Credit Suisse Rises as U.S. Guilty Plea Ends Three-Year Probe

May 20, 2014 4:15 am ET

May 20 (Bloomberg) -- Credit Suisse Group AG, Switzerland’s second-biggest bank, rose the most in six months in Zurich trading after it agreed to pay $2.6 billion to end a three-year U.S. tax probe.

Credit Suisse gained as much as 3 percent, the biggest intraday advance since Nov. 7, and was up 2.8 percent at 26.79 Swiss francs by 9:47 a.m., valuing the lender at 42.7 billion francs ($47.7 billion).

The bank agreed yesterday to the largest penalty in an offshore tax case after using secret Swiss accounts to help Americans hide money from the Internal Revenue Service, and its main banking unit pled guilty. Chief Executive Officer Brady Dougan told analysts and journalists on a conference call today that the firm did extensive work before the settlement and found no legal barriers that would prevent clients from doing business with the bank because of the guilty plea.

“As long as a guilty plea and the resulting reputational issues don’t have an effect on its ability to operate, it should be business as usual for Credit Suisse,” said Shailesh Raikundlia, an analyst at Espirito Santo Investment Bank in London, who has a neutral rating on the stock.

The cost of insuring Credit Suisse’s debt for five years rose 2 basis points to 64.3, the highest this month, according to data compiled by Bloomberg. That’s still below the level at the end of last year. A basis point is a hundredth of a percentage point.

Dougan told analysts and journalists on a conference call today that the settlement resolves the last major litigation issue for the bank, adding that Credit Suisse sees no exposure to the Libor probes and no “material” issues with regards to investigations into alleged manipulation of currency markets.

Asked if Credit Suisse expects the U.S. authorities to take action to try to get the bank to deliver client data, Dougan said the deal “brings all those issues” to the close. Chief Financial Officer David Mathers said he doesn’t expect a material impact on the lender’s activities.

--With assistance from Nicholas Comfort in Frankfurt, Chris Malpass in Berlin and Jeffrey Vögeli in Zurich.