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Credit Suisse shares fall despite surprise profit

ZURICH--Credit Suisse Group AG managed to reported a surprise profit for the third quarter, though investors were discouraged by the Swiss bank's struggle to maintain profitability amid a continuing overhaul.

Zurich-based Credit Suisse said Thursday its net profit in the quarter was 41 million Swiss francs ($42.2 million), compared with 779 million francs in the same period last year. Net revenue fell 10%, to 5.4 billion francs. Analysts had expected a net loss of 174 million francs and revenue of 5.1 billion francs.

Investors seemed unimpressed, however, and traded the bank's shares down nearly 4%. Morgan Stanley analysts zeroed in on Credit Suisse's 0.4% return on tangible equity in the quarter, down from 8.9% in the same period last year. The profitability measure suggests the bank still has a "long way to go," they wrote in a research note.

Daniel Regli, a MainFirst analyst, noted that Credit Suisse's results follow a series of upbeat reports from rivals, which may have raised the bar. "Most of the banks were able to surprise positively, so I think the market already assumed Credit Suisse would follow," he said. In particular, Credit Suisse's investment bank debt trading result likely fell short of expectations, the analyst added.

Credit Suisse began a broad strategic shift under Chief Executive Tidjane Thiam to limit investment banking and focus more on its wealth-management businesses roughly one year ago, just as markets were souring and clients began to hold back on investments and trades that can generate fees for the bank...