Credit Suisse, the Swiss investment bank, suspended a “small group” of London traders led by Kareem Serageldin yesterday after revealing a shock $2.85 billion (£1.5 billion) asset writedown that will wipe $1 billion off first-quarter profits.

The Swiss bank said that it had discovered the writeoff last week after instigating an “ad hoc” audit of its structured credit division — a matter of days after publishing a glowing set of full-year results on February 12, showing that it had shrugged off the worst of the sub-prime mortgage crisis with a profit of about SwFr8.5 billion (£3.9 billion).

The Canary Wharf-based team, led by Mr Serageldin, who is the bank’s global head of synthetic collateralised debt obligations (CDOs), which are a type of complex financial instrument, are still employed by Credit Suisse. However, the traders have been suspended pending investigations. Credit Suisse refused to name the traders.

The bank’s 20,000 investment banking staff will be left with a $1.5 billion bill because Credit Suisse will recoup some of its losses through pay and bonuses over the coming year.

Credit Suisse said that it was convinced that “mispriced” trades associated with the writedown were an isolated incident but that it would, nevertheless, “tighten” its internal controls.

Brady Dougan, Credit Suisse’s first American chief executive, who took the helm a year ago, played down suggestions that the bank will have to restate its full-year figures. He said: “Our analysis does not indicate we would have to restate at the end of 2007. We think that most of the issues that have come about are in the first quarter of 2008.”

As a result, the impact on Credit Suisse’s first-quarter profits will be $1 billion, though the figure could be higher since an investigation into the trades is continuing. The bank said yesterday: “The final determination of these reductions will depend on further results of our review and continuing market developments.”

Mr Dougan strongly denied that the bank’s surprise writedown was similar to the crisis enveloping Société Générale, France’s second-largest bank, which had to write off ¤followinga series of<NO>rogue trades by one of its bankers, Jérôme Kerviel.

Mr Dougan played down suggestions of fraudulent activity at the bank, saying that the traders partly responsible for the $2.85 billion writedown had been “tardy” and that there had been “pricing that did not meet our standards”. The bank was in touch with regulators about the matter, he said.

The problem has been found after the Qatari Investment Authority, the Qatar Government-backed group that tried to acquire the J Sainsbury supermarket group last year, bought shares in Credit Suisse. The bank refused to say whether the revelations had soured relations with its new backers.

Credit Suisse’s problems arose from traders delaying the repricing of complex structured finance products, in particular CDOs and residential mortgage-backed securities, to the current market price — a practice known as “mark-to-market” pricing.

Mr Dougan insisted that most of the $2.85 billion writedown was because of the effect of adverse market conditions on the value of assets, rather than “mispricing and pricing errors” by traders.

In reaction, Standard & Poor’s last night said that it may lower its rating of Credit Suisse.

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