been cases of competition between the commercial bank and the investment bank, and confused lines of communication.

Moves are afoot to co-ordinate CS and CSFB more closely, and also to work towards an integrated pan-European investment banking operation that would report to Zurich directly rather than via New York.

But CSFB starts with a big advantage over Continental rivals seeking global investment banking reach in that it is the only one with a significant presence in the key US market.

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