.credit-suisse Annual Report Part 2 An overview of Credit Suisse Group Organisation Financial review Strategic review
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.credit-suisse Annual Report Part 2 An overview of Credit Suisse Group Organisation Financial review Strategic review .credit-suisse Annual Report Part 2 An overview of Credit Suisse Group Organisation Financial review Strategic review Document Transcript

  • ANNUAL REVIEW 2000/2001 PART II AN OVERVIEW OF CREDIT SUISSE GROUP
  • PART I 2 Financial highlights 2000 4 To our shareholders PART II 6 An overview of Credit Suisse Group 6 Organisation 8 Financial review 11 Strategic review PART III 13 Review of business units 16 Credit Suisse Financial Services 23 Credit Suisse Private Banking 25 Credit Suisse Asset Management 27 Credit Suisse First Boston PART IV 30 Credit Suisse Group Risk Management PART V 50 Consolidated financial statements PART VI 107 Parent company financial statements 118 Five-year summary of selected financial data 120 Management 126 Main offices 127 Information for investors
  • AN OVERVIEW OF CREDIT SUISSE GROUP Credit Suisse Group is one of the world’s leading global financial services companies. In the area of asset management and asset gathering, specialised business units offer their clients – comprising private individuals, companies and institutions – investment products, financial advisory services, life insurance, pension solutions and the full range of other bank services, as well as non-life insurance from Winterthur. In the area of investment banking, Credit Suisse First Boston is one of the global leaders, playing a major role in many significant transactions. Credit Suisse Group is headquartered in Zurich and dates back to 1856. Its registered shares (CSGN) are listed on the SWX Swiss Exchange, in Frankfurt and Tokyo. They are also traded in New York as an American Depository Receipt (ADR), in London and Paris. The Group employs around 80,000 staff worldwide. Financial Services Private Banking Credit Suisse Financial Services is one of the leading Credit Suisse Private Banking is one of the providers of comprehensive financial services in Europe world’s leading private banks. It has a strong and other selected markets. It is a market leader in deve- market presence both within and outside loping innovative solutions for customers’ financial require- Switzerland and specialises in providing ments in banking and insurance, through its e-business personal investment counselling and profes- applications and integrated distribution and service sional asset management for high-net-worth channels. individuals. Winterthur Insurance Credit Suisse Banking Winterthur Life & Pensions Credit Suisse Personal Finance Credit Suisse e-Business Winterthur legal entity Credit Suisse legal entity 6
  • Asset Management Investment Banking Credit Suisse Asset Management is a leading Credit Suisse First Boston is a leading global global asset manager focusing on institutional, investment banking firm serving institutional, mutual fund and private client investors, provid- corporate, government and individual clients. Its ing investment products and portfolio manage- businesses include securities underwriting, sales ment advice in five core markets around the and trading, investment and merchant banking, world. financial advisory services, investment research, venture capital, brokerage services for financial institutions and online brokerage services. Credit Suisse First Boston legal entity Number of employees by business unit 28,122 40,577 2,350 8,665 CSFS CSPB CSAM CSFB www.credit-suisse.com 7
  • AN OVERVIEW OF CREDIT SUISSE GROUP Credit Suisse Group continued to perform well in 2000. It increased its net operating profit by 35% to CHF 7.2 billion and recorded a 19.3% growth in assets under management to CHF 1,417.0 billion. Earnings per share on an operating basis rose by 32% to CHF 25.98. Overview of business unit results Credit Credit Credit Credit Adjustments Suisse Suisse Suisse Suisse including Credit 2000 Financial Private Asset First Corporate Suisse in CHF m Services Banking Management Boston Center Group Operating income 9,520 6,251 1,562 20,363 (465) 37,231 Operating expenses 6,135 2,617 1,137 15,645 (386) 25,148 Gross operating profit 3,385 3,634 425 4,718 (79) 12,083 Depreciation and write-offs on non-current assets 1) 356 41 29 644 283 1,353 Valuation adjustments, provisions and losses 2) 563 160 0 537 5 1,265 Profit before extraordinary items, taxes 1) 2,466 3,433 396 3,537 (367) 9,465 Extraordinary expenses/(income), net 3) (20) (1) 1 0 212 192 Taxes 3) 547 766 57 925 (477) 1,818 Net operating profit before minority interests 1) 3) 1,939 2,668 338 2,612 (102) 7,455 Amortisation of acquired intangible assets, net of tax, and goodwill 48 7 52 254 (2) 359 Restructuring provision, net of tax 1,074 1,074 Net profit before minority interests 1,891 2,661 286 2,358 (1,174) 6,022 Minority interests (147) (29) 0 (3) (58) (237) Net profit 1,744 2,632 286 2,355 (1,232) 5,785 Net operating profit 1) 3) 1,792 2,639 338 2,609 (160) 7,218 Value added 4) 1,134 2,456 215 1,107 (564) 4,348 10,093 5) Average allocated equity capital 3,117 1,147 11,968 18.7% 5) Return on average equity capital n/a n/a 19.7% Return on average equity capital (operating) 1) 19.2% 5) n/a n/a 21.8% Equity capital allocation as of 1.1.2001 13,873 3,031 1,296 16,346 1) Excl. amortisation of acquired intangible assets and goodwill. (151) (40) 0 6 2) Net of allocation (-)/release (+) of reserve for general banking risks. 