ZURICH Credit Suisse Group, the worlds No. 3 merger adviser and stock underwriter, said its second-half profits last year fell 12% from a year earlier after the company took a charge for its purchase of the U.S. investment banking firm Donaldson, Lufkin & Jenrette Inc.
Company spokesman Andreas Hildenbrand said profits declined to $1.3 billion. Credit Suisse did not report per-share earnings.
The company took a $664 million charge in the DLJ deal, which was announced Aug. 30 just as investment banking profits began to decline. However, its profits for the full year rose 11%, exceeding analysts expectations.
Credit Suisse bought DLJ close to the highs in investment banking, said Marco van Son, a fund manager at SNS Asset Management in the Netherlands, which owns shares of the company. The timing was bad.
The Zurich company said that business is getting more challenging as stock prices fall and takeovers are down more than 60% this year. Rising profits in its asset management and insurance units curbed the second-half drop.
Morgan Stanley Dean Witter & Co. and Goldman Sachs Group Inc. have reported declines in fourth-quarter earnings. Declining net income is leading to job cuts on Wall Street. After it bought DLJ, Credit Suisse announced plans to cut about 2,500 jobs.
Shares of Credit Suisse, which have fallen 23% since the deal for DLJ was announced, rose as much as 3.5% during trading Tuesday, to $179.74 a share. Credit Suisse also announced a share buyback program and plans for a 4-for-1 stock split.
Lukas Muehlemann, Credit Suisses chairman and chief executive officer, and Allen Wheat, head of the Credit Suisse First Boston securities unit, have been losing some top bankers, including Kenneth Moelis and Herald Ritch.
However, in an interview Monday, Mr. Muehlemann said the company has been positively surprised by the large number of key employees that we have succeeded in retaining, during a period when we had expected to face greater difficulties. Credit Suisse says it has retained more than 90% of the DLJ investment banking employees it tried to keep.
The year as a whole looks quite good for Credit Suisse in comparison with other investment banking companies, said Susan Smith, a fund manager at M&G Group PLC in London. However, our best guess is, the companys earnings target is going to have to come down, unless we have an exceptionally good second half.