UPDATE 5-Big U.S. bank gains put C. Suisse in the shade

* C. Suisse posts 2.1 bln Sfr net vs f'casts of 2 bln Sfr

* Net down 2 pct y/y, fixed-income trading & sales down y/y

* Wealthy client net new assets 13 bln Sfr, best since 2005

* CFO says no knowledge of SEC CDO probe into C.Suisse

* Shares down 5.6 pct, hit 7-week low and underperform index

(Adds CEO comments to Reuters Insider TV, more details)

By Lisa Jucca

ZURICH, April 22 (Reuters) - Credit Suisse's (CSGN.VX)(CS.N) investment banking results undershot forecast-beating gains at U.S. peers, dragging shares to seven-week lows even as the bank won new wealthy clients' money faster than in any quarter since 2005.

Credit Suisse, Switzerland's No.2 bank behind UBS (UBSN.VX) (UBS.N), posted first-quarter net profit of 2.1 billion Swiss francs ($2 billion) on Thursday on fixed-income trading gains and broadly in line with a Reuters poll.

This came, however, as a disappointment to investors, who had been pricing in big gains after the blowout numbers from major U.S. banks. Shares were down 5.6 percent by 1401 GMT, while the Stoxx Europe 600 Banks index .SX7P fell 2.29 percent.

"Relative to U.S. peers the bank has underperformed in investment banking and trading revenues," said Sebastien Lemaire, a banking analyst with Natixis Securities.

"The bank collected a lot of new assets. This is good news for the future but they did not manage to translate that into revenues in the first quarter." <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Reuters Insider show on link.reuters.com/jas88j

Reuters Breakingviews column on [ID:nLDE63L0K9]

Reuters graphic on Credit Suisse and UBS asset trends

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Credit Suisse emerged quickly and without state aid from the financial crisis and posted hefty trading gains in 2009 while others struggled. But a year on, rivals are back in the fray.

Morgan Stanley (MS.N), for instance, more than doubled its fixed-income sales and trading revenues from a year ago, while Credit Suisse's gains in this segment dropped by nearly a third from a hefty 3.7 billion francs in the first quarter of 2009.

Yet, interest rate and forex trading rose more than three times from the last quarter, making up nearly two-thirds of Credit Suisse's trading revenues of 3.5 billion francs.

Chief Executive Brady Dougan said many rivals were starting from a lower base and were also taking more risks.

"The strategy we have is one that is focused on client flow," he said. "It is not going to have a big asset drag when markets are buoyant. Others have more assets on the book."

Credit Suisse has slashed risky assets to meet new strict Swiss and global regulatory requirements and its Tier 1 ratio of 16.4 percent makes it one of the world's best capitalised banks.

"The positive story of strong FICC (fixed income, currency and commodities) income in Q1 is now priced in for the investment banks," said Matrix analyst Andrew Lim.

"The attention will now turn to exposure to regulatory issues, where we think Credit Suisse will be less exposed than the likes of Barclays (BARC.L) and Deutsche Bank (DBKGn.DE) given its large private banking business."

WINNING CLIENT MONEY

Credit Suisse attracted 13 billion francs of net new assets from wealthy clients, more than double the previous quarter, despite concerns the franchise could have been hit by a German tax evasion probe into 1,100 of its clients. [ID:nLDE62I1MK]

Dougan told Reuters Insider TV the German probe may have an impact, although the bank was still attracting money in Europe.

Analysts welcomed the asset growth, which was partially driven by withdrawals at UBS. But a drop of 10 basis points in gross margins on the back of low interest rates and customers shunning high-margin products, meant revenues were weak.

"We hope that in the next couple of quarter we will start seeing a normalisation of the activity of the business," Dougan said in the interview with Reuters Insider TV.

Credit Suisse has won net new assets of 145 billion francs since January 2007 and was able to improve margins and market share while UBS lost more than 200 billion francs as it was hit by the fallout of the credit crisis and a U.S. tax fraud probe.

"Overall we have a positive feeling on Credit Suisse on fundamentals," Banca del Sempione fund manager Sascha Kever said. "This is one bank that has come ahead (after the crisis)."

Chief Financial Officer Renato Fassbind said the first quarter had been "very good in fixed-income, not a stellar quarter in equities and showing an improvement on the advisory business". Dougan expects the same market conditions to prevail this quarter.

Trading revenues for interest rate products rose fourfold from the previous quarter, foreign exchange trading revenues doubled and equities trading turned positive. The bank suffered trading losses in credit products and, to a lesser extent, in commodities, still a small business for Credit Suisse.

Dougan said Credit Suisse had not been approached by the U.S. Securities and Exchange Commission, which is investigating rival Goldman Sachs (GS.N) for some collateralized debt obligation (CDO) transactions, adding that the CDO business was in any case marginal for his bank.

He saw significant opportunities to further boost market share in investment banking even as competition is picking up.

JP Morgan JP.N Goldman Sachs, Morgan Stanley, Citi (C.N) and Bank of America (BAC.N) beat analysts with trading-driven first quarter earnings, raising the bar for European banks.

Domestic rival UBS, which was hit hard by the crisis, has turned around its fixed-income business and forecast group first quarter pretax profit of 2.5 billion francs. [ID:nLDE61802M] (Editing by Mike Nesbit and Sharon Lindores) ($1=1.067 Swiss Franc)