PREVIEW-C.Suisse profits seen down, German tax row eyed

* Investment banking activity seen slowing in Q2

* Bank to book 400 mln-Sfr ($380 mln) charge on UK tax bonus

* More clarity on German tax issue hoped

By Lisa Jucca

ZURICH, July 19 (Reuters) - Second-quarter profits at Swiss bank Credit Suisse (CSGN.VX) (CS.N), currently the target of an investigation by German tax officials, are expected to have fallen as the euro crisis takes its toll on its investment banking business.

Major U.S. banks Bank of America (BAC.N) and Citigroup (C.N) have already reported reduced trading activity in the quarter caused falls of 20 and 40 percent in investment banking profits compared with the first quarter. [ID:nN16100246]

Analysts polled by Reuters expect Switzerland's second biggest bank by market value behind UBS (UBSN.VX) to post a net profit of 1.229 billion Swiss francs ($1.17 billion) when it releases results on July 22, down 22 percent from the previous quarter. [ID:LDE66I1GK]

Credit Suisse is also expected to book a charge of around 400 million francs related to a one-off British tax on staff bonuses paid on 2009 profits. But this could be nearly offset by an accounting benefit stemming from the widening of spreads on its credit-default swaps, analysts said.

Beyond the numbers, investors are expected to focus on anything management has to say about Germany's attempt to identify possible tax evaders who have banked with Credit Suisse in Switzerland, which resulted last week in tax officials searching the Swiss bank's offices in Germany. [ID:nLDE66F1HT]

The raids are too recent to have had any material impact on Credit Suisse's wealth management business, analysts say. But they show that Switzerland's cash-strapped neighbours are not willing to drop the pressure as the euro sovereign debt crisis continues to rumble on. "It's one of the clarifications that people expect management to give in the conference call," said Elie Darwish, an analyst with Exane BNP Paribas. "Investors would like to have a better understanding of what is at stake here."

Switzerland agreed last year to weaken its treasured banking privacy laws to help UBS (UBS.N) settle a bitter U.S. tax fraud.

But pressure on the Swiss offshore banking industry has remained strong after an informant stole client data from HSBC's (HSBA.L) private bank in Switzerland and then the German authorities said they were targeting local Credit Suisse branches after analysing a compact disc of client names which they obtained earlier this year. [ID:nLDE66D0NZ]

CLEARER PICTURE

Vontobel analyst Teresa Nielsen hopes management will also give more clarity on the operating profitability of the investment bank and whether Credit Suisse will continue to hire staff.

"Furthermore, we expect to get a clearer picture of where Credit Suisse is currently gaining and losing market share," she said in a recent note.

Analysts said Chief Executive Brady Dougan already signalled at a lunch at the end of May that primary activities and the secondary business had been weak.

But the bank should still perform better in this area than rivals such as UBS and Barclays (BARC.L), Darwish said.

Given persistent investment banking volatility, investors may concentrate on private banking margins and the volume of new client money Credit Suisse has attracted.

Regulation is also expected to be topical ahead of the release on July 23 of the results of the industrywide stress tests that have been conducted on 91 European banks.

With a Tier 1 capital adequacy ratio of around 16 percent, one of the best in the banking world, Credit Suisse is expected to stand out against EU rivals, although it is not yet clear if and when Swiss regulator FINMA will reveal details of its own stress testing.

Shares in Credit Suisse have fallen by 16 percent this year, underperforming an 8 percent drop in Europe's STOXX 600 banking index .SX7P, with the German tax raids making the shares more volatile in the recent week, traders said. ($1=1.052 Swiss francs) (Editing by Greg Mahlich)