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credit-suisse Business Review 2005


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credit-suisse Business Review 2005

  1. 1. Credit Suisse Group Business Review 2005
  2. 2. Our vision The vision of Credit Suisse is to become the world’s premier bank, renowned for its expertise in investment banking, private banking and asset management, and most valued for its advice, innovation and execution. Brand launch in Hong Kong On January 16, 2006, we launched our new Credit Suisse brand and logo worldwide. The façades of Credit Suisse buildings in Hong Kong, London, New York, Singapore and Zürich were illuminated to celebrate the new brand.
  3. 3. Credit Suisse Group financial highlights Year ended December 31, in CHF m, except where indicated 2005 2004 2003 Consolidated income statement Net revenues 60,632 55,139 52,515 Income from continuing operations before cumulative effect of accounting changes 5,863 5,684 1,585 Net income 5,850 5,628 770 Return on equity Return on equity – Group 15.4% 15.9% 2.2% Return on equity – Banking 16.2% 17.8% 12.6% Return on equity – Winterthur 11.7% 9.2% (26.9%) Earnings per share Basic earnings per share in CHF 5.17 4.80 0.64 Diluted earnings per share in CHF 5.02 4.75 0.63 Net new assets in CHF bn 58.4 32.9 5.0 December 31, in CHF m, except where indicated 2005 2004 Assets under management in CHF bn 1,484.3 1,220.7 Consolidated balance sheet Total assets 1,339,052 1,089,485 Shareholders’ equity 42,118 36,273 Consolidated BIS capital data Risk-weighted assets 232,891 199,249 Tier 1 ratio 11.3% 12.3% Total capital ratio 13.7% 16.6% Number of employees Switzerland – banking segments 20,194 19,558 Switzerland – insurance segments 5,928 6,147 Outside Switzerland – banking segments 24,370 21,606 Outside Switzerland – insurance segments 13,031 13,221 Number of employees (full-time equivalents) 63,523 60,532 Stock market data Market price per registered share in CHF 67.00 47.80 Market price per American Depositary Share in USD 50.95 42.19 Market capitalization 75,399 53,097 Market capitalization in USD m 57,337 46,865 Book value per share in CHF 37.43 32.65 Share performance Market capitalization Swiss Market Index (rebased) Credit Suisse Group As of end of reporting period (in CHF bn) 75 100 90 60 80 50 70 60 40 50 40 30 30 20 10 2003 2004 2005 97 98 99 00 01 02 03 04 05
  4. 4. Key Highlights 2005 Our 2005 results show that we are making good CHF 5,850 million progress in transforming Net income for 2005 totaled CHF 5,850 million, up 4% compared to 2004. the underlying profitability of our business. Our new integrated structure will help us to further enhance our growth and returns for CHF 42.7 billion our shareholders. Private Banking recorded net new assets of CHF 42.7 billion, reflecting excellent inflows across all regions. This corresponded to a strong annual growth rate of 7.9%. CHF 1,484.3 billion The Group’s total assets under management stood at CHF 1,484.3 billion as of December 31, 2005, up 21.6% from December 31, 2004. 63,523 As of year-end 2005, Credit Suisse Group employed 63,523 people, of which 44,564 in its banking business, Credit Suisse, and 18,959 in its insurance business, Winterthur.
  5. 5. Credit Suisse Group Business Review 2005
  6. 6. For a detailed presentation of Credit Suisse Group’s financial statement 2005, its company structure, risk management, an in-depth review of the operating and financial results and additional information on corporate governance, please refer to the Annual Report 2005 and the Supplemental Information 2005. Cover image: Daria Mihaesco, Private Banking (Geneva)
  7. 7. Contents 4 Credit Suisse at a glance 6 Message from Walter B. Kielholz, Chairman of the Board of Directors 8 Message from Oswald J. Grübel, Chief Executive Officer 10 Our vision and our mission 11 Our three principles 12 A relentless focus on the needs of our clients 16 Teamwork must be at the heart of all we do 20 Our reputation is everything 24 Operating review 24 Credit Suisse Group and Credit Suisse 28 Winterthur 30 Aiming for Operational Excellence 32 Credit Suisse Group in society 36 Corporate governance and management 36 Corporate governance 38 Executive Boards of Credit Suisse Group and Credit Suisse 40 Summary of the responsibilities of the Board of Directors and the Executive Boards of Credit Suisse Group and Credit Suisse 42 Financial tables The content of this Business Review is for information purposes only and constitutes neither an offer for sale of any product nor investment advice.
  8. 8. Credit Suisse at a glance Credit Suisse As one of the world’s leading banks, Credit Suisse provides its clients with investment banking, private banking and asset management services worldwide. Credit Suisse offers advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as retail clients in Switzerland. Credit Suisse is active in over 50 countries and employs more than 44,000 people from 100 different nations. Credit Suisse’s parent company, Credit Suisse Group, is a leading global financial services company headquartered in Zürich. Credit Suisse Investment Group also includes Winterthur, the leading insurance company in Switzerland and one of the top 10 composite insurers in Europe. Credit Suisse Banking Group’s registered shares (CSGN) are listed in Switzerland and, in the form of American Deposi- tary Shares (CSR), in New York. In Investment Banking, Credit Suisse offers securities products and financial advisory services to corporations, governments and institutional investors. Operating in 69 locations in 33 countries, this business specializes in creating innovative solutions to clients’ challenges, drawing on expertise from across the full spectrum of products: debt and equity underwriting, sales and trading, mergers and acquisitions, investment research, correspondent and prime brokerage services. You can find further information about Credit Suisse Group and Credit Suisse at and further information about Winterthur at 4 Credit Suisse Group Business Review 2005
  9. 9. Private Asset Banking Management In Private Banking, Credit Suisse provides comprehen- In Asset Management, Credit Suisse manages sive advice and a broad range of investment products portfolios, mutual funds and other investment vehicles and services tailored to the complex needs of high-net- for a broad spectrum of clients globally, from worth individuals all over the world. Credit Suisse’s governments, institutions and corporations to private structured advisory process encompasses both asset individuals. It offers investment products across the full and liability management. Furthermore, the bank is a range of asset classes, including equity and fixed leading provider of innovative alternative investment income securities, commodities and multiple-asset class products. Wealth management solutions include tax products. The bank is a world leader in providing planning, pension planning, life insurance solutions, alternative asset solutions and offers alternative wealth and inheritance advice, trusts and foundations. investments including real estate, hedge funds, private Credit Suisse offers multiple booking platforms and equity and volatility management. This business is a global execution capabilities. In Switzerland, Credit globally integrated network, sharing information across Suisse supplies banking products and services to busi- borders to deliver our best investment ideas and ness and retail clients as well as to private banking clients. capabilities to clients around the world. Credit Suisse Group Business Review 2005 5
