paul calello on morgan stanley financial services conference · 2017-07-07 · merlin, fx aes)!...

Morgan Stanley Financial Services Conference

Paul Calello, CEO, Investment Bank

London

March 31, 2009

Cautionary statement

Cautionary statement regarding forward-looking and non-GAAP information

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties, and we might not be able to achieve the predictions, forecasts, projections and other outcomes we describe or imply in forward-looking statements.

A number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions we express in these forward-looking statements, including those we identify in "Risk Factors" in our Annual Report on Form 20-F for the fiscal year ended December 31, 2008 filed with the US Securities and Exchange Commission, and in other public filings and press releases. We do not intend to update these forward-looking statements except as may be required by applicable laws.

This presentation contains non-GAAP financial information. Information needed to reconcile such non-GAAP financial information to the most directly comparable measures under GAAP can be found in Credit Suisse Group's fourth quarter report 2008.

Credit Suisse overview

Repositioning the Investment Bank

Financial implications

Well positioned going into 2009

Strong client momentum

Validated integrated bank model

Exceptional capital strength

Clear and consistent strategy

Aggressive risk reduction

Continue to be differentiated from our competitors

Accelerated implementation of strategic plan

Positions Credit Suisse strongly with reduced risk,lower costs and strong capital to enable us to weather the continuing market

challenges, capture opportunities, and prosper when markets improve

Continue to focus Asset Management business and align it with the bank�s other businesses

Accelerated repositioning of the Investment Banking businessportfolio with a reduction in risk, volatility and costs

Continued commitment to integrated business model;growth of Private Banking globally and Swiss businesses

1) Excluding ARS settlements of CHF 310 in 3Q08 and CHF 456 m in 4Q08 and the charge of CHF 190 m related to an account close-out in 4Q08

Private Banking pre-tax incomeCHF bn

2007 20082005 20062004

5,486

3,8503,966

4,596

3,717

4,8061)

Resilient Private Banking performance and solid net inflows

Net new assets in 2008

Rolling four-quarter NNA growth on AuM in %6.0 5.9 6.2 5.0 5.0

CHF bn

1Q08 2Q08

13.5

3Q08 4Q08

15.4

11.342.2

14.2

8.4

16.6

2008

2.0

3.0

EMEA APAC Americas Switzerland

Asset Management with strong growth in high-margin alternative investments

Assets under managementCHF bn

Asset Management division

412

146

! Sold traditional long-only business outside Switzerland in line with strategy to focus on high margin and scalable business

! Alternative investment with strong inflows

! Money market lift-out portfolio further reduced by 44% to CHF 0.6 bn in 4Q08

Alternative investment strategies

(57.7)

(17.1)127

139

Multi-assetclass solutions

Other traditional investments

(63.3)

+11.5

Includes outflows of CHF (40.1) bn inmoney market and pension advisory assets

Net new assets 2008CHF bn

Capital strength as competitive advantage

32.229.4 30.8 32.2

34.2

1Q08 2Q08 3Q08

Tier 1 capital and tier 1 capital ratio

Tier 1capital

13.3%

9.8% 10.2%Tier 1

capital ratio

(CHF bn and %)

! Industry-leading capital ratio

! Strongly positioned to continue building client franchises

! 16% reduction in risk-weighted assets during 4Q08, primarily in Investment Banking

! Raised CHF 11.2 bn of capital in 4Q08, while minimizing dilution (share count today below January 2006 level)

! 2008 dividend proposal of CHF 0.10

4Q08

10.4%

4Q07

10.0%

Balance sheet reduced by 16% in 4Q08 while maintaining strong funding structure

1,170 1,170

Assets4Q08

Capital & liabilities4Q08

Reverse 299repo

Trading 367assets

Loans 227

Other 187

Repo 273

Trading liab.154

Short-term1)100Long-term 151debt

Deposits 266

Capital 226& Other

117%coverage

Asset and liabilities by category (period-end in CHF bn)

1,394

! Total assets in 4Q08 reduced by CHF 224 bn, or 16%, whereof CHF 59 bn due to FX movements

! Trading assets reduced 22% in 4Q08 and 35% in 2008

! Increased market spreads only affect a small part of funding base(CHF 13 bn of long-term debt matures in 2009)