3) Excl. restructuring provision. 4) Value added is a measure of value creation in the period under review. It is derived from Credit Suisse Group’s Value Based Analysis (VBA) and complements the per- formance metrics which are currently used, but does not replace them. The measure is aimed at enhancing management’s awareness of value creation. For this pur- pose, accounting figures are adjusted by adding back accounting distortions such as selected non-cash charges (e.g. goodwill), and cost of equity is charged to the business unit as well as to consolidated accounts. 5) For Winterthur Group within Credit Suisse Financial Services, average invested capital is used for calculation of return on invested capital (ROIC). 8
  • Overview of assets under management 1) 31 Dec. 2000 31 Dec. 1999 Change in CHF bn in CHF bn in % 303.0 278.2 8.9 Credit Suisse Financial Services – of which net new assets 2) 3) 8.1 11.1 (27.0) 153.6 136.8 12.3 – of which discretionary 488.2 476.7 2.4 Credit Suisse Private Banking – of which net new assets 3) 21.0 11.6 81.0 101.1 95.2 6.2 – of which discretionary 487.2 424.6 14.7 Credit Suisse Asset Management – of which net new assets 3) 4) 24.4 18.5 31.9 360.1 324.2 11.1 – of which discretionary 142.1 10.6 – Credit Suisse First Boston – of which net new assets 3) 1.6 1.6 0 6.6 1.4 371.4 – of which discretionary 31.5 5.7 452.6 – of which Private Equity 1,417.0 1,188.1 19.3 Credit Suisse Group (consolidated) – of which net new assets 3) 53.3 41.9 27.2 619.6 556.2 11.4 – of which discretionary 1) Assets under management include assets which are held for investment purposes. For the insurance business, assets under management include all investment assets underlying insurance contracts. Not included are corporate liquidity funds, wholesale custody, banking and broking assets, except for assets of corporate clients of Credit Suisse in Switzerland. The previous year’s figures have been adjusted accordingly. 2) 1999 net new asset figure adjusted for short term/extraordinary asset inflows. 3) Net new assets exclude interest and dividends. 4) Net new discretionary assets. Financial review financial institutions which have made CHF 25.98 (+32%) on an operating large purchase acquisitions. After basis, and book value per share rose In the year 2000, all business units deducting amortisation of goodwill and by 14% to CHF 136.30 since the end achieved double-digit growth rates other intangibles of CHF 359 million of 1999. both in revenue and in net profit and and the one-off DLJ restructuring made further progress towards achiev- charge of CHF 1.1 billion, Credit Par value reduction and share split ing their strategic targets. Suisse Group’s reported net profit after Instead of a dividend, the Group’s taxes and minority interests for the full Board of Directors will propose a par year stood at CHF 5.8 billion. value reduction of CHF 8 per share to Further increase in profits and strong Looking at the individual business the Annual General Meeting on 1 June operating results For the first half of 2000, Credit units, Credit Suisse Financial Services 2001. This distribution compares to a Suisse Group recorded a net operating contributed CHF 1.8 billion (+16%) to dividend of CHF 7 per share in 1999 profit of CHF 3.7 billion, excluding the the Group’s net operating profit. (CHF 5 in 1998). At the same time amortisation of goodwill. Despite diffi- Excluding its Personal Financial Credit Suisse Group will split its shares cult market conditions and a lower Services initiative in Europe, which is in 4 to 1, resulting in a new par value of level of capital market activity, the investment mode, Credit Suisse CHF 3 per share. The corresponding Group nearly equalled this result in the Financial Services posted a net operat- amendments to Swiss corporate law second half, posting a net operating ing profit of CHF 2.0 billion (+30%). entered into force on 1 May 2001. If profit of CHF 3.5 billion, excluding the Credit Suisse Private Banking con- approved by the Annual General amortisation of goodwill and other in- tributed CHF 2.6 billion (+38%) to Meeting, the capital reduction of tangibles, and the one-off restructuring the Group’s total net operating profit; CHF 8 will be paid out and the share charge for the integration of Donald- Credit Suisse Asset Management, split will be effected on 15 August son, Lufkin & Jenrette (DLJ). For the CHF 338 million (+32%); and Credit 2001. year as a whole, Group net operating Suisse First Boston, CHF 2.6 billion profit was up 35% to CHF 7.2 billion. (+ 34%). Sustained healthy growth of assets The net operating profit gives a clearer Credit Suisse Group’s return on under management indication of current and future equity stood at 17.7%, or 21.5% on Credit Suisse Group has grown its as- earnings strength, and has become an an operating basis. Earnings per share sets under management by a total of accepted measure of earnings for amounted to CHF 20.83 (+8%), or CHF 228.9 billion to CHF 1,417.0 bil- www.credit-suisse.com 9
