Big losses and divi cut at Credit Suisse

TROUBLED Swiss banking and insurance giant Credit Suisse is to slash its dividend following losses of Swfr579m (£253m) in the second quarter ending June. The size of the dividend cut will be decided when full year results are available.

The losses have been worsened by what chairman and chief executive Lukas Muhlemann described as 'extremely low investment income in the insurance businesses due to the significant deterioration in the equity markets'. These hit in the second quarter of the year to the tune of Swfr1.5bn.

Today the group said its ailing insurance activities would lead to further losses in the current quarter 'unless we see some robust rally in equity markets, which looks unlikely right now'. The huge losses exceeded analysts' expectations as they had been forecasting an average of Swfr460m.

The losses were curtailed by massive cost-cutting measures at subsidiary Credit Suisse First Boston during the three-month period ending June. Operating expenses were cut by 19% with personnel expenses slashed by 17% and other operating expenses chopped by a massive 25% as the banking arm embarked on staff cutbacks that have led to thousands of job losses. Bonuses have also been pared to the bone.

CSFB is forecasting that cost savings for the whole of the current financial year will be $1.8bn (£1.2bn), 'which is well in excess of the previously announced target of $1bn'. Further head count reductions, the sale or closure of certain non-core businesses and offices and reductions in discretionary spending, mainly bonuses, are not ruled out.

Muhlemann plans to strengthen the group's troubled Winterthur insurance business, possibly by injecting fresh capital from the parent group. Chief financial officer Phil Ryan said: 'We will have to put some capital into Winterthur. We're in the process of deciding how much and how to do it.'

The figures are bound to revive speculation that Swiss-based rival UBS may make a bid for the group. On Tuesday UBS president Peter Wuffli admitted it was in acquisition mode, even though it suffered a second-quarter 4% decline in earnings and issued a full-year profits warning.

Ryan today refused to comment on whether Credit Suisse remained committed to its dual banking and insurance strategy.