Picture: REUTERS/ARND WIEGMANN
Picture: REUTERS/ARND WIEGMANN

Zurich — Credit Suisse Group has agreed to pay $600m to settle a lawsuit over mortgage securities that collapsed in the 2008 financial crisis, crystallising a large hit to its profit.

The plaintiff, MBIA Insurance, said late on Thursday that it had reached an agreement after a post-trial court decision that ordered the Swiss bank to pay about $604m in damages. The settlement means there will be no appeal trial.

Credit Suisse is expecting to post a fourth-quarter loss when it reports earnings on February 18, after setting aside $850m for US legal cases, including MBIA, and booking a $450m impairment on a hedge fund investment.

“We are pleased to have resolved this legacy matter, which dates back to 2007. The settlement amount of $600m is substantially less than our earlier guidance of up to about $680m and has been fully provisioned for in our fourth-quarter 2020 results,” Andreas Kern, a spokesperson for Credit Suisse said.

In January, the New York state judge presiding over the case ruled against Credit Suisse in the 2009 suit brought by the bond insurer over alleged misrepresentations of the quality of loans underlying residential mortgage-backed securities it guaranteed in 2007. MBIA had been seeking $686.7m plus interest while Credit Suisse had estimated damages of $597.7m.

Credit Suisse is among lenders including UBS Group, Morgan Stanley and Nomura Holdings that are still defending themselves against claims over the sale of the securities that plummeted in value during the 2008 crisis.

Credit Suisse probably has the most exposure in repurchase litigation, as it faces suits seeking more than $3bn, according to Bloomberg Intelligence’s Elliott Stein.

Bloomberg

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