  • AN OVERVIEW OF CREDIT SUISSE GROUP lion since end-1999. This corresponds sions. Credit Suisse Financial Services to total growth of 19.3%, of which also includes a newly-formed unit Revenue composition 4.5%, or CHF 53.3 billion (1999: CHF focusing on e-business and e-enabling, 41.9 billion), is attributable to net new as well as a specialised technology and 14% 17% assets. The Group’s net new asset services unit. growth comprised CHF 8.1 billion from The new structure is aimed at en- Credit Suisse Financial Services, CHF hancing the Group’s asset gathering 24% 21.0 billion from Credit Suisse Private strategy through closer integration of Banking, CHF 24.4 billion from Credit banking and insurance, a focusing of 45% Suisse Asset Management and CHF strengths and expansion of services in 1.6 billion from Credit Suisse First e-business, and the exploitation of ad- Boston’s private equity and private ditional business opportunities in target Balance sheet business client businesses. Challenging market markets in Europe. The performance of Commission and service fees conditions and the weakening of the the new business area in 2000 under- Trading US dollar in the second half allowed lines the success of the measures Insurance only modest performance. already initiated. Strong revenue growth Acquisition of DLJ bolsters position The Group’s operating income rose by The acquisition of the US investment 34% to CHF 37.2 billion. Net interest bank Donaldson, Lufkin & Jenrette income was up 1% compared to (DLJ), concluded on 3 November Revenue contribution by business unit 1999. Commission and service fee in- 2000, creates considerable added come increased 53%, and trading in- value for both of Credit Suisse Group’s 25% come increased 34%. Income from the core areas of business. insurance business was up 22%. In investment banking, the acquisi- 54% Operating expenses also increased tion creates a ‘super bulge bracket’ 34%, to CHF 25.1 billion. This was global investment bank in Credit Suisse 17% attributable in large part to business First Boston. The Group’s market 4% expansion, higher performance-related position and earnings quality in global staff incentive payments in line with in- investment banking have been sub- CSFS dustry pressure on compensation levels stantially improved, with Credit Suisse CSPB and increased profitability, and to spe- First Boston ending the year ranked CSAM cial staff retention programmes con- among the leading providers in its CSFB nected to the DLJ acquisition which industry. were announced at the time. Gross The integration of DLJ into Credit operating profit rose by 32% to CHF Suisse First Boston was completed 12.1 billion, and valuation adjustments, rapidly to minimise business disruption. provisions and losses were CHF 1.3 Cost savings are on track, with 80% of billion. Extraordinary expenses, entail- savings achieved by year-end. To date, ing the aforementioned one-off re- Credit Suisse First Boston has been Net operating profit contribution by business unit structuring costs of CHF 1.1 billion able to achieve its goal of retaining in (net of tax) from the integration of DLJ, excess of 90% of identified talent. 24% stood at CHF 1.8 billion. In asset management, the Group’s 35% activities benefited from DLJ’s financial services business, which includes asset Closer collaboration in the areas of management and brokerage for high- banking, insurance and e-business Credit Suisse Group announced the net-worth investors, the online broker 5% creation of Credit Suisse Financial DLJdirect (operating under the name 36% Services in the first half of the year. CSFBdirect as of 2001) and Pershing, The private and corporate client busi- a leading provider of transaction pro- CSFS ness in Switzerland and the onshore cessing. CSPB business with affluent clients in Europe DLJ’s institutional asset manage- CSAM (Personal Financial Services) come un- ment business was integrated into CSFB der the umbrella of the new business Credit Suisse Asset Management, area, in addition to the activities in non- leading to a significantly stronger posi- life insurance, life insurance and pen- tion in the US. 10