  10. 10. Message from the Chairman Dear shareholders, clients and colleagues The year 2006 marks the occasion of Credit Suisse’s 150th anniversary. This milestone gives us an opportunity to thank those who have helped to build our company and those who place their trust in us. At the same time, we want to continue to foster the spirit of innovation that has been a hallmark of our bank. Alfred Escher, who founded Credit Suisse in 1856, was one of the most important politicians and commercial pioneers of his time. In addition to founding Credit Suisse, he played a crucial role in the founding of two important railway lines, a technical university, and two insurance companies. I am convinced that Escher’s strength in innovation continues to influence us even now that we are a global institution. Our ability to implement new ideas while maintaining the tried and tested is the golden thread that runs through our 150-year history and one which will stand us in good stead for the future. Walter B. Kielholz Chairman of the Board of Directors Our long tradition of innovation is evident not only in the way we develop products and Credit Suisse Group services to meet our clients’ high expectations – but also in the way we developed a response to our rapidly changing business environment in 2005. Technology and the globalization of markets have increased the complexity of the financial services industry and transformed the needs of our clients. In 2005 we responded swiftly and effectively to this challenging environment by building an organizational structure that enables us to combine our wealth of experience and expertise of the financial markets from across our banking business to meet our clients’ demand for sophisticated and holistic solutions. Credit Suisse began operating as an integrated global bank on January 1, 2006. Focused on investment banking, private banking and asset management, we are now well-placed to strengthen our competitive position globally and seize opportunities in our key markets. Our 150 years of experience has been the solid foundation that has enabled us to constantly look ahead, create novel solutions for our clients and define the marketplace of the future. We are proud to have a strong Investment Banking business that is one of the most innovative on Wall Street; a Private Banking business that is the benchmark in terms of profitability and innovation, and an Asset Management business that is a market leader in alternative investments. Our transition to an integrated structure means we can use our resources more effectively and our people can work together on a global basis – from all three areas of our bank – for the benefit of our clients. Crucially, while implementing our strategic plan, we remained committed to enhancing profitability and creating value for our shareholders. We reported net income of CHF 5,850 million for the full year. The Board of Directors will propose a dividend of CHF 2.00 per share to the Annual General Meeting on April 28, 2006. 6 Credit Suisse Group Business Review 2005
  11. 11. Two markets have, so far, accounted for a significant amount of our business volume: Switzerland and the US. Both markets will remain very important to the bank. However, we see a shift towards the emerging economies. We are operating in a global environment; if we want to be close to our clients and the markets in which they operate, we know we must increase our global footprint. This will complement the strong bases we will continue to develop in our home markets. Our global business strategy will be underpinned by our proximity to our clients, the expertise and commitment of our people, and the effective use of technology. We are therefore committed to investing in our global expansion, to recruiting and training the very best people in our industry and to dedicating resources to technology. This will enable us to create a competitive advantage through customized solutions and economies of scale. In 2005 we demonstrated our ability to deliver good results, while at the same time refocusing our business. I am confident that with our integrated global structure, we will be able to capitalize on our strong operating business and solid capital base to achieve sustained and profitable growth. Yours sincerely Walter B. Kielholz Credit Suisse Group Business Review 2005 7
  12. 12. Message from the Chief Executive Officer Dear shareholders, clients and colleagues Change is the driving dynamic of the banking business – change that is fueled by the growth of an increasingly global economy and the new, wired world of global networks and instant communications. In our constantly changing business environment, it is all too easy for the individual client to become marginalized, even neglected. That is why we are dedicated to putting our clients first in every single phase of our business. Clients are at the heart of everything we do. Meeting their needs, earning their trust and keeping that trust through the successful delivery of products and services tailored to their requirements are our highest priorities. Our success depends upon our ability to unlock the considerable experience and knowledge of the financial markets from across our organization. We have therefore Oswald J. Grübel built an integrated global bank, focused on our core strengths in investment banking, Chief Executive Officer private banking and asset management. Our new organizational structure, which we Credit Suisse Group launched on January 1, 2006, enables our people to work together closely on a global basis for the benefit of our clients. Our ability to create innovative solutions has been evident throughout our 150-year history. We think independently, finding new ways of solving problems and developing new services in response to client-specific needs. Preserving and enhancing our reputation is a major element of our service to clients. We know that it can take decades to develop a reputation – and an instant to lose it. Our reputation is determined by our capital and how we use it, by the ability and integrity of our people, and by the results we achieve – the value we bring to our clients. A relentless dedication to our clients, a ceaseless determination to earn and keep their trust, and a deep commitment to teamwork and integrity – these are the foundation stones of the integrated global Credit Suisse. While we implemented our integration strategy in 2005 and prepared Credit Suisse for future growth, we remained fully focused on our clients and succeeded in growing our business. Net income for the full year reached CHF 5,850 million, strengthening the underlying profitability of our business. We maintained strong capital ratios with a consolidated BIS tier 1 ratio of 11.3% at year-end 2005. Net new assets of CHF 58.4 billion for the full year 2005 underscore the trust our clients place in us to increase and protect their wealth. As of December 31, 2005, we had assets under management of CHF 1,484.3 billion. These figures also include Winterthur, which further improved its profitability in 2005. 8 Credit Suisse Group Business Review 2005
  13. 13. The year 2005 was decisive for Credit Suisse. I am convinced that we are now in an excellent position to build on our success by meeting our clients’ demand for sophisticated and holistic solutions across Investment Banking, Private Banking and Asset Management. In Investment Banking, we see attractive trends in areas in which we have historically been strong, and we will stay focused on these strengths – such as in leveraged finance, prime brokerage, advanced execution services and initial public offerings (IPOs). The latter performed very well in 2005 and Credit Suisse was ranked first in the global market share for IPOs for the full year, having participated in a number of high- profile transactions, including the IPO for China Construction Bank, the world’s largest IPO since 2001 and the largest IPO ever in China and in non-Japan Asia. In Private Banking, we set the industry benchmark for profitability and we fully expect to continue to do so. The demographics of this market are attractive, and we are well-placed to benefit from projected growth. We are broadening our global footprint in Private Banking: in 2005 we created a Private Banking hub in Dubai (United Arab Emirates) – a further milestone in our global strategy to grow the wealth management business. In addition, we opened local representative offices in Bangkok (Thailand), Guangzhou (China), Mumbai (India) and St. Petersburg (Russia). In Asset Management, the integration of our skills and know-how into one division empowers us to take full advantage of our leading position in discretionary mandates and alternative capital. It provides us with the opportunity to adjust swiftly and effectively to each and every change in this dynamic industry. I am confident that as an integrated bank, Credit Suisse will force the pace of innovation in asset management. The future of our industry in today’s rapidly changing global marketplace will be shaped by the banks that can stay close to their clients and their needs, by the banks that can efficiently turn their expertise into effective products and solutions, and by the banks that embrace change for the benefit of their shareholders, clients and employees. At Credit Suisse, we understand this new marketplace. We have created the integrated organization to thrive in it. And we have the talent and dedication to become the best in our business. Yours sincerely Oswald J. Grübel Credit Suisse Group Business Review 2005 9
