credit-suisse Credit Suisse Group Interim Report 1997

1997 INTERIM REPORT
TO SHAREHOLDERS

Dear Shareholders

Credit Suisse Group benefited during the first six months from the initial
impact of the far-reaching restructuring and the reallocation of capital
between and within the business units, which led to more productive use of
capital. The favourable conditions in the financial markets also had a positive
effect on results. The very good interim results, a 70% increase in consolidat-
ed net profit, after minorities, to CHF 1,413 million, was reported at the same
time as the announcement of the proposed merger with Winterthur on
11 August 1997. Along with the invitation to the Extraordinary General Meeting
on 5 September 1997, you received an information memorandum which pro-
vides you with the details of this important event in the history of your
company. While we do not anticipate the favourable market environment to
continue throughout the second half of the year, we are confident of achieving
good overall results for 1997.

SHARE PERFORMANCE

Swiss Market Index
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Contents J F M A M J J A S O N D J F M A M J J A

From the beginning of 1996 to 21 August 1997,
Commentary on the consolidated results 3
the Credit Suisse Group share increased by
Consolidated income statement 6
66%.
Consolidated balance sheet 7
Market capitalisation rose to over CHF 38
Credit Suisse 8
billion. The number of outstanding shares
Credit Suisse Private Banking 10
ranking for dividends was 195,037,752 as
Credit Suisse Asset Management 11
per the end of July 1997.
Credit Suisse First Boston 12
Consolidated off-balance-sheet business, Ratings 14
Selected notes to the consolidated financial statements 15
Outlook, Extraordinary General Meeting 16

2

Increased revenue contributions from Differing cost developments
all four business units The developments of costs (total operating
All four business units reported increased rev- expenses plus depreciation) over the first six
enues for the first six month of the year. At CHF months differed according to business unit. At
4.8 billion, Credit Suisse First Boston contributed Credit Suisse, where extensive measures were
58% of total revenues. The second largest share taken to streamline the branch network and
with CHF 1.8 billion, or 21%, was derived from increase productivity, total costs decreased by
the worldwide private banking business, while CHF 145 million, or 11%, compared to the pro
the domestic retail business contributed CHF forma figures for the same period last year. Per-
1.4 billion (16.5%) to the Group’s revenues. sonnel costs decreased by CHF 62 million (7%).
Credit Suisse Asset Management’s revenues Higher costs at Credit Suisse Private Banking
amounted to CHF 373 million, or 4.5% of the (2%) and Credit Suisse Asset Management
Group total. (10%) in comparison with last year’s pro forma
The 29% increase in net interest income to figures were in line with expansion plans for both
CHF 2,278 million was due to an 12% growth in business units. The appreciation of the dollar
interest and discount income to CHF 9,302 mil- over the period had a substantial impact on costs
lion, from an expansion in securities lending and at Credit Suisse Asset Management and Credit
reverse repurchase agreements, and a 15% Suisse First Boston.
growth in interest and dividend income from trad- At Credit Suisse First Boston costs increased
ing portfolios to CHF 3,165 million, mainly as a by CHF 933 million, up 40% compared to last
result of investments in high yielding emerging year’s pro forma figures, due to higher budgeted
market securities and securitized loans. Interest
expense was up only 10% to CHF 10,383
million.
CORPORATE AND FINANCIAL HIGHLIGHTS
Commission income, up 28% at CHF 3,098
HALF-YEAR 1997
million accounted for 38% of net operating
income, affirming its position as the largest
source of income for the Group. Commissions First half 1997 First half 1996 Change
from securities and investment transactions, in CHF m in CHF m in %

generated largely from the private banking and
Net operating income 8,065 6,372 27
investment banking business, rose by 29%, or
Net profit (after minorities) 1,413 830 70
CHF 664 million, to just under CHF 3 billion.
Cash-flow 2,496 2,038 22
Trading income was up 31% to CHF 2,483
million with favourable market conditions. While Earnings per share (CHF) 7.25 4.40 65
income from securities trading rose by 41% to
Cash-flow per share (CHF) 12.80 10.80 19
CHF 1,327 million, income from trading in inter-
ROE (after minorities) 17.2% 9.7% 77
est rate instruments increased an impressive
65% to CHF 480 million. Income from precious
metals trading rose by over 50% from CHF 34
At 30 June 97 At 31 Dec. 96
million to CHF 51 million. Income from foreign in CHF m in CHF m
exchange and bank note trading decreased by
Total assets 544,645 524,154 4
18% from CHF 493 million to CHF 403 million,
Total shareholder’s equity 16,886 16,426 3
partly as a result of a change in strategy in the
– of which minoritiy iterests 515 581 –11
foreign exchange operations which took place at
Market capitalisation 37,466 26,701 40
the end of last year. With a view to preparing for
the introduction of the EURO, foreign exchange
capacities were reduced. Other trading income
in % in %
includes income from commodities trading at
Credit Suisse Financial Products. BIS tier 1 ratio 8.3 8.0
Taking into account other ordinary income of BIS total capital ratio 13.3 11.9
CHF 206 million, net operating income
amounted to CHF 8,065 million, an increase of
27% compared to the same period of last year. Total staff 34,105 34,821
– of which in Switzerland 22,174 23,553

