Credit Suisse Group
) resolved a lawsuit filed in 2010 by bond insurer Ambac
Financial Group, Inc. The terms of the settlement were
ASSURED GUARNTY (AGO): Free Stock Analysis
BANK OF AMER CP (BAC): Free Stock Analysis
CREDIT SUISSE (CS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
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The plaintiff alleged that DLJ Mortgage Capital - a subsidiary of
Credit Suisse's U.S. division - and Credit Suisse
Securities misrepresented the mortgage-backed securities (MBS),
which were insured by Ambac in 2007.
Credit Suisse Securities, along with its DLJ Mortgage Capital,
issued misleading statements and omissions related to MBS.
Further, the defendants had concealed the risks, including the
ability of the borrowers to repay. This portfolio was worth
roughly $170 million and included around 2,000 home equity lines
Until the lawsuit was filed, Ambac had already paid $44 million
in damages and that amount was anticipated to rise almost 10
times. In March last year, Ambac had a restructuring plan
approved by the bankruptcy judge after it filed for Chapter 11
bankrupcy in 2010.
Recently, it had become a trend for bond insurers to sue major
banks associated with underwriting of mortgage securities.
JPMorgan Chase & Co.
Bank of America Corporation
) are also entangled in lawsuits from bond insurers such as
Assured Guaranty Ltd.
) and MBIA Inc., pertaining to the above-mentioned issue.
We believe that legal troubles such as this are likely to result
in huge expenses and affect the top line of many financial
institutions. However, the measures being undertaken by the
regulatory and legal authorities to come down hard on such
unwarranted activities of these institutions will provide huge
relief to the investors.
However, these legal tangles have not had a substantial impact on
Credit Suisse's financials. The company reported fourth quarter
net income attributable to shareholders of CHF 816 million
($894.8 million) or CHF 0.17 per share, compared to the year-ago
quarter's loss of CHF 632 million ($693.1 million) or CHF 0.62
per share. For full-year 2012, net income attributable to
shareholders came in at CHF 3.8 billion ($4.2 billion), surging
99% from the last year.
Amid an uncertain macroeconomic environment, higher net revenues,
aided by higher net interest income boosted Credit Suisse's
results. Further, reduced operating expenses and a strong capital
position were the other positives for the quarter.
Credit Suisse currently retains a Zacks Rank #3 (Hold).