The fourth quarter results of Swiss bank Credit Suisse on Thursday reflected the financial institution's burden of handling legal costs as opposed to generating profit.
In the holiday quarter of last year, Credit Suisse reported net income of CHF267 million or $295 million. Although it was a 2% increase compared to the net income incurred the same period the previous year, The New York Times' the DealBook said it fell short of analysts' expectations. On Thursday, shares of the Swiss bank dropped 0.9% in Zurich.
The bank's earnings took the brunt of the increasing allocations for legal costs stemming from a US tax dispute and continuing mortgage litigation, DealBook said. Credit Suisse's allocation of CHF514 million for legal costs contributed to the low earnings already affected by the investment bank's weak performance.
In November of last year, the state of New Jersey sued the Swiss bank for the misinterpretation of the risk level associated with residential mortgage-backed securities amounting to $10 billion. Moreover, Credit Suisse and other Swiss banks are facing a US investigation in claims that they had provided relief to private banking clients who wishes to avoid paying US taxes.
DealBook said the Swiss bank's chief executive officer, Brady Dougan, is looking to reduce its annual costs to CHF4.5 billion by the end of next year. Also, Dougan is planning to trim down its investment bank unit's risk-weighted assets and increase it underlying return on equity from 10.1% last year to over 15%. DealBook said the underlying return on equity is a measure of a company's profitability. Dougan was said to have expressed those goals he intended to accomplish on Thursday.
Mr. Dougan said in the earnings report, "In 2013, our priorities were to further improve profitability, continue to strengthen our capital position and reduce risks and leverage exposure while expanding market share in targeted markets. We made strong progress toward these objectives."