3

operational costs and currency movements. first six months of last year and by 19.5% versus
Revenue contribution
Higher personnel costs accounted for CHF 713 one half of 1996.
by Business Unit
First half 1997
million of the increase, mainly as a result of Depreciation and write-offs on non-current
4.5%
larger performance based bonus accruals in line assets fell 19% from CHF 404 million to CHF
21%
16.5%
with very favourable financial markets. The cost 328 million, mainly due to slightly lower current
increase of 40% remained, however, below charges as a result of the extraordinary adjust-
earnings growth of 44% thus leading to an ments which were made at the end of last year.
improved cost/income-ratio of 67.7%. In this
Provisions in line with expectations
respect Credit Suisse First Boston compares
58%
favourably with its peers, although the restructur- Credit and loan loss provisions were made for the
ing measures taken over the last year have yet to first time on an anticipatory statistical basis. The
Credit Suisse
Credit Suisse Private Banking
reach full impact. amount of the Annual Credit Provision (ACP) is
Credit Suisse First Boston
Credit Suisse Asset Management
Total costs at the Group increased by 24% charged on a pro rata basis for the first six
compared to the half-year published results last months to the income statement. Any residual
year. A more meaningful comparison, we believe, credit and loan loss provision deviating from the
is first half 1997 versus one half of 1996 actual. ACP amount is covered through or added to the
On that basis, costs increased by 17%, and the reserves for general banking risks (Incremental
cost/income ratio, improved from 71.1% to Credit Reserve ICR). Additional provisions of
Operating expenses
by Business Unit
66.6%. CHF 338 million had to be made on existing
First half 1997
Personnel expenses rose by 32% from CHF non-performing loans. The reserve for general
4.5%
2,863 million to CHF 3,787 million, or by 24% banking risks at 30 June 1997 is CHF 2,050
15.5%
21%
compared to half the 1996 full-year costs. million.
Salaries and accruals for incentive based com- Non-interest earning loans including accrued
pensation amounted to CHF 3,294 million, interest increased to CHF 14.2 billion. Total pro-
employee benefits totalled CHF 315 million and visions for credit risks at 30 June 1996 were
other personnel expenses were CHF 178 million. CHF 11 billion.
59%
Other operating expenses were up 18% from The item valuation adjustments, provisions and
Credit Suisse
CHF 1,071 million to CHF 1,259 million. losses, showing an increase of 63% to CHF
Credit Suisse Private Banking
Premises and real estate expenses showed a 1,016 million, includes the ACP, CHF 338
Credit Suisse First Boston
Credit Suisse Asset Management
slight decrease of 3% from CHF 247 million to million in provisions for non-performing loans
CHF 240 million. Expenses for IT, machinery, (which are ultimately offset by reserves for gen-
furnishing, vehicles and other equipment went up eral banking risks), a CHF 25 million provision
by 4% from 288 million to CHF 300 million, for an anticipated increase of the ACP, as well as
while sundry operating expenses increased by provisions for other business risks of CHF 251
one third to CHF 719 million. Included in other million. The utilisation of CHF 338 million of the
operating expenses are the contribution of CHF reserves for general banking risks is included in
33 million for the Humanitarian Fund and a provi- extraordinary income.
sion of CHF 25 million to cover the cost of the As part of an ongoing exercise of implement-
merger with Winterthur. ing the new credit risk management framework,
Excluding these items total operating the company reassesses the appropriate ACP
expenses would be up 27% compared to the charge based on an annual risk classification of
the loan portfolio. The exercise should conclude
at the end of September. In light of the growth of
Risk-weighted assets and capital ratios
the loan portfolio since establishing the ACP,
30 June 1997 CHF m currency movements and reclassifications of the
31 Dec. 1996 CHF m

portfolio, an increase of the ACP in the next
Risk weighted positions
twelve months is likely.
Balance sheet 165,948 168,958
Off-balance-sheet 18,665 24,485
Strong operating results
Total 184,613 194,443
With an increase in net operating income of 27%
to CHF 8 billion, Group profit before extraordi-
Tier 1 capital 15,372 15,633
nary items and taxes up 19% to CHF 1,675 mil-
Total capital 24,601 23,221
lion and cash flow up 22% to CHF 2,496 million,
BIS Tier 1 ratio 8.3% 8.0%
the Group’s strong earnings power continues.
BIS Total capital ratio 13.3% 11.9%