  • Key performance indicators Long-term Key criteria objective 2000 Credit Suisse Group Net new asset growth >6% 4.5% Operating return on equity (ROE) 1) 2) 18–22% 21.5% Credit Suisse Financial Services Net new asset growth 6% 2.9% Operating return on equity (ROE) 1) 3) 20% 19.2% Credit Suisse Banking: operating cost/income 1) 60% 64.6% Winterthur Life & Pensions: net return on technical provisions 60–65 bp 68 bp Winterthur Insurance: combined ratio 103% 106.5% Credit Suisse Private Banking Net new asset growth 5% 4.4% Net operating margin on assets under management 1) 45–50 bp 54 bp Credit Suisse Asset Management Discretionary net new asset growth 10% 7.5% Net operating margin on assets under management 1) 8 bp 7.5 bp Credit Suisse First Boston Market share Increase market share Achieved Operating return on equity (ROE) 1) – in a good market environment >20% 21.8% – over market cycles 15–20% 1) Excl. amortisation of acquired intangible assets and goodwill. 2) Excl. restructuring provision. 3) For Winterthur Group within Credit Suisse Financial Services, average invested capital is used for calculation of return on invested capital (ROIC). Strategic review Outlook for 2001 Credit Suisse Group continues to be- lieve that the underlying favourable The market environment for financial macro trends in asset gathering and services companies such as Credit financial intermediation will provide con- Suisse Group holds a great deal of tinued opportunity for growth. It is well promise over the coming years. On the positioned in these two areas of strate- one hand, an unprecedented volume of gic focus to take advantage of the wealth will be accumulated in the form attractive opportunities in its key of private and collective savings, prima- geographic and global markets. The rily directed at providing retirement focus will be on performance, service, benefits and bringing with it a rising de- quality and brand to differentiate the mand for suitable investment opportu- Group in an increasingly competitive nities. This individual wealth will in- environment. creasingly require the high levels of 2001 has started off with a less service, performance and multi-channel robust economic and capital markets access that large global financial insti- environment, particularly in equity tutions can provide. At the same time, markets, as compared to the first half companies and institutions worldwide of 2000. Additionally, the Group con- will be using more and more of the tinues to make significant investments products and services provided by pro- in its core businesses to be poised for fessional, globally-active financial serv- growth and to adapt to changing client ices groups to help finance their opera- needs and opportunities. This year will tions and make more efficient use of likely offer a more challenging environ- their financial resources. Further con- ment; however, the Group remains solidation is expected in the global fi- confident it can maintain its strategic nancial services sector, leaving the momentum and performance. market to be contested by fewer, but stronger, competitors. www.credit-suisse.com 11
  • AN OVERVIEW OF CREDIT SUISSE GROUP The two core businesses: asset management and investment banking Our main priorities for the next few years Against this background, Credit Suisse Group focuses its activities on two key disciplines. One is asset management/ asset gathering, offering customers • Continue to focus on growth in asset gathering and the best service, quality and perform- management, both organically and through targeted ance in savings, life insurance, pension acquisitions. and investment products, as well as in other banking and insurance services. • Realise the full benefits of the merger with Donaldson, The other is investment banking, Lufkin & Jenrette (DLJ), thus improving Credit Suisse First where the Group acts as a financial Boston’s position among the leading global investment market intermediary, servicing compa- banks and growing the asset gathering business with nies, countries and major institutions. high-net-worth individuals in the US. In both areas, double-digit growth rates are expected in the coming • Strengthen earnings power by increasing productivity in years. both core areas of business, and minimise earnings volatility In asset management, the Group through strict risk management and by optimising the enjoys an excellent position in the business mix. savings, investment, insurance and pension markets with Credit Suisse • Further develop the potential within the Group by Financial Services, Credit Suisse strengthening the Credit Suisse brand, and increase Private Banking and Credit Suisse leverage across the Group in distribution, products, Asset Management. In investment expertise and technology. banking and in financial intermediation in general, the number of institutions • Further focus on performance measurement, using Value that can keep pace with developments Based Analysis (VBA), and on capital allocation, introducing in today’s highly competitive global Economic Risk Capital (ERC). marketplace is constantly declining. Credit Suisse First Boston is one of the world’s leaders in this sector. Over the longer term, asset management should contribute two-thirds of the Group’s net profit, with the remaining third being derived from investment banking. Net profit contribution before corporate center costs Financial intermediation (Credit Suisse First Boston) 35% 34% Asset gathering/asset management and supporting businesses 34% 65% 35% 66% 45% 66% 55% 65% 55% 45% Target mixx 1996 1997 1998 1999 2000 12