GENEVA (AP) — After seeming to have skirted the worst of the mortgage issues plaguing the financial sector, Credit Suisse revealed yesterday that it had suspended a "handful" of traders for overvaluing assets and would take a $1 billion hit to its first-quarter results.

Switzerland's second-largest bank said it would still post a profit for the period, but the mispricing of asset-backed securities led to an overvaluation of about $2.85 billion.

Traders didn't update their figures to keep up with the market downturn, and this tardiness resulted in assets being marked higher than their actual value, Credit Suisse chief executive Brady Dougan said during a conference call.

Several traders are being investigated, but an outright fraud had not been detected, he said.

"There are no discrepancies around positions," Dougan said, adding that the circumstances were still under review. The bank earlier said a "small number" of traders had committed "mismarkings and pricing errors".

The news comes a week after Credit Suisse posted solid fourth-quarter results that defied the industry-wide gloom stemming from the fallout of the US sub-prime crisis, and a month after French bank Societe Generale SA said a futures trader racked up losses of more than $7 billion before being found out.

Credit Suisse shares tumbled nearly seven percent to 52.90 Swiss francs ($48.39).

Analysts said the discovery of overpricing by traders at Credit Suisse — which until now had managed to evade the worst of the problems that ensnared its cross-town rival UBS AG — raised questions about the bank's internal oversight.

"Whilst we had received some assurance that the Credit Suisse balance sheet is not as laden with problem securities as UBS, this disclosure just raised the prospect that they may be simply bad at knowing what problems they do have," said Peter Thorne of independent brokerage Helvea. Other analysts warned that regulators were likely to consider forcing financial institutions to demonstrate tighter controls of the complex — and often vast — investments handled by small groups of traders. "From the viewpoint of financial stability as a whole, regulators are likely to see the (current) situation as unacceptable," said Cubillas Ding at Celent.

"A limited number of individuals handling esoteric instruments can have the capacity to wipe out a disproportionate chunk of a bank's profits," he said.

In reporting its fourth-quarter results last week, Credit Suisse said it was taking a 2.07 billion Swiss franc ($1.88 billion) write-down for sub-prime-related assets in that period, but still posted a net profit of 1.33 billion francs ($1.2 billion).

The charges were small compared to those at UBS, which wrote down 15.6 billion Swiss francs ($13.7 billion) in mortgage-related investments last year and reported its first full-year loss.

But Credit Suisse warned that last year's results may still be affected by the overvalutions, which were discovered during an internal probe into how its traders marked the value of products such as commercial mortgage-backed securities, residential mortgage-backed securities, and collateralised debt obligations, or CDOs.

"The final determination of these reductions will depend on further results of our review and continuing market developments," the bank said.