Credit Suisse says convertibles were among securities most affected by third-quarter market conditions

By Jennifer Lanning Drey

Portland, Ore., Oct. 23 - Credit Suisse Group's investment banking chief executive officer Paul Calello said convertible securities were among the bank's key trading areas most affected by the market volatility experienced during the third quarter.

"The convertible bond market was one of the most negatively affected asset classes in the quarter as the ability to hedge convertibles was adversely impacted by the short-sale role and stresses in the CDS market," Calello said Thursday during the bank's third-quarter earnings conference call.

The ongoing unwinding of hedge funds and forced selling also put pressure on the prices of convertible assets, he said.

As a result, Credit Suisse plans to reduce the size of its convertibles trading book, focusing the business on client flow facilitation and supporting primary issuance, he said.

The trading book was reduced by 17% during the third quarter.

"We've already cut this portfolio in the third quarter, and we will substantially reduce these positions further in the next few months," Calello said.

CHF1.26 billion net loss

Credit Suisse reported a net loss of CHF1.26 billion for the third quarter, compared with net income of CHF1.30 billion for the same period in 2007.

The overall results were affected by September's market disruption and changes in the competitive landscape that led to a difficult market environment, particularly in investment banking.

"The third quarter was challenging and volatile and our business has been impacted, and the fourth quarter has continued to be challenging," Brady W. Dougan, Credit Suisse's chief executive officer, said during the call.

Credit Suisse reported a pre-tax loss of CHF 3.2 billion in investment banking, reflecting write-downs of CHF 2.4 billion in the leveraged finance and structured products businesses.

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