4

Net profit per share up by 65%; Business unit results
ROE target exceeded At year-end 1996, business unit financial data
After accounting for extraordinary items, taxes was prepared in order to give an estimate of gen-
and minority interests, consolidated net profit for eral levels of profitability of the four business
the first six months amounted to CHF 1,413 mil- units. As previously disclosed, the “indicative”
lion, a 70% increase over the previous year. figures for 1996 were only best estimates for the
Shares outstanding ranking for dividend at the year as records were not kept along business
end of June 1997 totalled 195,037,752. EPS of unit lines in 1996. Subsequent to the presenta-
CHF 7.25 for the six months were up 65%. The tion of the data, a variety of decisions have been
return on equity amounted to 17.2%, exceeding made with respect to the operations for 1997 as
the group target of 15%. regards the allocation of clients to business units,
the sharing of revenue and costs between units,
Comfortable capital position the discontinuation of certain business practices
The Group’s total consolidated assets rose by conducted in 1996 and a reallocation of capital
4% from CHF 524.2 billion at the end of last among the business units.
year to CHF 544.6 billion as at 30 June 1997. Therefore, we have adjusted the indicative
Practically the entire increase in total assets is a 1996 financial information to provide for a better
result of the weakening of the Swiss franc versus comparison of activities 1997 to 1996. The
the US dollar and other major dollar-linked cur- adjustments to 1996 data result in lower revenue
rencies. amounts for Credit Suisse and Credit Suisse
Total shareholders’ equity amounted to CHF Asset Management as well as an increase in pro-
16,886 million at the end of June 1997. As a visions and lower capital employed at Credit
result of a slight decrease of risk-weighted Suisse First Boston. Presented below and on
assets and off-balance-sheet positions from pages 8 to 13 are business unit results for the
CHF 194.4 billion to CHF 184.6 billion, the first six months of 1997. For comparison pur-
Group’s capital ratios improved. The BIS core poses only, half the adjusted indicative results
capital ratio improved from 8% to 8.3% and the are shown. Capital allocations are for the period
BIS total capital ratio rose from 11.9% to commencing 1 July 1997.
13.3%.

SUMMARY BUSINESS UNIT INCOME STATEMENTS

1st half 1997 Credit Suisse Credit Suisse Credit Suisse Credit Suisse
in CHF m Private Banking First Boston Asset Management

Net operating income 1,357 1,775 4,819 373
Personnel expenses 797 440 2,346 143
Other operating expenses 323 390 816 96
Total operating expenses 1,120 830 3,162 239
Gross operating profit 237 945 1,657 134
Depreciation and write-offs on non-current assets 68 21 101 6
Valuation adjustments, provisions and losses 346* 42 248 0
Profit before extraordinary items and taxes –177 882 1,308 128
Extraordinary income 7 8 16 0
Extraordinary expenses 17 31 21 6
Taxes –38 178 418 24
Net profit –149 681 885 98
of which minority interests 1 5 52 0
Net profit (after minority interests) –150 676 833 98

Capital allocation as of 1 July 1997 3,800 2,400 9,900 360
Return on adjusted average capital –7.7% 18.6%

*net of CHF 338 m ICR

5

CONSOLIDATED INCOME STATEMENT
1 January 1997 to 30 June 1997

1st half 1997 1st half 1996 Change
in CHF m in CHF m in CHF m in %

Interest and discount income 9,302 8,306 996 12
Interest and dividend income from trading portfolios 3,165 2,747 418 15
Interest and dividend from financial investments 194 169 25 15
Interest expenses 10,383 9,454 929 10

2,278 1,768 510 29
NET INTEREST INCOME

Commission income from lending activities 175 151 24 16
Commission from securities
and investment transaction 2,961 2,297 664 29
Commission from other services 167 157 10 6
Commission expenses 205 186 19 10

3,098 2,419 679 28
NET COMMISSION AND SERVICE FEE INCOME

Income from foreign exchange and
precious metals trading 454 527 –73 –14
Income from trading in interest rate instruments 480 291 189 65
Income from securities trading 1,327 940 387 41
Other trading income 222 138 84 61

2,483 1,896 587 31
NET TRADING INCOME

Income from the sale of financial investments 39 125 –86 –69
Income from investments 41 44 –3 –7
– of which participations valued according to the equity method 35 39 –4 –10
– of which from other non-consolidated participations 6 5 1 20
Real estate income 21 18 3 17

Other ordinary income 137 135 2 1

Other ordinary expenses 32 33 –1 –3

206 289 –83 –29
OTHER ORDINARY INCOME

8,065 6,372 1,693 27
NET OPERATING INCOME

Personnel expenses 3,787 2,863 924 32

Other operating expenses 1,259 1,071 188 18

5,046 3,934 1,112 28
TOTAL OPERATING EXPENSES

3,019 2,438 581 24
GROSS OPERATING PROFIT

Depreciation and write-offs on non-current assets 328 404 –76 –19

Valuation adjustments, provisions and losses 1,016 622 394 63

1,344 1,026 318 31
TOTAL DEPRECIATION, VALUE ADJUSTMENTS

1,675 1,412 263 19
GROUP PROFIT BEFORE E.O. ITEMS AND TAXES

Extraordinary income 372 20 352

Extraordinary expenses 49 91 –42 –46

Taxes 523 400 123 31

1,475 941 534 57
GROUP PROFIT

– of which minority interests 62 111 –49 –44

1,413 830 583 70
NET PROFIT (AFTER MINORITY INTERESTS)

