C.Suisse investment bank hit, peers may fare better

LONDON Oct 23 (Reuters) - Credit Suisse's investment bank suffered a "miserable" third quarter that showed it may not be as defensively positioned as expected, analysts said, adding that European rivals should have fared better.

The Swiss bank (CSGN.VX) on Thursday posted a 1.7 billion Swiss franc ($1.46 billion) third-quarter trading loss for its investment bank arm, which pushed the overall group 1.3 billion francs into the red. [ID:nLM534060]

"I expect all (European investment banks) to have a tough third quarter -- and a tough fourth quarter. But Credit Suisse's third-quarter investment banking result does seem especially bad, both versus expectations and recent history," said Matthew Clark, analyst at Keefe, Bruyette & Woods. He said it was a "miserable" result.

Its problems may not be mirrored elsewhere, however, and Deutsche Bank (DBKGn.DE), which reports next week, should fare better, analysts said.

Deutsche Bank had about 10 percent of its equity business in proprietary trading as opposed to around 20 percent at Credit Suisse, said David Williams, analyst at Fox-Pitt Kelton.

"In that respect, Deutsche Bank will probably fare a little bit better," he said.

Credit Suisse unveiled proprietary losses of 400 million francs from trading preferred securities, 700 million from trading convertibles, 500 million from its equity long/short strategy and 100 million from arbitrage positions.

"Credit Suisse's prop trading books would make it one of the largest hedge funds in the world -- not consistent with its defensive reputation," Derek de Vries, analyst at Merrill Lynch, said in a research note.

Deutsche Bank "seems in a better shape operationally," Dresdner Kleinwort analyst Stefan-Michael Stalmann said.

A bigger issue for Deutsche Bank could be its capital position, however, with some pressure on it to lift its capital ratio after recent capital increases by Credit Suisse, UBS (UBSN.VX), Barclays (BARC.L) and other European banks.

"The new minimum for investment banks must now lie in the range of 12-15 percent," Williams said.

Barclays' investment banking unit also appears to have performed better. The British bank said its profit in September had "very signficantly" exceeded its monthly run rate in the first half of the year, helped by a strong contribution from its investment banking and investment management arm. (Editing by David Cowell)