  14. 14. Our vision and our mission The vision of Credit Suisse is to become the world’s premier bank, renowned for its expertise in investment banking, private banking and asset management, and most valued for its advice, innovation and execution. Our mission describes how we will achieve our vision. Credit Suisse will set new standards: new standards in partnering with our clients and new standards in providing them with innovative and integrated solutions. Cultural diversity is essential to the success of Credit Suisse. As an integrated global bank, Credit Suisse will empower people to work openly and respectfully with each other and with clients to deliver superior results that will lead to success and prosperity for all its stakeholders. Charlene Yu, Roderick Ng, Private Banking (Hong Kong) 10 Credit Suisse Group Business Review 2005
  15. 15. Our three principles Three principles guide our actions, ambitions and decision-making: we want to give our clients maximum value through our integrated approach; we optimize the expertise from our Investment Banking, Private Banking and Asset Management businesses through teamwork; and we preserve and nurture our reputation at every opportunity. A relentless focus The financial world is becoming ever more sophisticated and its clients consequently more demanding: they expect superior results. Clients are at the center of what on the needs of we do. We must understand their business, consider their goals from the outset, our clients and anticipate their needs. Nothing short of excellence will suffice in helping them to maximize their potential. Teamwork must If we are to succeed in becoming an integrated global bank that delivers truly world- class, innovative solutions to its clients, we must work together across our businesses be at the heart in a spirit of respect and collaboration. We have an obligation to bring together the of all we do combined intelligence of the entire organization to present a seamless service that will set us apart in our industry. Our reputation Reputations are built over decades but can be lost in an instant. Ours is built on trust, and has enabled us to build a global business. We understand the past but are shaped is everything by the future, so we must preserve and nurture our reputation at all times. Our reputation is determined by our capital and how we use it; by our people, their integrity, openness and respect; and, ultimately, by the results we achieve – the value we bring to our clients. Credit Suisse Group Business Review 2005 11
  16. 16. 12 Credit Suisse Group Business Review 2005
  17. 17. A relentless focus on the needs of our clients The measure of our success To build strong relationships with our clients, it is crucial that we understand their needs – what they need today and what they will need in the future. But as their requirements are rapidly changing, how do we stay ahead? We make sure we understand their business inside out; asking the right questions; finding the best solution. Like a team of Formula One engineers fine-tuning a car to suit the driver and the requirements of the track, we take pride in providing the perfect product and service to fulfill the client’s need and circumstance. Our talent for innovation is born of a desire to continually find better ways of serving our clients, to produce ideas triggered by the issues they face. We have pioneered techniques and business practices that are now standard in the industry, thanks to the imagination and creativity of our people in response to our clients’ objectives. Through our experience in investment banking, private banking and asset management, we can respond to the needs of a broad range of private, corporate and institutional clients. Through the global scope of our business, we can be close to our clients and their markets and we are able to give the service they expect. Of course, it is no good just talking about it; actually achieving what we say we will is the key to earning the satisfaction of our clients, by far the most important measure of our success. Yvonne Siu, Kehinde Longe, Product Control (Hong Kong) Credit Suisse Group Business Review 2005 13
  18. 18. Principle in action: client focus Our relentless focus on the needs of our clients – coupled with our product and market knowledge – means we can provide advice that works. This sounds fine in theory, but how does it work in practice? The following cases show the first of our three principles in action. Innovative debt restructuring for Brazil Our Investment Banking business managed a major Brazilian bond exchange in July 2005. The transaction’s success was largely due to its design, which grew out of our Liability Management expertise, solid experience in Latin America, and two years’ ongoing dialogue with our client, the government of Brazil. We focused the transaction on what the client wanted to accomplish – in effect, to retire the inefficient and underperforming C Bond (Capitalization Bond – a widely-held issue with interest accruing on the principal and capitalized interest) – one of the last reminders of the country’s previous instability. Michael Schoen, Our solution removed unpopular elements such as a call option, in return for a longer Debt Capital Markets – Latin America, maturity, yet retained many of the attractive features of the old bond. However, in terms Investment Banking (New York) of success, the really novel move was to offer this to investors in an auction based on the maturity they would accept, rather than price. This innovation was vindicated when the transaction achieved the highest participation rate ever recorded for a Brazilian exchange, including every major holder, with over 80% of the old bonds retired. It extends the bond’s maturity by 3.75 years – and, as well as retiring USD 4.3 billion of bonds that came out of the Brady plan debt restructuring, it relieves Brazil of over USD 500 million in annual amortization payments through 2009. With this transaction, Brazil could confirm its strengthening economic prosperity, just 11 years after its restructuring. Largest IPO in China… We also showed marketing leadership and innovation when in October 2005 we successfully priced and executed the largest initial public offering (IPO) in the world that year, which was also the largest ever IPO in China: the USD 9.2 billion offering for China Construction Bank. This was the first of China’s large state-owned banks to list shares overseas and was also the largest ever for a bank. Investment Banking obtained a high-quality and diverse investor base, actively addressing any enquiries and concerns, and converting these to orders through roadshows and one-to-one meetings. The offering, and the strong institutional demand for it, are seen as fresh evidence of investor confidence in China’s booming growth. … and in Russia In 2005, Credit Suisse also handled the largest ever IPO in Russia, helping Sistema raise USD 1.56 billion in the form of global depositary receipts traded on the London Stock Exchange. The offering was more than 2.6 times oversubscribed in the face of uncertain investor sentiment towards Russia. Sistema is the largest private sector consumer services company in Russia and the Commonwealth of Independent States, owning a 51% stake in Russia’s largest mobile phone company, plus additional interests in telecoms, financial services, real estate, technology and media. The company plans to use the proceeds to participate in the upcoming privatization of national telecom holding company Svyazinvest and to consolidate its leadership positions in selected industries. 14 Credit Suisse Group Business Review 2005