2,496 2,038 458 22
CASH FLOW

17.2% 9.7%
RETURN ON EQUITY (AFTER MINORITY INTERESTS)

6

CONSOLIDATED BALANCE SHEET
At 30 June 1997

30 June 1997 31 Dec. 1996 Change

ASSETS

Cash and other liquid assets 2,364 2,900 –536 –18
Money market claims 25,044 20,077 4,967 25
Due from banks 141,300 122,359 18,941 15
– of which securities lending/reverse
– repurchase agreements 91,062 82,313 8,749 11
Due from customers 140,505 159,291 –18,786 –12
– repurchase agreements 63,540 85,785 –22,245 –26
Mortgages 68,150 70,161 –2,011 –3
Securities and precious metal trading portfolios 96,967 85,380 11,587 14
Financial investments 10,378 10,444 –66 –1
Non-consolidated participations 750 685 65 9
Tangible fixed assets 6,148 7,047 –899 –13
Accrued income and prepaid expenses 5,132 4,747 385 8
Positive replacement value of derivatives 43,700 38,166 5,534 14
Other assets 4,207 2,897 1,310 45

544,645 524,154 20,491 4
TOTAL ASSETS

Total subordinated claims 1,862 1,616 246 15

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities in respect of money market paper 10,853 11,236 –383 –3
Due to banks 191,676 194,572 –2,896 –1
– repurchase agreements 85,176 90,052 –4,876 –5
Due to customers in savings and investment accounts 48,214 47,296 918 2
Due to customers, other 176,332 166,972 9,360 6
– repurchase agreements 55,288 52,064 3,224 6
Medium-term notes (cash bonds) 8,189 8,681 –492 –6
Bonds and mortgage backed bonds 29,532 26,129 3,403 13
Accrued expenses and deferred income 7,358 7,802 –444 –6
Negative replacement value of derivatives 45,186 37,060 8,126 22
Other liabilities 6,418 4,311 2,107 49
Value adjustment and provisions 4,001 3,669 332 9
Reserves for general banking risks 2,050 2,388 –338 –14
Share capital 3,903 3,886 17 0
Capital reserve 7,937 7,882 55 1
Retained earnings 1,068 4,278 –3,210 –75
Minority interests in shareholders’ equity 453 424 29 7
Group profit 1,475 –2,432 3,907 –161
– of which minority interests 62 157 –95 –61
Total shareholders’ equity 16,886 16,426 460 3

TOTAL LIABILITIES AND
544,645 524,154 20,491 4
SHAREHOLDERS’ EQUITY

Total subordinated liabilities 12,695 13,397 –702 –5

7

CORPORATE AND INDIVIDUAL CUSTOMERS Credit Suisse will be able to meet the wide vari-
ety of customer needs even more effectively.
IN SWITZERLAND
As expected, individual customer business
continued to improve in the first half. The
systematic cross-selling efforts of the business
unit are starting to pay off.
In investment business, the trend towards
investments in funds and equity instruments con-
In the first half of 1997, Credit Suisse tinued, stimulated by the favourable climate of
posted net operating income of CHF 1,357 the stock markets. The Interest Growth Savings
million, an increase of 5% against the Account, which rewards long-term saving with
adjusted 1996 pro forma results. Staff costs higher interest, was very well received, with more
were reduced in line with the ongoing than 25,000 new accounts opened. Sales of CS
planned reduction in staff. The pre-tax loss Life products were again very strong. Around
before extraordinary items was reduced by 60% of all CS Life’s new policies and more than
CHF 357 million, to CHF 177 million. 40% of its premium volume was generated
The focus of Credit Suisse on corporate and indi- through Credit Suisse’s branch network.
vidual customers in Switzerland is proceeding as In mid-May a new range of exclusive non-
planned. The harmonisation of the product banking services, including hotel, restaurant and
range, organisational adjustments and the travel discounts, was launched under the name
merger of branches have been carried out, whilst Bonviva. The number of people signing up to this
ensuring that customers continue to receive the service exceeded high expectations.
best quality service possible. Thanks to the suc- Customers’ use of direct banking products –
cessful launch of a number of innovative prod- banking services over the telephone, PC or Inter-
ucts, especially in the field of direct banking, net – also showed a positive trend. With the
launch of Direct Net, Credit Suisse became the
first Swiss bank to provide a comprehensive
banking service on the Internet, thereby consol-
idating its leading position in the direct banking
INCOME STATEMENT
market. Sales figures for Direct Net were well
Half of 1996
1st half 1997 Pro forma figure Change
above expectations.
in CHF m in CHF m in %
Direct Net represents the systematic continu-
Net interest income 928 935 –1
ation of Credit Suisse’s multichannel strategy.
Net commission and service fee income 300 261 15
Depending on their situation and requirements,
Net trading income 88 60 47 customers can choose which channel is best
Other ordinary income 41 39 5 suited for conducting their banking business: a
branch office, the telephone, the Internet, bank
1,357 1,295 5
cards or ATMs (Bancomat). Since 1993 banking
Personnel expenses 797 859 –7
staff at the first Call Centre in Switzerland have
Other operating expenses 323 331 –2
been providing customers with an individual
1,120 1,190 –6
banking service over the phone 24 hours a day,
237 105 126
GROSS OPERATING PROFIT seven days a week. The experience of the last
few years shows that this service meets a gen-
Deprecations and write-offs on non-current assets 68 143 –52
uine customer need.
Valuation adjustments, provisions and losses* 346 496 –30
Corporate customer business developed satis-
LOSS BEFORE EXTRAORDINARY
factorily. The co-operation with Winterthur pro-
–177 –534 67
ITEMS AND TAXES
gressed, particularly in the area of corporate
Extraordinary income 7
clients, underlining the value of this fruitful part-
Extraordinary expenses 17
nership.
Taxes –38
Valuation adjustments mainly consist of the
–149
NET LOSS
statistically calculated risk costs of the credit
of which minority interests 1 portfolio, the ACP, at CHF 311 million, and pro-
visions for previously noted non-performing loans
–150
NET LOSS (AFTER MINORITY INTERESTS)
of CHF 338 million which have been offset by an
*net of CHF 338 m ICR
equal amount of reserves for general banking
8

