Credit Suisse returns to profit

ZURICH, Switzerland (CNN) -- Credit Suisse Group, Switzerland's second-largest bank, has returned to profit after two quarters of losses.

Net income for the first three months to March 31 dropped 74 percent to 368 million Swiss francs ($228 million) from 1.43 billion francs a year ago. Analysts polled by Reuters had forecast on average a profit of 563 million.

"Credit Suisse Group marked a return to profitability in the first quarter of 2002 despite continuing challenging conditions," Chief Executive Lukas Muehlemann said in a statement.

Credit Suisse blamed the decline in profit on the falling value of investments held by its insurance businesses. European markets have declined about 4 to 5 percent this year and about 20 percent last year, according to analysts.

"Lowered equity valuations had a negative impact of 455 million francs" on net income compared to a year ago, Muehlemann said.

CS's insurance business posted a net operating loss of 147 million francs and as expected it wrote down the value of its stake in insurer Swiss Life, which has fallen more than 20 percent this year, by 154 million francs.

Its investment banking arm Credit Suisse First Boston (CSFB) reported a loss of $19 million in the first quarter but that was far less than the $939 million loss in the fourth quarter of 2001, when it booked costs to slash its workforce and cut costs.

Under the stewardship of CEO John Mack, CSFB has drastically cut costs through a series of job cuts and slashing of bonuses. Operating expenses were down 26 percent versus the prior year.

"At Credit Suisse First Boston, we saw a substantial improvement in results due to the unit's cost reduction efforts and continued strong market shares." Muehlemann said. CSFB was ranked No. 1 in mergers and acquisitions.

However, the company was cautious about its assessment for the year ahead, saying market conditions were showing signs of improvement but revenue levels at CSFB are expected to be lower than in 2001.