  19. 19. Crafting solutions to meet individual requirements Our focus on clients’ needs runs through every part of the bank. Our Private Banking clients have known for years that their dedicated relationship manager affords access to the entire spectrum of knowledge and services Credit Suisse has to offer. For one such client, Credit Suisse provided asset allocation, security selection and trading services. We hedged and monetized a single stock position worth CHF 500 million – and we also helped him close on a USD 2 billion private equity transaction by arranging a tailor-made escrow service. In addition, we structured a private investment fund for his family and friends to participate in his investment activities, and have arranged financing for a new yacht and private aircraft. Similarly, another private client was looking to buy a medium-sized enterprise when he retired from the Executive Board of a listed company. We assessed and recommended several candidate firms whose owners were considering succession planning and we arranged financing of CHF 5 million for the selected acquisition. For a key executive of a South Asian company, colleagues from Credit Suisse’s Private Banking and Investment Banking divisions cooperated in 2005 to complete a pioneer- ing corporate equity derivative deal. The transaction allowed the executive to generate cash to pay off a loan secured by shares in his company, while still maintaining upward exposure to the company’s performance through the purchase of a call option. The transaction was well received by the market with the stock opening higher than its previous day close after the executive had disclosed the deal publicly. One point of contact at a single bank is the most efficient way for many of our private clients to manage their wealth. A Hong Kong client, with a significant investment portfolio, used to deal separately with different divisions of leading financial institutions. As such, his advisors often focused on promoting products rather than offering objective advice. Now, with a single contact point at Credit Suisse to coordinate his different needs, he enjoys comprehensive banking and wealth management services based on our global resources. New products, new ideas, new perspectives – for our clients In 2005, our Asset Management division developed a high dividend yield equity product to offer Japanese clients exposure to global markets. Faced with the low yield of government bonds at around 1.5%, this product offers Japanese retail investors above 4.0% and pays a monthly dividend payment. We developed the product and won the mandate in response to a request from Nikko Cordial, one of the top three Japanese brokerage firms, for a product to distribute through their network to retail clients. This is a good example of how we can design a specific new product to meet the needs of clients in certain market environments. Iana Schlaeppi, Private Banking (Geneva) Credit Suisse Group Business Review 2005 15
  20. 20. 16 Credit Suisse Group Business Review 2005
  21. 21. Teamwork must be at the heart of all we do Combining our experience, knowledge and expertise What use is an orchestra of talented musicians who play only solos? To perform well, we must perform together. Teamwork creates enormous value. Our people collaborate across the business with one common goal: bringing value to our clients. Credit Suisse has a global reach – over 44,000 people in locations as diverse as Mexico City, Tokyo and Geneva. Performing as one team is not always simple. It requires dedication, determination and dialogue. It means we have to trust each other, listen attentively and be generous with our talent and ideas. We have to understand and believe in our goals, and recognize we are part of a global team. We make our talent work for our clients by sharing our wealth of experience, knowledge and expertise throughout the entire business in investment banking, private banking and asset management. Working as a team is not something we can choose to do some days but not others. It is the means by which we can make the most of our inherent strengths – our global reach, our first-class advice and our business experience – and reach our full potential for the benefit of our clients and our shareholders. Yong Cai, Charles Jin, Michael Daniel, Manish Kumar, Collateralized Mortgage Obligations, Investment Banking (New York) Credit Suisse Group Business Review 2005 17
  22. 22. Principle in action: teamwork Developing market-leading innovations – or acquiring them – represent two routes to growth for large organizations such as Credit Suisse. Putting those innovations to work successfully for different clients, internal and external, across a global, multi-business company, can create huge competitive advantage. But it takes teamwork to develop the structures, processes and relationships to pursue cross-business opportunities. The following cases provide a practical demonstration of our teamwork and the tangible benefits it can create for our clients. Building on knowledge from experts and clients HOLT, a platform to analyze the financial performance of companies, offers Credit Suisse divisions and clients unique insights into corporate strategy, performance and valuation, through one of the most advanced frameworks available, with a database covering over 18,000 companies in more than 55 countries. It works on the premise that stock markets set prices based on fundamentals such as cash flow, rather than Tim Bixler, traditional accounting measures. Therefore, it removes accounting distortions and HOLT, Investment Banking (Chicago) inflation, and calculates performance on Cash Flow Return on Investment (CFROI). Brought into the Cash Equities business of Credit Suisse in 2002, HOLT has lived a broad vision from day one to become a shared resource, or strategic advisory boutique, for many different areas within the bank. It is used for research, publications, structured and tailored products, insights and sometimes purely to demonstrate the competitive advantage of Credit Suisse to win pitches. Better still, HOLT enjoys a natural upward spiral in quality every time it is used. Diverse enough to cater for the needs of over 600 external clients, as well as our thousands of internal users, the framework and database improve as more people look at it, contributing their own unique insights, and customizing it to meet their own specific needs. The moment each improvement is in the database, every HOLT user gets the benefit of it. In effect, it is building a community that people want to be part of, bringing the ability to create niche businesses within Credit Suisse, and becoming a case study in how to engender innovation across a large organization. Raising funds through teamwork Coordinated team efforts feature across many parts of the bank. Since 2001, the Leveraged Investment Group of our Alternative Capital business and colleagues from Fixed Income have raised USD 4.8 billion of leveraged loan Collateralized Debt Obligations (CDOs) across nine transactions. Private Banking played a critical role in raising funds for several of these. The latest of these is Castle Garden Funding, a USD 850 million CDO structured and underwritten by Fixed Income. An integrated approach, a wealth of resources Successful company executives and leaders of industry will, by the nature of their work, have a strong relationship with an investment bank. Their very success means they will also need private banking facilities. So it’s natural to choose a bank that can offer both services – and where the two can work seamlessly together. In 2005, our Paris office arranged a number of services for a client who owned a private company. He wanted to monetize part of this wealth and also raise funds to grow the company. Our investment bankers evaluated his options and found a buyer for two- thirds of the company, then subsequently took the company public. In the end, the client entrusted our Private Banking division with the task of structuring and managing his private wealth. Nicole Nahass, HOLT, Investment Banking (New York) 18 Credit Suisse Group Business Review 2005