risks. In anticipation of the annual review of the
ACP an additional provision of CHF 25 million
has been charged to valuation adjustements,
provisions and losses.
Credit Suisse has started to introduce differ-
entiated credit pricing, which takes into consider-
ation the different levels of risk and the different
amounts of administration work required for
loans.
The newly created contact point for small- and
medium-sized businesses handled a large num-
ber of queries in the first half of the year. Now,
services for this core client segment will focus on
the special financing and support required when
setting up new companies and organising suc-
cession management.

BALANCE SHEET
Pro forma
30 June 1997 1 Jan. 1997 Change

Cash and other liquid assets 959 633 52
Money market claims 6,099 5,122 19
Due from banks 3,399 4,932 –31
Due from customers 23,753 24,242 –2
Mortgages 55,719 55,379 1
Securities and precious metals
trading portfolios 61 53 15
Financial investments 1,940 1,859 4
Participations 76 77 –1
Fixed assets 302 437 –31
Accrued income and prepaid expenses 702 638 10
Other assets 1,452 2,029 –28

94,462 95,401 –1
TOTAL ASSETS

Liabilities in respect of money market paper 3 5 –40
Due to banks 7,319 8,241 –11
Due to other business units 10,720 10,307 4
Due to customers in savings
Ratios/Key Performance Indicators
and investment accounts 36,738 36,832 0
Allocated capital CHF m 3,800
Due to customers, other 21,544 21,654 –1
Cost/income ratio 87.5%
Medium-term notes 7,601 7,665 –1
Return on adjusted average capital –7.7%
Bonds and mortgage backed bonds 4,174 4,153 1
Number of employees 14,854
Accrued expenses and deferred income 896 634 41
Pre-tax margin –13.8%
Other liabilities 2,050 2,417 –15
Pre-tax profit per employee CHF –12,589
Valuation adjustments and provisions 220 384 –43
Staff expenses/operating expenses 71.2%
Reserve for general banking risks 21 21 0
Staff expenses/total income 58.7%
Share capital 3,115 3,115 0
Operating expenses per employee CHF 75,401
Capital and revenue reserve, incl. net profit 50 –38 –232
Number of branches 296
Minority interest 11 11 0
Net interest margin 1.96%
94,462 95,401 –1
TOTAL LIABILITIES
Loan growth 0.00%
3,197
Loan/deposit ratio 3,109 3
88.10% WHEREOF SHAREHOLDER’S EQUITY

9

SERVICES FOR PRIVATE INVESTORS All these efforts were enhanced by the excep-
tionally favourable conditions in the financial mar-
IN SWITZERLAND AND INTERNATIONALLY
kets, which helped increase total funds under
management substantially.
Net operating income rose by 15% to CHF
1,775 million, with commission and fee income –
the major component of the income cluster –
In the first half of 1997 a series of initiatives increasing by 21%. With operating expenses
were launched towards implementing rising by only 3% to CHF 830 million, a further
Credit Suisse Private Banking’s corporate improvement in the cost/income ratio (down to
strategy. With a 30% increase in profits 48%) was achieved. Pre-tax profit, before extra-
(pre-tax and extraordinaries) and an ordinaries, amounted to CHF 882 million, up
improved cost/income ratio, the business 30% on pro forma figures for 1996.
unit is well on the way to reaching its earn- The outlook for the current financial year is
ings and growth targets. optimistic. However, it would be unrealistic to
The restructuring of the distribution network, both believe that the financial markets will perform as
in Switzerland and internationally, was completed strongly in the second half of the year as they did
during the first six months of the year. Further ini- in the first. Overall the full-year result is expected
tiatives included a fundamental review of pro- to be in line with the strategic targets of the busi-
ducts, advisory and portfolio management services, ness unit.
and the implementation of regional strategies.
These measures were taken with the objective
of reinforcing Credit Suisse Private Banking’s
commitment to its clients and to further strengthen
its leading position as a major player in global
private banking.

