Credit Suisse Loss of $2.85 B

123jump.com Staff
19 Feb, 2008
New York City

Credit Suisse plunged 10% after it reported an error of $2.85 billion in valuing securities in structured investment vehicles. The surprise write-down hurt the stock and shocked investors. Credit Suisse, only a week ago, reported an asset write-down of Sfr12.5 billion and left impression in call with investors that the company has a handle on the risky loan portfolio.

[R]11:30AM New York – Credit Suisse drops as much as 10% after reporting an error in valuing a portfolio of structured securities. The shocked investors punished the stock.[/R]

Credit Suisse ((CS)) lowered its asset backed securities valuation in structured investment vehicles by $2.85 billion with an estimated impact of $1 billion on the current quarter profit. The company said that after the asset write-down in the current quarter it is still profitable.

The company after conducting an internal review of asset backed positions and blamed the write-down to “mismarkings and pricing errors” by a small number of errors.

The company said that it has laid-off these traders but did not cite names and locations of their work offices.

Credit Suisse suffers from a credibility gap to report such a large loss after reporting a week ago a lone loss and asset write downs of Sfr12.5 billion. As recently as few days ago chief executive Brady Dougan reiterated that risk control process is tight and the company is transparent to investors with its risky loan holdings.

However to report, such a large loss, in just less than a week reporting a loss Sfr12.5 billion has dealt a severe blow to management credibility.

Separately Qatar based sovereign fund reported over the weekend that it is building an investment position in Credit Suisse.