UBS, Credit Suisse not to scale down India plans

Credit Suisse, the second largest jewel in the Swiss banking crown, yesterday announced a whopping loss of $2.1 billion and asset write-downs of $5.2 billion in the first quarter.

"These losses as well as the write-downs are due to the broader credit and liquidity crisis involving assets and leveraged finance," Marc Dosch, a Credit Suisse executive told Business Standard.

Credit Suisse has not been subjected to the sub-prime mortgage crisis, but has suffered losses on account of commercial mortgages and securities in which it maintains a substantial exposure.

Over the last five years, Credit Suisse- which is focused more on investment banking activities- has never suffered losses to the tune of billions of dollars.

It is forced to cut down its exposure to credit-related assets by 41 per cent since last year, with Sfr 20 billion (about $20 billion) exposure to leveraged finance, Sfr 3 billion to US commercial mortgages and Sfr 700 million to mortgaged-backed collateralized debt obligations still remaining.

Unlike the largest Swiss bank UBS, which experienced the highest write-downs of $37 billion stemming from the sub-prime mortgage crisis as well as credit bubble, Credit Suisse was reckoned as having adopted a different model, analysts said.

"Credit Suisse is forced to substantially reduce its exposure to the damaged credit markets," Dosch said, arguing that it will have no implications for the Indian market. "In India, we are following a successful integrated banking model by focusing on private banking (wealth management) and investment banking," he said.

"Clearly, there are synergies from the model we are following in India and we are confident that Credit Suisse will grow into a major player in both these areas in the coming years," Dosch maintained.

Sheel Kohli, a Credit Suisse executive in Hong Kong, said, "India is one of our key priority markets," arguing that it has increased its operations over the last two years in several areas.

Credit Suisse began brokerage operations last year and currently has about 2 to 4 per cent equity turnover on a daily basis. It secured the portfolio management licence in Janauary for pursuing wealth management activities.

On Monday, UBS faced unprecedented investor pressure with some shareholders calling for fundamental changes in the face of reckless exposures to sub-prime mortgages.

"Fundamental change is required in the way we look at risk and implications on the scope of activities in which we want this bank to be engaged," argued Peter Kurer, who was elected as chairman at the bank's annual meeting despite opposition from some shareholders.