INCOME STATEMENT
Half of 1996

Net interest income 373 380 –2
Net commission and
service fee income 1,177 969 21 Balance sheet information
Net trading income 179 152 18 30 June 1997 in CHF m
Other ordinary income 46 40 15 Total assets 78,159
1,775 1,541 15
NET OPERATING INCOME Due from customers 24,310
whereof secured by mortgages 9,155
Personnel expenses 440 404 9
whereof secured by other collateral 7,537

830 805 3

945 736 28
Depreciations and write-offs on non-current assets 21 28 –25
Valuation adjustments, provisions and losses 42 29 45
PROFIT BEFORE EXTRAORDINARY Number of employees 6,057
882 679 30
ITEMS AND TAXES
Pre-tax margin 48.4%
Pre-tax profit per employee CHF 141,820
Staff expenses/operating expenses 53.0%
Taxes 178
681
NET PROFIT Operating expenses per employee CHF 137,032
of which minority interests 5 Fee income/total income 66.3%
Fee income/operating expenses
676 141.8%

10

SERVICES FOR INSTITUTIONAL business growth was strong in all asset manage-
ment units, with particularly impressive results in
INVESTORS WORLDWIDE
Japan and Australia.
The Tokyo unit continues to thrive, exceeding
Yen 1 trillion in assets under management and in
the UK the volume of retail unit trust business
passed the £ 1 billion mark.
Credit Suisse Asset Management made Credit Suisse Asset Management’s joint ven-
substantial progress in the first half of 1997 ture in Poland, Credit Suisse PKO, launched its
towards the objective of uniting the various first fund, the PKO/Credit Suisse Balanced Trust
independent asset management compa- Fund to mark the start of what we anticipate, will
nies in the Group to form an integrated be an important alliance in Eastern Europe.
global asset management business. Credit Suisse Asset Management further devel-
Credit Suisse Asset Management continues to oped its range of Russian based funds and is
work towards the integration of mutual fund busi- currently evaluating alternative distribution strate-
ness with the asset management units through- gies with a view to building our market shares.
out the world in order to enhance distribution Revenues for the first half of 1997 benefited
capabilities and improve the development of new from strong markets and new business inflows,
investment products. One of the highest strategic while expenses have run at the expected level,
priorities is to further improve mutual fund distri- resulting in a 26% increase in gross operating
bution through Credit Suisse and Credit Suisse profit to CHF 134 million.
Private Banking and to develop distribution
through third-party channels throughout Europe.
In order to complement segregated portfolio
management, a global unit to manage co-
mingled accounts for institutional clients was
established.
Total assets under management increased by
17.7% to CHF 255 billion. In USD terms, the
increase was 7.0% reflecting Credit Suisse
Asset Management’s high proportion of USD
INCOME STATEMENT
assets and the strong USD. Geographically, new
Half of 1996

Management and advisory fees 237 187 27
Net mutual fund fees 125 123 2
Allocated capital CHF m 360
Other revenues 11 12 –8
373 322 16
After-tax profit/average AUM 8.3 bp
Personnel expenses 143 111 29
Number of employees 1,306
Pre-tax margin 32.7%
Pre-tax profit per employee CHF 93,415 239 216 11
Staff expenses/total expenses 59.8% 134 106 26
Depreciations and write-offs on non-current assets 6 7 –14
Operating expenses per employee CHF 183,002
Valuation adjustments, provisions and losses 0 17 –100
Total assets under management CHF bn 254.8
PROFIT BEFORE EXTRAORDINARY
Total discretionary funds CHF bn 178.0 128 82 56
ITEMS AND TAXES
Total mutual funds distributed CHF bn 61.8
Total advisory assets CHF bn 76.8
Growth in assets under management 17.7%
Taxes 24
Growth in discretionary
98
NET PROFIT
assets under management 12.8%
of which minority interests 0
of which is volume 2.7%
98
of which is performance NET PROFIT (AFTER MINORITY INTERESTS)
10.1%