  23. 23. In addition, a number of other leading executives wanting to exercise stock options could not find the specific and speedy cash management service they required from their retail banks. Colleagues from the Investment Banking and Private Banking divisions worked together before the transaction to arrive at the best approach for the executives concerned, as well as the company and its employees. We then advised each client from a tax and wealth organization perspective, including assets the clients held with other banks. Working in close partnership with our clients Our work with Hiag Holding AG, a leading Swiss forestry products group and its owners, provides a similar illustration of maintaining a client relationship across several parts of the bank. We have worked with them for many years, including on the establishment in 2000 of their joint venture Nybron Flooring International Corporation, Europe’s leading wooden flooring company. In 2005, our clients, on the initiative of their private equity partner in Nybron, decided to monetize their investment and awarded Credit Suisse’s Investment Banking business the mandate. We ran a successful divestiture process, which raised a sum considerably above the sellers’ target, while also providing financing to the purchasers based on Nybron’s credit status, and pre- hedging the expected euro proceeds into Swiss francs for Hiag and its owners. Here again, thanks to our integrated approach, we were able to offer our clients not only investment banking, but also private banking services. Advice without boundaries In asset management, there is no single product or selection that will suit every client. So to reach our goal of bringing value to clients, we need close cooperation across the business, generally coordinated by a relationship manager. Our work for a German insurance company, who came to us with a quite specific product request, crosses borders. With the relationship managed from Frankfurt, and our teams there also taking care of reporting and compliance issues, we were able to bring in our portfolio management team in London to work on a sophisticated solution. This changed the structure of the product, keeping the out-performance ability the client wanted, yet building in other features to provide a perfect fit for the client’s needs. Credit Suisse is a market leader in the field of alternative investments, managing over USD 100 billion in a broad range of alternative asset classes, including real estate, private equity and hedge funds, among others. The alternative investments area is growing rapidly around the world, as both institutional and individual investors are Laurent Bouvier, increasingly seeking new investment areas that provide diversification from traditional Mergers and Acquisitions, asset classes, and are shifting to a focus on absolute returns. Our experience in this Investment Banking (London) area allows us to advise clients on an ever broader selection of investment choices that suit their circumstances and needs and put us at the forefront of an exciting new opportunity for our clients. Credit Suisse Group Business Review 2005 19
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  25. 25. Our reputation is everything Our most valuable asset In today’s competitive financial services industry, complacency is not an option. We are continually judged on the strength of the results we achieve, the attitude of our people, the respect we show for others and the value we bring to our shareholders and our clients. Like a chess grandmaster planning a move, we take great care over the immediate requirement, but always with an eye on the greater long-term consequences of our actions. To earn and preserve the long-term trust and support of our clients, we must anticipate, meet and beat their expectations. Their faith is crucial to our ability to grow our business and meet our goals. Our clients want more than just a product; they want a solution to their specific financial needs. They want more than just information; they want guidance from a specialist with an in-depth knowledge of their business. We take pride in rising to the challenges they set. We care about the difference we make. We serve our clients well and act professionally, and our experience shows that our own success follows. When our clients turn to us over and over again, it is because they enjoy working with our people. They value our straightforward approach, our integrity and our willingness to listen. They admire our commitment, energy and creativity. They appreciate our desire for finding the answers to their complex and rapidly changing requirements, supported by our wealth of experience in investment banking, private banking and asset management. We want them to know that we have the talent and resources to provide outstanding advice and expertise. And we want them to know that when we say we will do something, we will do it. Piers Cox, Richard Hitchcox, Shane O’Cuinn, Fixed Income, Investment Banking (London) Credit Suisse Group Business Review 2005 21
  26. 26. Principle in action: reputation Edyta Lopizzo, Ernest Durussel, Trade Finance Services, Private Banking (Geneva) The knowledge that our reputation is everything is crucial to our ability to serve our clients. Reputation is the third principle that guides us in our daily activities. In the final part of this chapter, we look to our people and the way they interact with our clients to illustrate this principle in action. Meeting and beating clients’ expectations Credit Suisse is reinforcing its reputation as an innovative partner for small and medium- sized enterprises (SMEs) in Switzerland. We are meeting their demand for growth financing options with some alternative forms of financing, which do not affect ownership structure – CSA Mezzanine and Preferred Pooled Shares (PREPS). Generally, SMEs are largely financed by bank loans, and it is difficult for many companies to support their expansion plans, as they cannot access the capital markets. Credit Suisse is therefore offering CSA Mezzanine financing, issued in the form of subordi- nated loans from Credit Suisse Investment Foundation, and managed by experts in the Asset Management division, as a vehicle for pension funds to tap into this alternative investment segment. PREPS, on the other hand, give both institutional and private investors a Pan-European platform to invest in larger SME companies in a broadly diversified, pooled manner. Prior to this, access to the capital markets to obtain resources similar to equity funding was unavailable for smaller companies. Reliable partner for US pension funds Credit Suisse is helping a growing number of US states with investment management programs that use state pension funds to invest in small and start-up enterprises within the state – these are often under-served by the large private equity firms. Central to the concept is the belief each state has in the quality of its entrepreneurs, and the endorsement of this by a global brand with the reputation of Credit Suisse. 22 Credit Suisse Group Business Review 2005
  27. 27. The state of Indiana chose Credit Suisse to manage a fund of funds, created to provide capital for innovation and investment in the state’s wealth of intellectual property in life sciences. Having raised USD 73 million, not just from the state employees’ pension fund but also from corporate investors and educational institutes, Credit Suisse now invests the money through carefully chosen venture capital firms. On the strength of this success, Credit Suisse operates similar schemes in Oregon and Ohio, with other states soon to follow. To demonstrate confidence in the funds, Credit Suisse also invests, usually at far higher than the standard 1%. Our involvement adds a confidence factor, which in itself can bring in greater investment, including from outside the state. It also has the benefit of shining the spotlight on different areas of entrepreneurial expertise within different states. While the outcome of these programs is a boost to economic development within the state, the main focus is the investment return for the states’ pension funds – and the funds are monitored strictly with this in mind. This is where the in-depth knowledge and experience of Credit Suisse plays such an important role. Clients place their faith in us and trust us to deliver. Finding new ways to improve client service At Credit Suisse, our reputation for smooth-running client service is due in no small part to our people, and the skills of every employee are important to us. We run a series of training programs and efficiency initiatives to support our aims. For example, Private Banking Switzerland runs the Next Pace initiative to improve staff familiarity with our five-step customer advisory process, while