If Barclays surprised on the upside on Tuesday, its Swiss rival Credit Suisse had a confession to make: some of its people can’t add up.
Or rather the bank is facing a revision of its 2007 figures delivered to the market just one week ago. As well as a repricing of assets to reflect tough market conditions during the first few weeks of the new year, an internal review at CS “has identified mismarkings and pricing errors by a small number of traders in certain positions in our structured credit trading business.”
How big are these errors and repricings? Well, the immediate hit, all told, is $2.85bn. The hit to net income is $1bn, but then the review is ongoing and CS management said they would not be holding an investors’ conference call on the matter until 14.00GMT.
In the meantime, CS shares dropped 7 per cent upon opening and were suspended.
Pity the Qataris, whose investment authority revealed on Monday that it had just bought a stake of up to 2 per cent in the bank.
The full CS statement:
Further to its commitment to provide transparency, Credit Suisse today announced that in connection with the operation of ongoing control processes, it has undertaken an internal review that has resulted in the repricing of certain asset-backed positions in its Structured Credit Trading business within Investment Banking. The current total fair value reductions of these positions, which reflect significant adverse first quarter 2008 market developments, are estimated at approximately USD 2.85 billion (having an estimated net income impact of approximately USD 1.0 billion). In the first quarter to date, we estimate we remain profitable after giving effect to these reductions. The final determination of these reductions will depend on further results of our review and continuing market developments. We will also assess whether any portion of these reductions could affect 2007 results. Finally, our internal review, which has identified mismarkings and pricing errors by a small number of traders in certain positions in our Structured Credit Trading business, is continuing.