! Stable and low cost deposit base a key funding advantage

Assets3Q08

Reverse 379repo

Trading 468assets

Loans 239

Other 261

Change in %Cash 47

Cash 1) 90

(28)%

(5)%

(22)%

(21)%

+91%

1) Includes due from/to banks

! Allocate resources towards client and flow-based businesses

! Reduce/exit businesses that are highly volatile or capital intensive

! Continue to grow cross-bank collaboration

Implementing our strategy

Priorities Key objectives

Streamline expense base

! Reduce headcount

! Ongoing expense management

Re-align business portfolio

Reduce risk! Sustained and consistent reduction in dislocated assets

! Significant reduction in riskier, more volatile trading positions

Sustained and consistent risk exposure reduction

Dislocated asset balances in Investment Bank

3Q07 4Q07

(88)%

1Q08 2Q08 3Q08 4Q08

1) Excluding US prime, US Alt-A and European/Asian residential mortgage exposures of CHF 3.2 bn

CHF bn

99

12

4

36

59 2731

43

67

0.9

1.9 1)

236 230214

193

163

135

Investment Bank RWAs (period-end in USD bn)

2007 1Q08 2Q08 3Q08 2009E4Q08

(31)%

(16)%

Leveraged finance

Subprime residential mortgages and CDO

Commercial mortgages

8.8










! Reduce headcount


Re-aligning the Investment Bank Key client businesses Repositioned businesses Exit businesses

! Emerging Markets - maintain leading business but with more limited risk/credit provision

! US Leveraged Finance -maintain leading business but focus on smaller/quicker to market deals

! Cash Equities

! Electronic Trading

! Prime Services

! Equity Derivatives - focus on flow and corporate trades

! Equity trading - focus on quantitative and liquid strategies

! Convertibles - focus on client flow

! Highly structured derivatives

! Illiquid principal trading

Eq

uit

ies

Fix

ed

In

co

me

Ad

vis

ory

! Global Rates

! FX

! High Grade Credit / DCM

! US RMBS secondary trading

! Commodities trading (joint venture)

! Strategic advisory (M&A) and capital markets origination

! Mortgage origination

! CDO

! Non-US Lev fin trading

! Non-US RMBS

! Highly structured derivatives

! Power & Emission trading

! Corporate Lending - improved alignment of lending with business and ability to hedge

! Origination of slow to market, capital-intensive financing transactions

Develop existing strong market positions

Maintain competitive advantage but reduce risk and volatility

Release capital and resources; reduce volatility

! Low volatility of revenue

! High margins

! Stable client-focused platform

! Top-3 client research rankings and differentiated content

! Top-3 execution platform

! Low cost provider, with global scale and diversified client base

! Estimated global commission pool: $27 bn

! CS market share: 10.6% (up from 9.1% for 2007)

! Strong momentum: Seven consecutive quarters of market share gains

! Top 3 market share globally

! Disruption experienced by competitors presents unique opportunity to gain 10-15% incremental market share

! Improving primary rankings and new issue activity provides significant upside

Cash Equities

Market Opportunity

CS Competitive Strengths

Growth Strategy and Focus! Consolidate and extend market share gains

! Deliver focused client service driven by account segmentation and integrated across the firm

! Continue to drive cost efficiencies across platform

! Maintain high pre-tax margins (> 30% at low end of cycle) and a strong return on capital

2Q 1Q 2Q4Q3Q1Q 3Q

2007 2008

4Q

Cash Equities revenuesCHF bn

3.6

4.9

Electronic Trading

! Top ranked in portfolio trading, algorithmic trading and transition management

! Credit Suisse's CrossFinder is the #2 registered ATS in the U.S. � roughly 170 million shares/day crossed in 4Q08

! Strengths in technology and operationally intense scale businesses

! Significant investment required to develop the platform constitutes an important barrier to entry

Market Opportunity

! Increasing number of financial products moving to electronic trading platforms

! Fewer competitors

! Alternative pools of liquidity developing overseas

! Continue investing in core business � technology, people, client relationships, etc.

! Lead the development of electronic markets through active industry participation and investment

! Extend AES to other asset classes, initially FX, options, futures


Growth Strategy and Focus

Electronic Trading revenuesCHF bn

2Q 1Q 2Q4Q3Q1Q 3Q

2007 2008

4Q

1.3

1.0

2001 2004 2005200320022000 2006 20082007

491

1,868

1,407

Prime Services

CHF bn

Prime Services revenues! Conservative standards, integrated solutions, select

client base and sound risk portfolio

! Viewed as a strong counterparty given strength of funding and liquidity

! Substantially increased market share in 2008, while top competitors� market share has declined

! Higher pricing power with fewer viable competitors

Market opportunity

CS competitive strengths

! Focus remains stronger than ever on improving return on assets through re-pricing and upgrading client base

! Continue to take the most selective approach in the market versus the "mass market" taken by competitors

! Responsible and prudent management of balance sheet with strong ROA

Growth strategy and focusHedge Fund Industry AUM (in USD trillions)*

2Q 1Q 2Q4Q3Q1Q 3Q

2007 2008

4Q

1.91.5

* Source: Hedge Fund Research

Equity Flow Derivatives Flow Derivatives revenuesCHF mn

Market opportunity


Growth strategy and focus

! Revenue momentum: growth of 97%

! Market-share momentum: 2008 ranking 3rd in Europe and 4th in US (Greenwich Associates Survey), up from 8th and 6th

! Unparalleled network of relationships from cash equities and private banking franchises

! Growing share of hedge fund flow in parallel with growth of prime brokerage platform

! Round out global footprint by strengthening APAC platform

! Consolidate gains in Europe and US: limited incremental investment required

! Continue to lever AES brand into options electronic execution and market-making

! Trend towards flow / exchange-listed products away from complex / OTC products! More liquid risk, reduced processing costs

! Increased usage of flow derivatives by institutional clients

! Significant dislocation at main competitors, resulting in wider spreads

! Increased demand for hedging in volatile markets

2007 2008

2Q 1Q 2Q4Q3Q1Q 3Q 4Q

446

226

Flow-based Rates and FX

Flow-based Rates/FX revenues

! Continue to expand client footprint both Rates and FX

! Ongoing investment in FX electronic platforms; focus on client execution � agency model

! Largely client based franchise, with marginal risk taking to facilitate intermediation role

CHF bn

2Q 1Q 2Q4Q3Q1Q 3Q

2007 2008

4Q

Market opportunity


Growth strategy and focus

! Seen as a counterparty of choice (perceived financial strength), especially in derivatives but increasingly in cash as well

! Solid management team, integrated sales and trading model

! Strong risk management during turbulent markets

! Market leading research and electronic solutions (e.g. Merlin, FX AES)

! Continued strong market liquidity after record volumes in 2008 (e.g. Jan'09 FX volumes = avg monthly '08)

− Increased client demand for hedging against volatility

− Historically wide bid/offers

− Increased role for intermediators as government issuance expected to grow rapidly in 2009

! Strong macro risk environment

4.1

2.3

US RMBS

US RMBS Revenues

Market Opportunity


Growth Strategy and Focus

! Clear #1 franchise - #1 ranked by Orion client survey and #1 RMBS TradeWeb

! Strong, deep and proven sales and trading team

! Nimble trading posture with limited, well-marked positions

! Long-standing customer relationships

! Historic competitor dislocation; attractive security valuations

! Tremendous need for risk transfer and intermediation

! Robust government-guaranteed RMBS issuance/trading

! Distressed private label markets with wide bid-offer

! Potential for disruptions due to government interventions

! Maintain leadership franchise, pursuing bid-offer and client-focused business model

! Opportunistic risk taking approach in dislocated markets

CHF bn

2Q 1Q 2Q4Q3Q1Q 3Q

2007 2008

4Q1)1)

(1) Q308 and Q408 results exclude credit provisions related to the deterioration in credit of a counterparty to a legacy structured finance transaction.

1.3

0.2

Equities: Repositioned businesses

0

25

50

75

100

Equity convertibles (market value at period-end, indexed)

Equity trading strategies (gross book at period-end, indexed)

! Sell-down of convertibles trading book now mostly complete

!Convertibles business is now primarily focused on client flow

! Sell-down of equity principal trading and risk arbitrage positions now mostly complete

! Focus is now on quantitative and liquid strategies

4Q07 2Q08 3Q08 4Q08

(70)%

0

25

50

75

100

4Q07 2Q08 3Q08 4Q08

(73)%

Convertibles

Equity trading strategies

0

25

50

75

100

Fixed Income: Repositioned businesses

Emerging market bonds (Indexed, net market value)

Leveraged finance (CHF bn)

