Well, another shoe dropped Tuesday, as Credit Suisse announced that it had overvalued its asset backed securities by at least $2.85bn, blaming 'mismarkings and errors' by 'a small number of traders' in structured credit trading. It's now the turn of staff over at rival UBS to smirk - at least for now, the heat is off their firm.

The news is a huge blow to Credit Suisse, which appeared to have weathered the recent market turmoil so well, and comes just a few days after the firm announced apparently healthy 2007 final profit figures. The write-downs are said likely to reduce first-quarter net income by $1bn. The firm is said to be assessing whether 2007 earnings may also have been affected by the errors, and the disclosure sent the company shares down by as much as 9% in early trading Tuesday.

The International Herald Tribune quotes Andreas Venditti, an equity analyst at Zurcher Kantonalbank, who said that 'it's a blow to confidence. It looked like they had done such a good job in risk management. Today, of course, that looks quite different'. Reuters quotes Helvea analyst Peter Thorne, who said 'this is a disaster. This could be the tip of the iceberg'.

The full text of the Credit Suisse announcement is detailed below:

'Further to its commitment to provide transparency, Credit Suisse today announced that in connection with the operation of ongoing control processes, it has undertaken an internal review that has resulted in the repricing of certain asset-backed positions in its Structured Credit Trading business within Investment Banking.

The current total fair value reductions of these positions, which reflect significant adverse first quarter 2008 market developments, are estimated at approximately USD 2.85 billion (having an estimated net income impact of approximately USD 1.0 billion). In the first quarter to date, we estimate we remain profitable after giving effect to these reductions.

The final determination of these reductions will depend on further results of our review and continuing market developments. We will also assess whether any portion of these reductions could affect 2007 results.

Finally, our internal review, which has identified mismarkings and pricing errors by a small number of traders in certain positions in our Structured Credit Trading business, is continuing'.

And The Wall Street Journal's 'Heard on the Street' column quotes unnamed 'people familiar with the situation', who have said that Lehman Brothers is looking at possible first-quarter write-downs of some $1.3bn.

Finally, the newspaper reports that Barclays Bank posted a 3.4% fall in second-half net-profit Tuesday, after a fall-off from fixed income trading and $3.2bn in asset write-downs in the period. Second half net profit came in at $8.6bn. CEO John Varley hailed his firm's 'resilient performance'.

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