Credit Suisse takes new hit over tax probe
Thursday 03 April 2014
Credit Suisse has taken yet another hit over its ongoing US tax probe which pushed its final-quarter results firmly into the red.
At the same time the bank, which employs 7500 people in London, revealed that its chief executive Brady Dougan’s pay rose by 26% last year to Swfr9.79 million (£6.64 million).
Credit Suisse said it had taken another Swfr468 million charge on its continuing negotiations with the US Department of Justice over US citizens who avoided tax through Swiss bank accounts.
That charge means that Credit Suisse has restated its fourth-quarter figures twice in two months. Last month it was hit by a Swfr275 million charge to settle lawsuits taken over mortgages sold to US companies Fannie Mae and Freddie Mac.
Originally, Credit Suisse had reported in February a fourth-quarter net profit of Swfr267 million which, in itself, was below analysts’ forecasts. Last month it was changed to a net loss of Swfr8 million which today was increased to a net loss of Swfr476 million.
It also meant that full-year, core pre-tax income has fallen to Swfr3.5 billion which was still well ahead of the Swfr1.9 billion it reported in 2012.
Credit Suisse settled with the US Securities and Exchange Commission over the tax-avoidance scandal last year at a cost of Swfr174 million.
Together with today’s DOJ provision it is likely Credit Suisse’s total cost of the US tax avoidance scandal could exceed the $780 million (£469.7 million) which its larger Swiss rival, UBS, paid out in 2009 to avoid criminal prosecution.
Credit Suisse shares were barely moved by today’s news, dropping just two cents to Swfr29.
Analysts said there was some relief that the bank appeared closer to a settlement with the DOJ. Credit Suisse simply described the extra charges as “part of its ongoing efforts to reach resolution with the DOJ into the US tax-related matters”.
Mediobanca’s Christopher Wheeler said: “They are certainly further down the road than they were before, but I think that is the full works yet.” Dougan told a senate committee hearing in February that a small number of individuals in the private banking arm “went to great lengths to disguise their bad conduct from Credit Suisse exceutive management”.
He also said: “This was a very small business from our point of view, less than 1% of the global profitability of the global bank.”
The committee said it believed Credit Suisse hid about Sfr 10 billion from the US Internal Revenue Service with 1800 employees helping 22,000 Americans open secret accounts.
Royal Bank of Scotland came under fire today as it announced it is closing 44 branches — 14 of which are classified as “the last bank branch in town”. RBS said most of the branches were open only a few hours a week and served one or two customers each hour.
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