ZURICH Credit Suisse CSGN.VX said its drive to cut costs, risky assets and focus on its investment bank were bearing fruit as its quarterly earnings beat analysts' expectations and it raised the prospect of a cash dividend this year.
The results are a boost to the Swiss bank's argument that its slimmed-down investment bank can prosper despite lacking the scale of Wall Street giants like JP Morgan (JPM.N) and Goldman Sachs (GS.N). Swiss rival UBS UBSN.VX is largely pulling out of fixed income to focus on private banking.
Credit Suisse said on Wednesday first-quarter investment bank net revenues were stable versus a year ago, contrasting with weaker trading revenues at Wall Street's top five banks.
But some analysts were cautious of drawing conclusions.
"It's a better quarter than expected, particularly in the investment bank, but one swallow doesn't make a summer," said Rainer Skierka, Zurich-based analyst for private bank Sarasin.
"For me, Credit Suisse's strategy is going to lead to more volatile results than those of UBS or someone focused on private banking. It's up to investors to decide which they prefer."
At 0730 GMT, Credit Suisse shares were up 0.5 percent at 26.59 Swiss francs, in line with the European banking index .SX7P. The stock has risen 19 percent this year, beating UBS's 7.2 percent gain and a 2.5 percent rise in the sector index.
Credit Suisse reported first-quarter net profit of 1.30 billion Swiss francs ($1.38 billion), up from 44 million francs a year earlier. The result topped the average estimate of 1.26 billion francs in a Reuters poll Of analysts.
The rise was driven by its investment banking division, where spending fell 13 percent and charges on Credit Suisse's own debt slid to 68 million francs from 1.5 billion a year ago.
Investment banking revenues at Barclays (BARC.L) were also flat in the first quarter as improving equities and prime services helped offset a decline in fixed income, currencies and commodities, the British bank said on Wednesday.
Credit Suisse's wealth management arm, the other pillar in its banking model, posted a seven percent drop in pretax profits as revenues fell five percent.
"One should never declare success based on one quarter, but clearly with a return on equity of 23 percent, it's a very good start for this year," financial chief David Mathers told journalists, referring to the investment bank.
He added the results showed Credit Suisse did not have to have the scale of the so-called "flow monsters" of Wall Street to succeed in investment banking.
"We've always been skeptical about the concept of flow monsters, because we're not really convinced it's a scale business. It's not one business, it's a collection of businesses," he said.
The Zurich-based bank said its restructuring - it is on track to meet a spending cut target of 4.4 billion francs by the end of 2015 - would help it pay investors a cash dividend after last year's largely stock payout.
Credit Suisse said its private bank, which targets clients with more than $1 million in bankable assets, won 12 billion francs in fresh money from clients.
The bank suffered big outflows of money from clients in Europe, where Swiss banks are under fire for helping tax cheats, but saw new assets up nearly 10 percent in Asia.
It said it could not give investors any information on when Swiss government talks to end a U.S. investigation into it and a host of other banks including Julius Baer BAER.VX in return for expected fines and a transfer of client names might end.
Last week, signs mounted that Swiss and U.S. diplomats were nearing a solution to resolve their dispute, part of a global crackdown on tax evasion.
Credit Suisse took a 295-million-franc provision towards a settlement with U.S. authorities in 2011.
The bank, a member of U.S. dollar, Swiss franc and Euro Libor panels, said it did not expect a big hit from a global investigation into rigging of benchmark interest rates, adding it would vigorously defend itself against U.S. civil lawsuits.
(Writing by Carmel Crimmins; Editing by Chris Gallagher and Mark Potter)