Credit Suisse warns on Q1 loss; shares plunge

By Thomas Atkins

ZURICH (Reuters) - Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) warned on Thursday it could report its first quarterly loss in five years, further eroding the bank's credibility with investors still shaken by February's $2.85 billion trading scandal.

The bank's shares dropped more than 11 percent after it said unprecedented market conditions in March -- with wild swings in prices for stock and debt and emergency interventions by major central banks -- had introduced new uncertainty and made any profit unlikely for the period.

"This is clearly embarrassing for Credit Suisse and further damages the reputation that it had worked so hard to improve after years of reckless risk taking. Whilst we suspect that the bank has less suspect assets than UBS, our confidence in this view has diminished considerably as a result of these recent announcements," said Helvea analyst Peter Thorne.

Brady Dougan, the American chief executive of the Swiss-based group, said an investigation revealed "intentional misconduct" by a handful of traders who have since been fired or suspended and said that control mechanisms had failed -- but that the scandal involving debt derivatives had not spread beyond one trading unit.

Dougan took pains to highlight how the group still faced difficult market conditions in March, which investors took to mean that more writedowns on the group's portfolio of risky assets were possible.

The group has already written down around 5.8 billion Swiss francs ($5.73 billion) related to the trading scandal and the credit crisis -- far less than the $18 billion absorbed by rival UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), Europe's hardest-hit bank.

"We're operating in extremely volatile markets. The stress on the industry is evident," Dougan said in a conference call.

CS shares pared losses to down 7.5 percent to 47.90 Swiss francs by 1444 GMT, having hit 46.10. Credit Suisse shares have shed around 50 percent since May last year.