11

ever, excellent progress has been made from a
WORLDWIDE CORPORATE
business perspective, allowing the unit to compete
AND INVESTMENT BANKING
successfully as one of the world’s leading whole-
sale and investment banks.
At 18.6% CSFB’s return on equity (before
minorities) for the period compares favourably to
Credit Suisse First Boston enjoyed an out- wholesale banking peers. While, excluding the
standing first-half performance, with revenues banking businesses (money markets and corporate
and profits up significantly on last year. The lending), returns exceed 26%, on par with other
firm benefited from strong economic and mar- leading global investment banks. Further to the suc-
ket conditions in most countries, including the cessful reorganisation, extensive multi-year invest-
emerging markets. Revenues and profits also ment programmes are underway to build and
recorded higher rates of growth than most strengthen CSFB’s client-driven businesses (espe-
industry competitors, even adjusting for cially investment banking and equities) and private
effects of the dollar appreciation. equity division, financed in part by a restructuring of
Every division performed well and ahead of the the corporate lending business. These programmes
1996 pro formas despite the fact that 1996 was are expected to have a near-term negative effect on
itself a record year. The greatest profit increases expenses but will strengthen the firm’s profitability
came from Fixed Income, Equities and CSFP and competitive position over the medium term.
(derivatives). Overall revenues were up 44% and CSFB’s capital base increased to CHF 9.9 billion
profit before extraordinaries and taxes up 51% on at 30 June 1997 and a substantial effort to redirect
1996 pro formas. capital resources to higher return areas was initi-
The Group reorganisation, from which Credit ated. Credit Suisse First Boston plans to operate
Suisse First Boston was formed, gave rise to some with sufficient equity to sustain an 8% Tier 1 BIS
distractions in the first half as the firm began oper- capital ratio and capital resources are also expected
ating as a single business for the first time. How- to adequately exceed the risk based measures of
economic capital utilised by the firm.
The Fixed Income division showed revenue
growth of 52%, accounting for 45% of total rev-
INCOME STATEMENT
enues. This represents an outstanding first half with
Half of 1996
strong performances in all product areas apart from
the government securities businesses. The division
Fixed income 2,184 1,435 52 is well balanced geographically. Domestic emerging
Equity 841 509 65 markets and real-estate finance activities were par-
Credit Suisse Financial Products 869 ticularly strong and the foreign exchange and money
580 50
markets businesses benefited from the reorganisa-
Corporate and Investment Banking 964 836 15
tion and their new global operating mandate. Strate-
Private equity and other –39 –9 n/a
gic initiatives to extend successful product areas
4,819 3,351 44
globally progressed well.
Personnel expenses 2,346 1,633 44
The Equities division showed revenue growth of
Other operating expenses 816 609 34
65% (accounting for 17% of the total) with a par-
3,162 2,242 41
TOTAL OPERATING EXPENSES ticularly strong performance in Europe including our
strong Swiss business. A four-year strategic plan to
1,657 1,109 49
significantly build the equities business globally was
Deprecations and write-offs on non-current assets 101 88 15
agreed and encouraging progress has been made
Valuation adjustments, provisions and losses 248 156 59
in implementing the plan. CSFB has integrated its
PROFIT BEFORE
convertibles and equity derivative businesses (part
1,308 865 51
EXTRAORDINARY ITEMS AND TAXES
of the revenue is reported in CSFP) under a single
management, successfully exploiting the merger
synergies.
Taxes 418 CSFP derivatives revenue, which accounted for
18% of total revenues for the firm, was up 50%. All
885
NET PROFIT
areas showed good progress with satisfying growth
of which minority interests 52
in customer activity and particular product strength
833
in fixed income and credit derivatives. CSFP contin-