Retail Banking’s Come On Camp initiative helps client advisors position Credit Suisse as a committed bank that offers friendly service. Trusted advice, trusted relationships Clients know we will rise to the challenge of their changing requirements, and we are proud of the faith they put in us. A multi-billion dollar pension plan in the entertainment industry is a case in point. Clients of Asset Management in New York, they expressed concern about the future expected return environment for US fixed income. Because of our strong relationship with them, we were able to work in partnership with their investment consultant to discuss the potential to expand their investment guide- lines to take in fixed income globally. This would bring the benefits of diversification, plus the opportunity to take advantage of other markets. We introduced them to our London team and they made the decision to exit US fixed income and move to a global mandate. So we retained the business, and the fund enjoyed the comfort of a seamless move. They didn’t have to hire a new manager, and could continue working with the same trusted firm to arrive at a different solution – and of course they retained all their existing client services relationships with our New York office. Sébastien Lerjen, Private Banking (Geneva) Credit Suisse Group Business Review 2005 23
  28. 28. Operating review: Credit Suisse Group and Credit Suisse Our 2005 results show that we are making good progress in transforming the underlying profitability of our business. Our new integrated structure will help us to further enhance our growth and returns for our shareholders. The following discussion is based on the operational and management structure in place in 2005. 2005 was a year of decisive change and significant progress for Credit Suisse Group. In May 2005, Credit Suisse Group merged its two banking entities, Credit Suisse and Credit Suisse First Boston, to create an integrated global bank. The integrated global structure, combining the core businesses of Investment Banking, Private Banking and Asset Management, began operations on January 1, 2006. On January 16, 2006, the new Credit Suisse brand was launched. Credit Suisse Group While Credit Suisse Group implemented the integration strategy of its banking business in CHF m, except where indicated 2005 2004 Net revenues 60,632 55,139 in 2005, the results for the full year demonstrate that it was at the same time making Total operating expenses 27,954 24,534 good progress in strengthening the underlying profitability of its business. The Group Net income 5,850 5,628 proved its ability to benefit from an increase in client activity and the continued favorable Return on equity – Group 15.4% 15.9% credit environment. Net income totaled CHF 5,850 million, up 4% compared to 2004. Return on equity – Banking 16.2% 17.8% This result includes a non-cash charge in the fourth quarter of 2005 of CHF 421 Return on equity – Winterthur 11.7% 9.2% million after tax relating to a change in the Group’s accounting for share-based awards, Basic earnings per share in CHF 5.17 4.80 as well as a CHF 624 million after-tax charge in Institutional Securities in 2005 to BIS Tier 1 ratio 11.3% 12.3% Number of employees (full-time equivalents) 63,523 60,532 increase the reserve for certain private litigation matters. Assets under management in CHF bn 1484.3 1220.7 Credit Suisse Group’s return on equity was 15.4% in 2005. The Group maintained its strong capitalization, with a consolidated BIS tier 1 ratio of 11.3% at year-end 2005. Furthermore, Credit Suisse Group recorded net new assets of CHF 58.4 billion for the full year 2005. Private Banking Private Banking provides wealth management products and services to high-net- in CHF m, except where indicated 2005 2004 Net revenues 7,729 7,170 worth individuals in Switzerland and many other markets around the world. Total operating expenses 4,431 4,143 Net income 2,647 2,473 This segment reported net income of CHF 2,647 million for 2005, up 7% compared to Cost/income ratio 57.3% 57.8% 2004. The increase in net income primarily reflected improved commissions and fees Gross margin 129.2 bp 133.7 bp and trading revenues, partly offset by higher compensation and benefits. Net new assets in CHF bn 42.7 26.4 Assets under management in CHF bn 659.3 539.1 As part of its growth in strategic key markets, Private Banking expanded its business Number of employees (full-time equivalents) 13,077 12,342 during 2005 in areas such as Asia, the Middle East and Russia. A Private Banking hub was created in Dubai (United Arab Emirates) – a further milestone in the global strategy to grow the wealth management business. In addition, local representative offices were opened in Bangkok (Thailand), Guangzhou (China), Mumbai (India) and St. Petersburg (Russia). In 2006, Private Banking intends to establish a presence in Saudi Arabia by entering into a joint venture with experienced local partners in the Saudi Swiss Securities consortium, with an office in Riyadh. Private Banking increased its net revenues by 8%. This improvement was mainly driven by higher commissions and fees, reflecting the increase in assets under management and higher brokerage volumes. Furthermore, Private Banking recorded higher trading revenues, reflecting higher client transaction volume. The segment recorded higher costs, with a 7% increase in total operating expenses compared to 2004. This increase was mainly due to higher compensation and benefits, while other expenses increased only marginally. Compensation and benefits increases were driven by higher performance-related compensation, in line with higher pre-tax income and ongoing strategic investments in growth markets, including front-office recruitment. 24 Credit Suisse Group Business Review 2005
  29. 29. The gross margin for 2005 was 129.2 basis points. Compared to 2004, the gross margin decreased 4.5 basis points, mainly related to lower net interest income. Assets under management were CHF 659.3 billion as of December 31, 2005, an increase of 22% compared to December 2004. The main drivers of this growth were strong net new asset inflows, the impact of favorable foreign exchange rate fluctuations and higher equity valuations. Private Banking continued to achieve healthy money inflows from strategic key markets in Asia and from the onshore business in Europe, where double-digit growth rates were achieved. The segment recorded CHF 42.7 billion of net new assets for 2005. Corporate & Retail Banking Corporate & Retail Banking, which offers banking products and services to in CHF m, except where indicated 2005 2004 Net revenues 3,458 3,348 Corporate & Retail clients in Switzerland, reported a 19% increase in net income to Total operating expenses 2,186 2,051 CHF 1,069 million, a record result. Net income 1,069 901 Cost/income ratio 63.2% 61.3% Net revenues for 2005 were up 3% versus 2004, reflecting strong increases in Return on average allocated capital 20.7% 18.0% commissions and fees from increased brokerage volumes and increased trading Number of employees (full-time equivalents) 8,469 8,314 revenues. Net interest income remained stable as an increase in lending volume was offset by margin pressure in the low interest rate environment. Key drivers for the segment’s strong result were stable net reserves and releases of provisions in 2005 compared to net provisions for credit losses in 2004. For 2005, net releases of provisions for credit losses of CHF 96 million were recorded compared to net provisions of CHF 122 million in 2004. The release of provisions reflected the ongoing favorable credit environment for lenders. For 2005, total operating expenses increased 7% compared to 2004, due to higher performance-related compensation in line with higher pre-tax income, while other expenses only marginally increased. Corporate & Retail Banking achieved a strong return on average allocated capital of 20.7% in 2005, which was well above the mid-term target of 15%. In 2005, Corporate & Retail Banking further expanded its Swiss residential mortgage business, reporting growth of approximately 9%. The growth in this business reflected increased marketing efforts and Credit Suisse’s wide range of mortgage products. In line with the strategic aim of gaining market share in the high-end retail business, particularly in investment products, Credit Suisse launched a new investment product during 2005: Credit Suisse Triamant. This new product combines the advantages of professional asset management with those of an investment fund by providing actively managed asset allocation, broad diversification and transparent reporting, and, furthermore, underscores Corporate & Retail Banking’s strategy to provide more innovative investment products to retail clients. Credit Suisse Group Business Review 2005 25
