Credit Suisse makes Q1 loss in commod, cuts risk

* Investment bank makes loss on commodity trading

* Reduces Q1 commodities risk, unlike Goldman, Morgan

David Sheppard

LONDON, April 22 (Reuters) - Credit Suisse (CSGN.VX) made a loss trading commodities in the first quarter as it reduced the size of its bets, setting itself apart from the biggest financial players who upped their stakes to try and maintain profits in calmer conditions.

Credit Suisse, Switzerland's second-largest bank behind UBS (UBSN.VX), posted an overall first-quarter profit of 2.1 billion Swiss francs ($1.97 billion) on Thursday, but this included a loss of 66 million Swiss francs from its commodity, emissions and energy product trading. [ID:nLDE63K1ZH]

"We had small losses in fixed income arbitrage trading and minimal losses in commodities, driven by losses in our commodities exit businesses, compared to revenues in 1Q09 and significantly lower revenues from our ongoing commodities business," Credit Suisse said in its quarterly report.

The bank had trading revenues of 99 million Swiss francs from commodities in the previous quarter and 214 million Swiss Francs in the first quarter of 2009.

The bank reduced its daily average Value at Risk (VaR) in commodities during the first quarter by almost 30 percent from the same period last year, down to 17 million Swiss francs from 24 million Swiss francs. Daily average VaR was 1 million Swiss francs below the last quarter of 2009.

VaR is a standard industry measure for how much of a bank's money is at stake on any day for trading a particular market. The bank's total VaR was up to 104 million Swiss francs from 95 million in the previous quarter, though it was substantially lower than the 204 million at risk in the first quarter of 2009.

"There has been relative stability in oil and other commodity prices in recent months," VTB Capital analyst Andrey Kryuchenkov said.

"With less volatility, sometimes you have to risk more money to make a smaller profit than in the past."

GOLDMAN AND MORGAN STANLEY UP STAKES

Credit Suisse's moves in commodities are in contrast to U.S. investment banks Goldman Sachs (GS.N) and Morgan Stanley (MS.N), two of the biggest financial players in the market.

Goldman increased its VaR in commodities to $49 million in the first quarter, up by almost 30 percent from the previous quarter and the first quarter of 2009, though the bank reported on Tuesday net revenues from commodities fell short of the year-ago period, without providing further details. [ID:nN20116796]

On Wednesday, Morgan Stanley said its Value-at-Risk for commodities stood at $27 million in the first quarter, up $4 million from the previous quarter and up $1 million from a year ago, but net income from commodities "reflected reduced levels of client activity". [ID:nN21116900]

Oil, metals and agricultural prices were largely locked in tight trading ranges between January and March and Goldman and Morgan Stanley's higher VaR suggested they were taking on larger bets with their own money to profit amid calmer markets, analysts said.

Goldman and Morgan Stanley together account for the bulk of the market-making activity for commodities on Wall Street, with both being capable of trading and shipping physical crude oil.

JP Morgan, the number two U.S. bank, behaved more like Credit Suisse, staking just $15 million of its own money for commodities trading on an average day during the first quarter, compared with $17 million in the previous quarter and $20 million in the first quarter of 2009. [ID:nN14134125]

Some of Credit Suisse's lower average commodity VaR may be due to the rise in value of the Swiss franc against the dollar, with most commodities trading in the U.S. currency.

The Swiss bank said it had 42 billion Swiss francs of real estate and commodities under management in its quarterly report, without providing a further breakdown.

(editing by William Hardy)