Credit Suisse CEO sees credit crisis nadir in months

Business Materials 17 February 2008 04:08 (UTC +04:00)

( Reuters ) - The worst of the banking crisis resulting from the subprime meltdown is likely to be over in months rather than quarters, Credit Suisse Chief Executive Brady Dougan was quoted as saying on Saturday.

Dougan said in an interview in the Neue Zuercher Zeitung he was an optimist and it could take three, four, five months before the crisis bottomed out.

"I believe I can already detect a certain easing of tension in liquidity and credit provision, but the big problems that set off the crisis have not yet been dealt with," he said.

"There would undoubtedly be much greater confidence if prices in the U.S. real estate market, where the crisis originated, finally stabilized. That could happen as soon as the middle of this year. But we are preparing for the possibility that the crisis continues for some time," he said.

The crisis has set off write-downs running to more than $100 billion by banks globally. Experts say final losses may reach as high as $400 billion.

Dougan forecast it would remain hard to find buyers for securitized and structured products. Buyers will only appear when the underlying assets have a market price.

At that point there would be a lot interest because of current low valuations, and there would be a prospect of considerable price rises.

"As soon as confidence returns, things will probably go up quickly again," he said.

In rare cases, Dougan expected securitized claims to be restructured, but many people holding them will be forced to wait for a better market climate, he said.

Meanwhile the mistrust between banks that has led money and credit markets to seize up was dissipating.

"Liquidity has generally improved somewhat. That's an important sign," he said. "Although markets are still far from normal, a modest recovery can be detected. The trend is now in the right direction."

Credit Suisse has suffered only limited fall-out from the subprime mortgage crisis, trimming full-year 2007 write-downs linked to the debacle to 2.0 billion Swiss francs ($1.83 billion) and pulling in billions in new investments from wealthy clients.

Its Swiss rival UBS on the other hand has been one of the worst hit, taking $18 billion of charges in 2007 and warning of more to come that could tip it into a second year of losses.

Dougan said he expected banks damaged by the crisis to lose wealth management customers, while better positioned institutions would pick them up.

Unlike other banks, Credit Suisse is not shedding investment banking staff, but is reallocating resources.

Thus it is expanding its commodities business and involvement in emerging markets while scaling back areas hit by the crisis such as mortgage securitization, structured products and high-yield financing for takeovers and buyouts, he said.

Dougan acknowledged there was a risk of a commodities bubble.

"But we think that it has great potential. Even if prices contract after the long rally, increased earnings are possible in commodities," he said.