Credit Suisse today posted a 42 per cent hike in third-quarter profits, to SwFr1.9 billion (£837m), further raising expectations of a bumper bonus season for City bankers.

The results followed similarly impressive figures from rival Swiss bank UBS, which yesterday reported a 71 per cent rise in third-quarter profits to a record SwFr2.77 billion.

Credit Suisse cashed in on improved investment banking results during the quarter, with profits surging 110 per cent year-on-year to SwFr612 million (£270 million) on the back of a resurgent M&A market and increased IPO activity.

Oswald Grübel, the chief executive, said: "Our advisory business has made significant progress with improved market share and rankings from 2004.

"Advisory fees, which include fees from mergers and acquisitions, increased significantly versus the previous quarter."

The improved figures were also a vindication for Credit Suisse’s head of investment banking, Brady Dougan, who replaced John Mack last year and focused on profitable areas such as proprietary trading, derivatives and leveraged finance.

In the second quarter of this year , the investment banking arm made a loss of SwFr408 million after taking a SwFr624 million charge to increase reserves set aside for legal actions.

Credit Suisse was also boosted by a surge in trading income and improved business at its Wealth and Asset Management arm, where net income surged 237 per cent year-on-year to SwFr101 million, but fell 59 per cent on the second quarter after particularly high returns on private equity in the spring.

Private banking profits rose 42 per cent to SwFr728 million, boosted by threefold increase in net new money inflows, while corporate and retail banking improved by by 33 per cent to SwFr264.

Credit Suisse's return on equity, a closely watched measure of profitability, improved to 20.1 per cent during the quarter from 15.3 percent a year ago.

"This performance reflects the progress we are making in refocusing our business,'' Mr Gruebel said. "I am confident that we can build on this performance and deliver higher returns in the future."

The news was not all good, however, with Winterthur, Credit Suisse’s struggling insurance business, dramatically underperforming.

Profits at the life and pensions arm fell 42 per cent to SwFr96 million after a change in actuarial assumption and models. The non-life part of the business was hit by "unusually heavy rainfall and flooding in Switzerland," which saw profits fall 4 per cent to SwFr190 million.

The bank said its plans to float Winterthur - which is involved in a dispute over liabilities after the sale of its international operations to XL Insurance – would have to wait for improved valuations of the business.

Looking ahead, Credit Suisse gave an upbeat outlook for the final three months of 2005. Mr Grübel said he expected the global economy will remain robust as growth in Asia and Europe helped to offset the pressure from higher energy costs and interest rates facing US consumers.

"Moreover, we expect that oil and other commodities will continue to experience a correction within the longer-term uptrend," he added.

"While we reported satisfactory results this quarter, we know we have the potential to do even better."

Credit Suisse declined to give an earnings outlook for the full year, saying its earnings depend too much on financial markets.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax