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2008-06-12 Goldman Sachs European Financials Conference, Berlin
 

2008-06-12 Goldman Sachs European Financials Conference, Berlin

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    2008-06-12 Goldman Sachs European Financials Conference, Berlin 2008-06-12 Goldman Sachs European Financials Conference, Berlin Presentation Transcript

    • Goldman Sachs European Financials Conference Panel: “Adapting the model: The originate and distribute model of the future” Berlin, Germany June 12, 2008 David Mathers, Head of IB Finance
    • 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 quot;Risk Factorsquot; in our Annual Report on Form 20-F for the fiscal year ended December 31, 2007 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 first quarter report 2008. Goldman Sachs European Financials Conference Slide 2
    • Earnings Power Disciplined Approach to Risk Reduction Strong Capital and Liquidity Position Adapting the Model: The Originate and Distribute Model of the Future Goldman Sachs European Financials Conference Slide 3
    • Credit Suisse has significant earnings power Benefit from a diversified and integrated global business Private Banking continues to deliver good results Solid results across most Investment Banking and Asset Management businesses, masked by valuation reductions Well positioned to create long-term value and seize opportunities that arise from market dislocation Goldman Sachs European Financials Conference Slide 4
    • A diversified earnings mix Private Banking Investment Banking Asset Management CHF m 2,502 1,439 1,990 1,381 1,377 1,324 1,289 1) 527 1) 191 299 257 1) 6 45 98 (247) (468) (849) (3,460) 1Q07 2Q07 3Q07 4Q07 1Q08 1Q07 2Q07 3Q07 4Q07 1Q08 1Q07 2Q07 3Q07 4Q07 1Q08 ! Stable results in challenging ! Most businesses performing well; ! Stable recurring management fees environment some at record levels ! Strong performance across most ! Good asset inflows and hiring ! Significant writedowns in leveraged businesses momentum for Relationship finance and structured products ! Valuation adjustments on our money Managers market assets ! Continued international expansion 1) Before losses from securities purchased from our money market funds Goldman Sachs European Financials Conference Slide 5
    • Fixed income revenues outside most affected areas at same level as very strong 1Q07 Fixed income trading and debt underwriting revenues CHF m ! Negative revenues in 1Q08 driven by valuation reductions in structured products and 1,226 leveraged finance 4,325 1,659 1,647 ! Very strong results in global rates and FX ! Strong results in emerging markets and proprietary trading ! 1Q08 adjusted revenues include (1,440) fair value reductions of CHF 0.5 Add back bn on corporate loan book 1Q08 Deduct 1Q08 1Q07 structured revenues 1Q08 fair adjusted adjusted 2) products and value revenues revenues leveraged finance gains on revenues 1) own debt 1) Total structured products and leveraged finance revenues excluding valuation adjustments of CHF 709 m reported in 'Other' revenues 2) Excluding revenues from structured products and leveraged finance businesses and converted into Swiss francs applying the 1Q08 average exchange rate to adjust for foreign exchange rate impact Goldman Sachs European Financials Conference Slide 6
    • Equity trading with solid performance in light of market conditions Equity trading net revenues CHF m ! Stable client-related businesses ! Good results in the global cash business driven by higher trading volumes, increased client flows and strong AES performance 2,475 2,171 2,068 ! Prime Services achieved record revenues 1,379 in 1Q08 with strong growth in client 1,037 balances and new client mandates ! Losses in equity proprietary trading in 1Q07 2Q07 3Q07 4Q07 1Q08 1Q08 compared to a strong 1Q07 AES = Advanced Execution Services, our electronic trading platform Goldman Sachs European Financials Conference Slide 7
    • Disciplined approach to cost management in Investment Bank General & administrative expenses CHF m ! Flexibility of cost base positions us well in current markets and going forward 941 864 827 ! Continued focus on reducing G&A 803 748 expense (10)% ! Despite headcount growth, G&A expense trend shows improvement 1Q07 2Q07 3Q07 4Q07 1Q08 Goldman Sachs European Financials Conference Slide 8
    • Continued revenue diversification Prime Services Quarterly Revenue Growth ! Record quarter with increased client balances and new client mandates 125% − Our chargeable balances are up 59% from the beginning of 2007 ! Credit Suisse viewed as a strong counterparty and a “safe haven” in this market given strength and stability of funding and liquidity 1Q07 2Q07 3Q07 4Q07 1Q08 Life Finance Quarterly Revenue Growth ! Dominant market position in trading and distributing both longevity and mortality risk ! Trading in both physical (life settlements, premium 446% finance) and synthetic (swaps, structured notes) forms ! Expanding internationally (Europe in 2008, Asia in 1Q07 2Q07 3Q07 4Q07 1Q08 2009) Goldman Sachs European Financials Conference Slide 9
    • Growing collaboration revenues 2007 collaboration revenues Key collaboration initiatives in CHF bn and growth % vs. 2006 ! Asset referrals CHF 3.1 bn 1 ! Structured Investment Products +5% 2 ! UHNW client solutions Private Asset ! Increase penetration of Managed Banking Management Investment Products 2 ! Product innovation CHF 2.3 bn CHF 0.5 bn ! Private Equity/Hedge Fund distribution +43% 1 +54% 3 ! Alternative investments distribution Investment ! Pension / Insurance solutions 3 Banking ! Fund linked products & Hedge Fund referrals Grow collaboration revenues from CHF 5.9 bn in 2007 to over CHF 10 bn in 2010 (+20% p.a.) Goldman Sachs European Financials Conference Slide 10