  30. 30. Operating review: Credit Suisse (continued) Institutional Securities provides securities and investment banking services to institutional, corporate and government clients worldwide. Institutional Securities Institutional Securities reported net income of CHF 1,080 million in 2005, a decrease in CHF m, except where indicated 2005 2004 Net revenues 15,102 13,120 of 18% compared to 2004. Excluding the CHF 624 million after-tax charge in the Total operating expenses 13,643 11,375 second quarter of 2005 to increase the reserve for certain private litigation matters, Net income 1,080 1,313 net income for the full year was CHF 1,704 million, an increase of 30% compared to Cost/income ratio 90.3% 86.7% 2004. This improvement, excluding the litigation charge, was driven by higher revenues, Pre-tax margin 10.1% 13.6% lower income tax expenses and lower credit provisions (including the release of Return on average allocated capital 8.6% 12.8% significant credit provisions), offset in part by higher operating expenses. Net income Number of employees (full-time equivalents) 18,809 16,498 for 2005 was positively impacted by certain tax-related items. Institutional Securities increased its revenues by 15% versus 2004, reflecting higher investment banking and trading revenues and increased industry-wide activity. This improvement demonstrates Credit Suisse’s strength and leadership position in key business areas, including initial public offerings (IPOs), leveraged finance, advanced execution services, emerging markets, prime brokerage and the increasingly important financial sponsor client base. Investment banking net revenues include debt underwriting, equity underwriting and advisory and other fees. Total investment banking revenues improved 16% in 2005. This strong investment banking performance reflected the impact of the newly established financing platform, which integrated the capital markets, leveraged finance origination and structuring teams. Institutional Securities also benefited from a leading position in the financial sponsors business. Debt underwriting revenues were up 8% versus 2004, primarily reflecting higher results in investment grade capital markets, leveraged finance and residential mortgage-backed securities. Equity underwriting revenues increased 25%. These improvements were due to higher industry-wide equity issuance activity and increased IPO market share in the Americas and Europe. Advisory and other fees increased 23%, due primarily to an increase in industry-wide activity and increased market share. Total trading revenues increased 14% compared to 2004. The increase in fixed income trading revenues reflected improvements in commercial and residential mortgage- backed securities as well as Latin America and other emerging markets trading, all of which are key growth areas in the industry. The increase in equity trading revenues reflected higher revenues in prime services, the global cash business and proprietary trading. Institutional Securities reported a 20% increase in total operating expenses versus 2004. This included the impact of the CHF 960 million charge in 2005 to increase the reserve for certain private litigation matters. Excluding the impact of this litigation charge, total operating expenses in 2005 increased 11%, primarily reflecting higher compensation accruals in line with higher revenues and higher other expenses. 26 Credit Suisse Group Business Review 2005
  31. 31. Credit Suisse was ranked first in the global market share for IPOs for the full year 2005, having participated in a number of high-profile transactions, including the USD 9.2 billion IPO for China Construction Bank, the world’s largest IPO since 2001 and the largest IPO ever in China and in non-Japan Asia. Other notable transactions include the USD 1.8 billion IPO for chemical company Huntsman, the IPO of Neustar, the landmark USD 21 billion sale of AT&T, the historic USD 4.4 billion “Brady Bond” exchange for Brazil, and the leveraged buyout of SunGard Data Systems, which was the largest ever technology buyout. Wealth & Asset Management Wealth & Asset Management offers international asset management services – in CHF m, except where indicated 2005 2004 Net revenues 5,234 4,202 including a broad range of investment funds – to institutional and private investors. Total operating expenses 2,687 2,539 It also provides financial advisory services to corporate clients. Net income 663 530 Total assets under management in CHF bn 608.8 482.4 The Wealth & Asset Management segment reported net income of CHF 663 million in Total net new assets in CHF bn 11.5 2.6 2005, an increase of 25% compared to 2004. The increase primarily reflected a higher Number of employees (full-time equivalents) 3,035 2,981 level of investment-related gains in Alternative Capital. Wealth & Asset Management measures business performance based on assets under management, discretionary assets under management and net new assets. Assets under management as of December 31, 2005 amounted to CHF 608.8 billion, up 26.2% versus December 31, 2004, while discretionary assets under management increased 28.7%. Wealth & Asset Management had a net asset inflow of CHF 11.5 billion, a significant improvement from the 2004 net asset inflow of CHF 2.6 billion. Wealth & Asset Management increased its net revenues in 2005 by 25% compared to 2004. Revenues before investment-related gains increased 5% from 2004, due to higher placement fees in Alternative Capital and higher management fees in Credit Suisse Asset Management. Investment-related gains increased 28% in 2005, driven by a higher level of private equity gains resulting from the sale of private equity investments. Operating expenses in 2005 increased 6% from 2004, primarily reflecting higher pro- fessional fees in Alternative Capital. The increase in professional fees was due primarily to consulting fees paid to managers who continue to assist in managing portfolios of certain funds spun off from Alternative Capital. Compensation and benefits expenses increased slightly in 2005, reflecting higher performance-related compensation, offset in part by lower severance costs. Detailed information on the financial results of Credit Suisse Group can be found in the Annual Report 2005 and the Supplemental Information 2005. Credit Suisse Group Business Review 2005 27
  32. 32. Operating review: Winterthur Winterthur achieved good progress in 2005 as it improved its overall financial results and strengthened its operating performance. This underscores the effectiveness of the measures implemented over the past three years. Winterthur still has further potential to grow and to enhance its profitability. Winterthur is the leading insurance company in Switzerland and is one of the top 10 composite insurers in Europe. Building on its 130-year history, Winterthur operates its Life & Pensions and Non-Life businesses primarily in Western Europe, as well as in Central and Eastern Europe, the US and Asia. It distributes a well-balanced product portfolio through multiple channels and focuses on private clients and small and medium-sized enterprises (SMEs). The Winterthur brand reflects a straightforward and entrepreneurial approach to business, a commitment to high-quality products and superior customer services. Winterthur is active in 17 countries and has approximately 19,000 employees serving 13 million clients worldwide. Credit Suisse Group’s strategy regarding Winterthur is to secure its leading market position in Switzerland and to strengthen its international operations. The Group continues to manage Winterthur as a financial investment and is preparing it for a potential capital markets transaction. 