Credit Suisse sees no Q1 profit in bad markets

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ZURICH (Reuters) - Credit Suisse <CSGN.VX> warned it was unlikely to be profitable in the first quarter due to big debt writedowns and tough markets but said the shock trading hit announced in February was not as bad as previously thought.

By Thomas Atkins

ZURICH (Reuters) - Credit Suisse <CSGN.VX> warned it was unlikely to be profitable in the first quarter due to big debt writedowns and tough markets but said the shock trading hit announced in February was not as bad as previously thought.

The bank said in a statement on Thursday that it was profitable through to the end of February and that client activity was strong, but difficult market conditions in March introduced a new element of uncertainty.

"In light of the difficult market conditions in March, at this time, Credit Suisse believes it is unlikely to be profitable in the first quarter," the bank said in a statement.

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Shares in Credit Suisse and rival UBS AG <UBSN.VX>, Europe's hardest-hit bank by the subprime crisis, were seen sharply lower in pre-market indications <CLPRE2>.

"This isn't ... the Easter egg that we'd hoped for, but there are not any new surprises. Rather, it is a detailed statement of the valuation problems communicated after the 2007 results," said analysts at bank Wegelin in a note.

Credit Suisse reduced its previously announced estimate for writedowns related to asset-backed securities by 200 million Swiss francs ($201.4 million) to 2.86 billion francs.

In February, the bank shocked markets by writing down $2.85 billion in asset-backed investments and suspending some traders after finding pricing errors on its books.

The bank had previously said it expected to post a profit for the first quarter and estimated that the writedowns would wipe $1 billion from its net income, after taking into account tax credits and cancelling some staff bonuses.

Credit Suisse now said it would post a writedown of 1.18 billion francs against its 2007 accounts -- which translated into a hit of 789 million francs net of tax -- and of 1.68 billion francs against its first quarter 2008 accounts as a result of the new valuations.

The writedowns dealt a sharp blow to Credit Suisse in February as the bank had until then appeared to have negotiated the subprime crisis far more skillfully than many rivals.

The writedowns are the latest in a string of shocks from global banks, including huge new subprime-related exposures at rival UBS <UBSN.VX> and the emergency takeover of U.S. investment bank Bear Stearns <BSC.N> by rival J.P. Morgan

<JPM.N>.

Credit Suisse had previously reported subprime-linked writedowns of 2 billion francs in 2007.

For presentation slides, click on: http://www.credit-suisse.com/investors/doc/csg_repricing_slides. pd

(Additional reporting by Peter Maushagen, Albert Schmieder and Douwe Miedema, editing by Will Waterman)