Credit Suisse Group today announced that it is restating its 2007 financials due to intentional mispricing of securities by some of its traders, and it warned that it will likely see a loss in the first quarter.

The Zurich based banking giant said after completion of an internal review related to the valuation asset-backed securities positions in the collateralized debt obligations (CDOs) trading business, it will write down 2.9 billion Swiss francs (US$2.7 billion), of which CHF 1.18 billion is related to the fourth quarter of 2007, and CHF 1.68 billion to the first quarter of 2008.

Net income for Credit Suisse has been revised down by CHF 789 million to CHF 540 million for the fourth quarter, and CHF 7.8 billion for 2007.

The firm added that, in light of the difficult market conditions in March, it believes it is unlikely to be profitable in the first quarter.

Following its revaluation review, Credit Suisse has determined that the pricing errors were, in part, the result of intentional misconduct by a small number of traders. These employees have been terminated or have been suspended and are in the process of being disciplined. The review also found that the controls put in place to prevent or detect this activity were not effective.

As a result, among other actions, it is also reassigning the trading responsibility for the CDO trading business and enhancing related control processes, and improving the effectiveness of supervisory reviews.

Brady Dougan, CEO of Credit Suisse Group, said, “This incident is unacceptable and it does not represent the high standard of Credit Suisse. Our overall control framework remains sound. We are taking strong action to remediate and move forward.”

“Credit Suisse continues to be well positioned through the challenging and volatile markets that have existed since the middle of 2007,” he added. “We are one of the world’s best capitalized banks, and our funding is conservative. Our Private Banking business continues to perform very well. Client momentum across our businesses is strong. We benefit from our diverse mix of businesses, our extensive global reach and our integrated banking model. I am confident in our ability to navigate current market conditions and deliver long-term value to our shareholders.”

http://www.credit-suisse.com/investors/en/reports/2007_results_q4.jsp