    • Earnings Power Disciplined Approach to Risk Reduction Strong Capital and Liquidity Position Adapting the Model: The Originate and Distribute Model of the Future Goldman Sachs European Financials Conference Slide 11
    • Significant progress in reducing risk positions Exposures and writedowns in CHF bn Leveraged finance Commercial mortgages Net writedowns: Net writedowns: Origination- 59 2007 (0.8) 2007 (0.6) -64% -46% 1Q08 (1.7) 1Q08 (0.8) 36 based 35 26 19 21 (exposures Funded shown gross) Unfunded 3Q07 4Q07 1Q08 3Q07 4Q07 1Q08 Residential mortgages 1) CDO trading 2) Net writedowns: Net writedowns: Trading- 2007 (0.5) 2007 (1.3) -66% -70% 16 1Q08 (0.1) 1Q08 (2.7) 2.3 based 3.9 1.6 9 (exposures 1.6 6 0.7 shown net) Subprime 1.1 Other 3Q07 4Q07 1Q08 3Q07 4Q07 1Q08 1) All non-agency business, including higher quality segments; global total 2) Year-end positions related to US subprime; total IB subprime is CHF 3.2 bn (across RMBS & CDOs) Goldman Sachs European Financials Conference Slide 12
    • Earnings Power Disciplined Approach to Risk Reduction Strong Capital and Liquidity Position Adapting the Model: The Originate and Distribute Model of the Future Goldman Sachs European Financials Conference Slide 13
    • Maintained strong capital position following transition to Basel II ! Weakening of US dollar reduces both risk- BIS Tier 1 ratio in % weighted assets and capital position Risk-weighted assets in CHF bn ! Managed to grow capital without having to 13.9 dilute existing shareholders 13.0 12.0 11.1 11.3 10.0 9.8 − Issued CHF 1.5 bn of hybrid tier 1 capital ! Reduced share repurchase activity 324 312 301 299 296 254 ! Strong capital base and conservative liquidity 233 position as competitive advantage (7)% ! Continue to prudently manage our balance sheet, exposures and capital 2005 2006 2Q07 3Q07 4Q07 4Q07 1Q08 Basel I Basel II Goldman Sachs European Financials Conference Slide 14
    • Earnings Power Disciplined Approach to Risk Reduction Strong Capital and Liquidity Position Adapting the Model: The Originate and Distribute Model of the Future Goldman Sachs European Financials Conference Slide 15
    • Adapting the model: The originate and distribute model of the future Changing competitive landscape Shrinking universe of buyers, particularly in Europe Reduced market size / simpler deal structures – “Back to the Future” Higher proportion of deals retained capital cost implications / regulation? Credit Suisse is well positioned when business recovers due to franchise leadership and world class distribution Goldman Sachs European Financials Conference Slide 16
    • Revenue by business as a % of Credit Suisse Group revenues 2007 Credit Suisse Revenue1) 2006 Credit Suisse Revenue1) Leveraged Finance C DO C M BS CMBS RM BS 3% 2% Leveraged Finance 4% 1% Asset Management 3% 7% 7% Private Banking 33% Private Banking Investment Banking (ex. 39% Investm ent CMBS and Lev Fin) Banking (ex. SP 50% and Lev Fin) 43% Asset M anagem ent 8% ! RMBS, CMBS and Leveraged Finance are important businesses for Credit Suisse Group ! However, IB has substantially diversified its business portfolio over the last five years, both broadening its FID franchise and developing the market position, breadth and financial performance of its Equity business 1) Based on Core Results Goldman Sachs European Financials Conference Slide 17
    • Adapting the model: Leveraged finance ! Fewer competitors, more rational Competitive Landscape marketplace ! Changing buyer universe ! Average exposures (and resulting revenues) “Back to the Future” will come down ! Target portfolio exposure $15-20bn ! Less aggressive deal structures Implications for Credit Suisse Model ! Time to market / time to exit Portfolio Management Orientation ! Probability of closing ! Managing distribution Goldman Sachs European Financials Conference Slide 18
    • Adapting the model: CMBS ! Shrinking investor base Competitive Landscape ! Significant opportunities in emerging markets, especially in Asia ! Liquidity recovering in US; European markets remain slow ! Gradual ramp up in origination activity “Back to the Future” ! Industry-wide focus on credit quality of underlying real estate collateral Implications for Credit Suisse Model ! Exit strategy: less reliance on securitization, Structural Changes more on syndications, loan sales and private placements ! Possibly need to retain higher percent of capital structure to facilitate transactions with consequent capital implications ! Credit Suisse has the people, industry expertise and distribution in place Goldman Sachs European Financials Conference Slide 19
    • Adapting the model: RMBS ! Number of competitors down due to higher Competitive Landscape capital costs of originate to distribute ! Non-agency market collapsed / conduit model (originate to securitize) is gone ! Only portfolio lenders are originating ! Remaining players distressed trading and agency lending ! Limited buyer universe ! Late 1990s issuance levels (approximately “Back to the Future” half 2006 levels) ! Plain vanilla products / LTVs coming down Implications for Credit Suisse Model ! Securitizations will re-emerge first for Structural Changes portfolio lenders ! Retain a more significant portion of the risk with consequent capital implications Goldman Sachs European Financials Conference Slide 20
    • Current market conditions validate Credit Suisse strategy Importance of geographic and product diversity Value of franchise leadership Use of ERC model and appropriate charging for capital Integrated Bank as differentiator Importance of strong capital and liquidity position Well positioned to create long-term value and seize opportunities that arise from market dislocation Goldman Sachs European Financials Conference Slide 21
    • Goldman Sachs European Financials Conference Slide 22