! Emerging market bond positions down 74% in 2008

!Maintain leading business but with morelimited risk/credit provision

! Funded and unfunded commitment exposure cut to minimal levels

!Maintain leading business but focus on smaller/quicker to market deals

4Q07 3Q08 4Q08

(74)%

3Q07 4Q07

59

35 (98)%

21

1Q08

14

2Q08 3Q08

11.90.9

4Q08

Unfunded

Funded

Emerging markets

US leveraged finance

Cross-bank collaboration effort remains critical

Collaboration revenuesCHF bn ! IB�s collaboration revenues with the Private

Bank and Asset Management have been resilient despite market conditions, totaling CHF 2.4 bn in 2008 vs. CHF 2.7 bn in 2007

! Continued cross-selling efforts remain critical, including tailored products (the Solution Partners JV) and new client introduction

! IB-related revenues are expected to continue to contribute approximately half of Credit Suisse�s collaboration target of CHF 10 bn

2006 2007 2008

Total4.9

IB - PB1.6

IB - AM0.3

Total5.9

IB - PB2.2

IB - AM0.5

Total5.2

IB - PB2.0

IB - AM0.4










! Reduce headcount


Reducing headcount and non-compensation expenses

Source: McLagan

(1) 2008 benchmark data not yet available

In USD thousands

Credit Suisse and benchmark non-comp per head (McLagan)

Benchmark non-comp per head

Credit Suisse non-comp per head

108

117

118 118

118

112

111

105

110

115

120

(1)

-8%

2005 2006 2007 2008

Investment Banking headcount (period-end)

17,300

18,70019,700

17,500

20,60021,300

2005 2006 4Q08 2009E2007 3Q08

! Outperformed peers in both absolute and relative terms with CS non-comp/head declining by 8% since 2005

! Resulting non-comp spend is among the lowest in the industry

! Committed to meeting 2009 year-end target of 17,500

! Headcount reduction of 1,600 in 4Q08 with further reductions scheduled for 2009 consistent with December announcement

Investment Bank cost savings target

! Total expected 2009 cost savings of CHF 1.3 bn of Credit Suisse total CHF 2 bn compared to 9M08 annualized

! 82% of savings from direct costs and 18% from shared services allocations

IB direct compensation

(0.7)

IB directnon-comp

Shared services

Total cost savings

Cost savings planned from re-alignment programCHF bn

(0.4)

(0.2) (1.3)

FY 08 pro forma results

17.7

(11.1)

2.1

CHF bn

(4.5)

13.2

5.5

10.9

1.3 (0.2)

1.1

7.2

4.9

EquityFixed Income

Strategic Advisory (M&A) and Capital Markets Origination

Key client businesses

Repositioned businesses

Operating costs and credit provisions

Pre-tax Income

2008 pro forma revenues

(3.7)

(1)

1) Includes fair value gain on own debt of CHF 3.6 bn.

(0.6)

2.5

4.1

2.10.7

Improved returns over the cycle with lower volatility

13.2

17.014.9

11.8

Investment Banking revenue (CHF bn)

2005 2006 2007 2008

Investment Banking pre-tax income(1) (CHF bn)

! Repositioned IB has robust revenues and earnings and at much lower volatility

! Margins and returns should be higher through the cycle, avoiding the losses suffered in 2008

! Significantly lower risk capital in IB, with more balanced capital allocation across the Group

! Model intended to be capital generative, with tight capital and risk usage across all businesses

Pro forma risk-weighted assets (USD bn)

99 129 161 135

Pro forma

2005 2006 2007 2008

Pro forma

(1) Excludes litigation charge of CHF 960m in 2005 and net insurance settlement credits of CHF 508m in 2006 and CHF 208m in 2008.

Strongly positioned for the new environment

Capital strength and liquidity

! Counterparty of choice ! Greater flexibility and consistency, with no government ownership

CS Group strengths� ...and the Opportunity for IB

Aggressive risk reduction ! Accelerates execution of IB strategy! Allows us to rebalance capital across CS Group

Integrated bank model! Stable approach, validated by stressed market environment! Unique collaboration opportunity

Repositioned IB platform ! First mover advantage as demand turns to less complex products! Profitable through cycle with lower volatility, risk and cost

Client-focused, capital-efficient strategy

paul calello on morgan stanley financial services conference · 2017-07-07 · merlin, fx aes)!...

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