2005 results 2005 was a successful year for Winterthur, which strongly contributed to Credit Suisse Group’s results. Considerable efforts, initiated in 2002, to systematically improve Winterthur’s risk profile and to implement strict and selective underwriting processes have proved beneficial. Solid operational progress contributed in 2005 to a significant increase in net income. The return on equity reached 11.7% in 2005 after 9.2% in the previous year. Life & Pensions Both reporting segments, Life & Pensions and Non-Life, succeeded in further in CHF m, except where indicated 2005 2004 Net revenues 18,197 16,618 strengthening the underlying business performance in 2005. Life & Pensions continued Total operating expenses 1,883 1,776 its focus on technical performance, reflected by an improved risk margin, while Total business volume 17,685 16,777 maintaining good growth dynamics. For the full year 2005, Life & Pensions reported Net income 490 522 net income of CHF 490 million. This 6% decrease compared to 2004 was primarily Number of employees (full-time equivalents) 6,913 6,524 attributable to specific effects related to taxes and changes in actuarial models and assumptions. In Non-Life, net income for 2005 increased from CHF 206 million Non-Life to CHF 578 million. This improvement was partly driven by the after-tax charge of CHF 242 million booked in the fourth quarter of 2004 to increase provisions for in CHF m, except where indicated 2005 2004 Net revenues 11,688 11,533 contingencies related to the sale of Winterthur International in 2001. The main factors Total operating expenses 2,850 3,134 contributing to the improvement of Non-Life’s operating performance were a favorable Net income 578 206 claims experience and continued strict cost and claims management. Combined ratio 96.6% 100.1% Number of employees (full-time equivalents) 12,046 12,844 Recent developments Winterthur has not only achieved a solid level of profitable growth but has also succeeded in further strengthening its business portfolio. It withdrew from the Canadian market in 2005, while further improving its position in promising pension markets in Central and Eastern Europe via the acquisition of the Polish pension fund Dom, for which regulatory approval is expected in 2006. A significant milestone was the completion in December 2005 of the seasoning process relating to the sale of Winterthur International to XL Insurance (Bermuda) Limited in 2001. Substantial progress has also been made in other areas, including the establishment by Credit Suisse Group of a new Board of Directors for Winterthur and the preparations for a potential listing of Winterthur on the stock market. In view of the accomplishments in 2005, Winterthur is well-positioned to successfully seize new business opportunities. 28 Credit Suisse Group Business Review 2005
  33. 33. Beyond 2005 The market environment in which Winterthur operates is characterized by sustained low interest rates and competitive pressure. Strict cost management, flexibility and, crucially, the spirit to shape market trends are key to coping with these challenges. Winterthur’s expertise with regard to risk and asset-liability management will provide a true competitive advantage as it captures new Life & Pensions opportunities resulting from growing pension markets and demographic trends. In Non-Life, the continued focus on customer needs and service quality, the streamlining of administration processes and the sophisticated underwriting approach set the foundations for Winterthur to achieve its target of generating profitable growth across the insurance cycle. In both Life & Pensions and Non-Life, Winterthur’s initiatives continue to be based on common business sense, hands-on entrepreneurial leadership and proximity to clients – as well as creativity and skillful execution. Winterthur will continue to focus on retail customers and SMEs, which will allow the insurer to further standardize processes and products. Winterthur will pursue its targeted underwriting policy and further develop pricing and claims-handling processes. Detailed information on Winterthur and its financial results can be found in the Credit Suisse Group and Winterthur Group Annual Reports 2005. Credit Suisse Group Business Review 2005 29
  34. 34. Aiming for Operational Excellence Operational Excellence is a key business initiative that aims to support the growth strategy of Credit Suisse and to promote innovation through the implementation of more than 300 targeted projects in all areas of the bank. The individual projects focus on the improvement of customer service, profitability and processes and aim to generate results within several months of their launch. Operational Excellence was launched at Credit Suisse in fall 2004 and initially introduced to Private Banking. After conducting benchmarking analysis, particularly in the US, Credit Suisse selected Lean Sigma as the basis for its Operational Excellence initiative. This is a well-established, systematic methodology for the improvement of business processes and service quality. Credit Suisse was one of the first companies in the European financial services industry to implement a full-scale Lean Sigma program. Lean Sigma provides Credit Suisse with a common language for the execution of its Operational Excellence activities and thus supports its efforts to better align key processes to client needs and expectations. These measures are focused on the client’s perspective and begin with a systematic, fact-based analysis of client requirements. Before initiating any improvements, Credit Suisse first asks its clients and then takes actions to best improve service, increase quality or minimize errors. Credit Suisse is now rolling out Operational Excellence within the entire bank and will coordinate the initiative across its Investment Banking, Private Banking and Asset Management divisions as well as across the bank’s support functions (Shared Services). The positive momentum of Operational Excellence in Private Banking and the experience gained so far will benefit the entire organization. In addition, it will be possible to incorporate the evaluation of client satisfaction into the assessment of a manager’s performance, whereas performance-related compensation was previously determined exclusively on the basis of financial results. Operational Excellence is, of course, an ongoing and long-term initiative. Its aim is to create and foster a culture of continuous improvement focused on delivering excellent client service, leading to profitable and sustainable growth. While the first series of projects focused on urgent issues or on improvements that could be realized rapidly, Credit Suisse is now addressing areas that may be less prominent internally but have a significant impact on client service. To date, around 200 employees have been trained as Lean Sigma project leaders or “Black Belts” and Credit Suisse has provided more than 6,000 days of project training for senior management and team members. In terms of benefits arising from our Operational Excellence projects, we have so far identified a net income contribution of around CHF 150 million per annum. 70% of the total benefits are expected to come from revenue increases, while the other 30% will stem from efficiency improvements. This underscores the key role of Operational Excellence as a driver of Credit Suisse’s growth strategy. Ali Baradar, Richard Shilling, Product Control (London) 30 Credit Suisse Group Business Review 2005
  35. 35. Charles Wittenoom, Equities, Investment Banking (Hong Kong) Credit Suisse is renowned for its innovative strength. Operational Excellence also serves to promote innovation by providing a platform for the realization of new ideas. Its standard Lean Sigma methodology supports the implementation of new solutions and thus leads to continuous advances in product and service quality. This is of particular importance within growth areas, where Operational Excellence ensures the smooth functioning of new processes. Operational Excellence reflects Credit Suisse’s commitment to placing its clients at the center of all that it does. It also serves to strengthen its reputation by ensuring flawless execution and promotes the principle of teamwork by fostering cooperation across the bank. Credit Suisse will continue to roll out further strategically-aligned Operational Excellence projects and to train more employees in Lean Sigma. Going forward Operational Excellence will be central to the way Credit Suisse works. Credit Suisse Group Business Review 2005 31