* Q2 net loss 700 mln Sfr vs 581 mln Sfr in poll
* Private bank wins 10.1 bln Sfr in net new money
* Investment bank pretax profit steady at 752 mln Sfr
* Credit Suisse to exit commodities trading
* Commodities trading exit will save $75 mln
* Says stowed funds for cash dividend in 2014
* Shares down 1.3 pct at 1155 GMT
(Adds CEO, CFO comments, updates share price)
By Katharina Bart
ZURICH, July 22 Credit Suisse Group AG will quit
commodities trading after chalking up its biggest loss since the
the financial crisis in 2008, the result of a 1.6 billion Swiss
franc ($1.78 billion) fine from U.S. authorities for helping its
clients evade taxes.
The Swiss bank reversed a recent vow to stick with its
commodities unit, and thus joins the ranks of trading firms
answering regulatory demands for more capital by significantly
reducing or even shuttering their natural resource trading arms.
Credit Suisse's fixed income unit outshone both
its wealthy client unit and its U.S. rivals with a 4 percent
rise in sales and trading, flouting its own downbeat guidance in
May. That compares to drops of at least 10 percent at American
banks like Goldman Sachs and JPMorgan last week.
Credit Suisse said the commodities cuts, set to save $75
million, would allow resources and funds to be reassigned to its
private bank, which disappointed investors with a 39 percent
drop in revenue and weaker margins, and swung to a loss due to
"I want to reiterate that we deeply regret the past
misconduct that led to this settlement and that we take full
responsibility for it," Brady Dougan, chief executive of the
Zurich-based lender, said on Tuesday.
Credit Suisse's private bank has been under scrutiny since
the bank's guilty plea to the U.S. criminal charge, with
investors worried about clients pulling money out of its wealth
management business as a result.
"It's hard to exactly estimate the impact but it certainly
did have an impact," Dougan told a news conference.
"There may have been clients who didn't do business with us
who otherwise would have," he said.
The private bank, measured by its ability to win fresh funds
from new and existing clients, saw a "hiatus of inflows" between
the end of April and May 19, when the settlement was publicly
disclosed, according to executives.
However, the unit ultimately netted 10.1 billion francs of
net new money in the quarter, a key indicator of future revenue
- and just above analysts' consensus for 9.27 billion francs.
Dougan said the bank's capabilities to offer services to
clients - another major concern of investors - were not hampered
as a result of the settlement.
"The guilty plea in the U.S. appears to have had no negative
impact on business and... we believe the shares remain
attractively priced," Nomura analyst Jon Peace said. He rates
the stock at buy with a 36 franc target price.
Pretax profit at Credit Suisse's investment bank, where it
cut back underperforming areas like its interest rate trading
arm, was near unchanged on the year at 752 million francs.
But the investment bank result failed to underpin the bank's
shares. At 1155 GMT, the stock was down 1.3 percent against a
1.7 percent rise in the European sector. Traders cited
feebleness at the private bank and weak capital ratios as
reasons for the underperformance.
The bank said it would wind down its commodities trading,
where it is mid-sized player, joining the likes of investment
banks like Deutsche Bank, JPMorgan and Barclays
that are either exiting or significantly downsizing their
activities in commodities.
Credit Suisse's exit leaves only a small number of players
in commodities trading, which had been seen as the absolute
necessity of investment banking only a few years ago, including
Goldman Sachs, Citigroup, Morgan Stanley and
some new comers such as BTG Pactual.
In past years, Credit Suisse's revenue from commodities was
very volatile, sometime exceeding $200 million and sometimes
barely above $10 million.
The bank didn't elaborate on how many staff would leave the
bank as a result of the dismantling, which doesn't affect a
Geneva-based commodities and trade finance unit.
The overall investment bank, which cut 500 jobs on the
quarter, will continue to trade precious metals, which typically
are traded alongside foreign currencies.
It will also move forex trading, where it is not a major
player, towards electronic trading and voice offering for larger
and more complex trades, and will focus its rates business on
cash products and derivatives.
The fixed income outperformance, on the back of activities
such as mortgage servicing, helped it counter a drop in equity
But the shifts in mix may not be enough to catch up to
crosstown rival UBS, the largest private bank in the
world, according to Espirito Santo Investment Bank.
"Overall, while the investment bank has outperformed this
quarter, private banking and wealth management continues to
disappoint," said Espirito's Shailesh Raikundlia.
"Given the focus on private banking to drive returns going
forward, we continue to believe that UBS' private banking
franchise offers higher returns potential than Credit Suisse's."
Credit Suisse wants to eventually return to double-digit
capital returns from its core investment bank, including its
equities and advisory divisions, following the overhaul.
The bank said on Tuesday it was on track to cut spending by
4.5 billion francs by the end of next year, having cut 3.4
billion. All the measures form part of a plan to begin paying
out roughly half of profits once a key ratio, which stood at 9.5
percent in the quarter, reaches 10 percent.
Credit Suisse's finance chief told journalists the bank,
which paid out 0.70 francs last year, had stowed funds for a
cash payout for this year, but that the ultimate level would
depend on second half business.
The bank swung to a second-quarter loss of 700 million
francs, wider than a Reuters analyst poll which called for a 581
million franc net loss.
German lender Deutsche Bank and crosstown rival
UBS both report the quarter next Tuesday.
($1 = 0.8979 Swiss Francs)
(Additional reporting by Oliver Hirt, Joshua Franklin and
Ruppert Pretterklieber in Zurich, and Dmitry Zhdannikov in
London; Editing by Sophie Walker)