Credit Suisse defied fears it would post fresh losses in investment banking in the second quarter, revealing only a small net markdown on its credit assets.

The Swiss bank made SFr1.22bn ($1.18bn) of net income in the second quarter, a year-on-year fall of 62 per cent. The result followed a lossmaking first quarter when it wrote down SFr5.3bn, partly due to a losses from a trading scandal.

The latest results benefited from only SFr22m of net write-downs on leveraged finance, mortgage and structured credit assets in the investment banking division, against expectations of a fresh SFr1.4bn hit. The net figure included markdowns of SFr477m on commercial mortgage-backed securities and SFr86m on the leveraged finance portfolio.

Credit Suisse has been aggressively scaling back its portfolio of risky credit assets, with leveraged loan exposure cut by 31 per cent in the period to SFr14.3bn. The leveraged portfolio was valued at less than 80 per cent of its original value.

Since October last year, the bank has reduced its leveraged loan exposure by 76 per cent and its CMBS portfolio by 58 per cent. The group said the positions were at “a level appropriate for current market conditions”.

Credit Suisse’s performance follows better-than-expected second-quarter results from JPMorgan Chase, which suffered another $1.1bn of write-downs, and Citigroup, with a further $7.2bn. Merrill Lynch’s write-downs were $9.4bn in the period.

The Swiss bank’s shares rose as high as 8.6 per cent in early trading and closed 5.3 per cent higher at SFr52.55.

Brady Dougan, chief executive, said he was managing the bank conservatively as the “current challenging market conditions will persist over the near to medium term”.

While analysts welcomed the smaller markdowns, costs in the investment banking division were higher than expected and took the shine off strong inflows into the private bank. Group headcount was up on the same period last year, including in the investment bank.

Mr Dougan defended the growth, saying Credit Suisse had cut expenses ahead of the credit crunch and was laying the foundations to prosper when markets normalised.

“One of the things the industry has not done well is managing counter-cyclically.”

The private bank registered SFr17.4bn of net new money but saw pre-tax profit fall 12 per cent.