Shock as Credit Suisse says traders hyped asset values

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In a curiously worded statement, the Swiss bank said the error would cost it $1 billion in the first quarter of the year and could also hit last year's results.

Sources insisted it was not a case of "rogue trading" such as the alleged activities of Jerome Kerviel at France's Société Générale, but rather a "mistake in light of the current environment".

The embarrassing admission came just days after Credit Suisse boasted it was a "safe haven" for investors as it announced strong results for last year. The bank last week trimmed its losses from the subprime mortgage crisis from Swfr2.2 billion to Swfr2 billion for 2007.

Profits for the year edged 3% higher to Swfr8.55 billion as Credit Suisse emerged relatively unscathed from the credit crunch.

The results were in stark contrast to those of its larger Swiss rival UBS, which was savaged by bad investments relating to toxic loans on the subprime mortgage market.

But Credit Suisse's claim to safe haven status looked premature today when it marked down asset-backed positions by $2.85 billion following an internal review.

The bank said: "Our internal review, which has identified mismarkings and pricing errors by a small number of traders in certain positions in our Structured Credit Trading business, is continuing."

Georg Kanders, an analyst at WestLB, said of the writedowns: "I'm speechless. To announce this just a week after reporting earnings is a major blow. This will again put the whole sector under pressure."