12

ued its track record as an industry leader in risk and economic trends, favouring growth in CSFB’s
management, collaborating with all business units markets and products. Profitability is increasingly
of the Group in implementing the “Credit Risk Man- achieved by using the firm’s global reach, country
agement Framework”. and industry expertise and product and capital
The Corporate and Investment Banking division resources to combine principal position taking,
had a good first half, with revenues accounting for underwriting and trading skills with client service –
20% of the firm’s total. Substantial progress was in both banking and securities markets. As such,
made in integrating the businesses and developing the firm’s emphasis on building higher margin
restructuring plans for lower margin activities. activities is consistent with both increased client
A significant multi-year investment programme and proprietary activities – each complementing
commenced in investment banking, complementing the other.
the equities initiatives, which will strain the division’s
returns over the next 18–24 months. Despite the
BALANCE SHEET
restructuring activity, client business was strong, Pro forma
with our global market share holding stable among 30 June 1997 1 Jan. 1997 Change
the top five firms on increased volume.
Cash and other liquid assets 914 1,533 –60
The Private Equity division completed its refo-
Money market claims 18,042 14,690 23
cusing and began an expansion programme
Due from banks 143,487 128,567 12
designed to increase the level of funds under man-
agement and exploit the Group’s global sourcing – whereof Securities Lending and
Reverse Repurchase Agreements 90,533 81,508 11
strengths and industry expertise.
Due from customers 101,472 125,298 –19
In geographic terms, the strength and unique
– whereof Securities Lending and
diversity of the new Credit Suisse First Boston was
Reverse Repurchase Agreements 63,445 85,745 –26
high-lighted by strong profit performances across
Mortgages 3,622 5,566 –35
all regions. Revenues were equally balanced
Securities and precious metals
between Europe and the Americas, while Asia
trading portfolios 92,428 81,527 13
totalled around CHF 700 million. Development of
Financial investments 4,325 6,046 –28
our emerging markets businesses in countries such
Participations 321 283 13
as Russia, Korea, India and Brazil is being balanced
Fixed assets 1,400 1,241 13
with investments in product and client diversification
Accrued income and pre-paid expenses 4,171 4,389 –5
in our core markets in the US and Europe.
Given the favourable earnings impact of current Other assets 46,462 38,428 21
market conditions, much interest has been focused 416,644 407,568 2
TOTAL ASSETS
on the mix of proprietary versus client activites.
Liabilities in respect of money market paper 10,780 11,169 –3
CSFB’s strategic plan recognises the continuing
Due to banks 220,627 215,402 2
cost and margin pressures implied by the competi-
tive industry environment. This competitive intensity Reverse Repurchase Agreements 89,047 89,637 –1
is balanced by attractive long-term social, political
Due to other business units 17,338 14,453 20
Due to customers, in savings
and investment accounts 818 400 105
Due to customers, other 79,828 95,456 –16
Return on adjusted average capital 18.6% Reverse Repurchase Agreements 44,468 51,525 –14
Revenue per employee CHF 434,183 Bonds and mortgage-backed bonds 19,805 17,023 16
Net profit per employee before minorities CHF 79,737 Accrued expenses and deferred income 5,632 6,724 –16
Number of employees 11,099 Other liabilities 49,535 36,135 37
Pre-tax margin 27.0% Valuation adjustments and provisions 2,229 2,058 8
Pre-tax profit per employee CHF 117,398 Reserve for general banking risks 412 412 0
Staff expenses/total expenses 74.2% Share capital 3,149 3,149 0
Staff expenses/total income 48.7% Capital and revenue reserves, incl. net profit 5,514 4,307 28
Operating expenses per employee CHF 284,891 Minority interests 977 880 11

416,644 407,568 2
TOTAL LIABILITIES
The business unit income statement differs from the Group’s legal
accounts in presenting brokerage, execution and clearing expenses
10,052 8,748 15
WHEREOF SHAREHOLDERS’ EQUITY
as part of operating expenses in common with US competitors, rather
than netted against revenues.

13

CONSOLIDATED OFF-BALANCE-SHEET BUSINESS
At 30 June 1997

30 June 1997 31 Dec. 1996 Change

Contingent liabilities
Contingent guarantees in the form of avals,
guarantees and indemnity liabilities 10,635 9,579 1,056 11
Bid bonds, delivery and performance bonds, letters
of indemnity and other performance-related guarantees 6,803 6,738 65 1
Irrevocable commitments in respect
of documentary credits 4,387 3,491 896 26
Other contingent liabilities 3,976 3,320 656 20

25,801 23,128 2,673 12
TOTAL

60,580 59,545 1,035 2
IRREVOCABLE COMMITMENTS

LIABILITIES FOR CALLS ON SHARES
65 76 –11 –14
AND OTHER EQUITY

298 510 –212 –42
CONFIRMED CREDITS

24,278 29,162 –4,884 –17
FIDUCIARY TRANSACTIONS

30 June 1997 30 June 1997 30 June 1997 31 Dec. 1996 31 Dec. 1996 31 Dec. 1996
Positive Negative Positive Negative
gross gross gross gross
Notional replacement replacement Notional replacement replacement
amount value value amount value value
in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn

Derivative instruments
Interest rate products 2,458.3 39.5 38.9 1,956.4 37.3 34.3
Foreign exchange products 1,388.8 25.6 25.1 1,311.0 25.9 28.4
Precious metals products 42.8 0.9 2.3 33.5 0.5 1.2
Equity/index-related products 251.1 11.7 13.1 179.2 3.9 4.2
Other products 18.9 0.1 0.0 6.5 0.1 0.0

4,159.9 77.8 79.4 3,486.6 67.7 68.1
TOTAL

RATINGS

AGENCY Credit Suisse Group Credit Suisse Credit Suisse First Boston

Long term Short term Long term Short term Long term Short term

Moody’s, New York A1 – Aa3 P1 Aa3 P1
Standard & Poor’s, New York AA– A1+ AA– A1+ AA A1+
IBCA, London AA– A1+ AA– A1+ AA A1+
Fitch, New York AA F1+ AA– F1+ AA F1+
Bank Watch, New York AA+ TBW1 AAA TBW1 AAA TBW1

Credit Suisse Financial Products carries the same ratings as Credit Suisse First Boston.

14

SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

USD
ANALYSIS OF INCOME AND EXPENSES 1st half 1997 Half of 1996 Change
FROM ORDINARY BANKING ACTIVITIES Switzerland International Switzerland International Switzerland International Translation rates
BY DOMESTIC AND FOREIGN ORIGIN in CHF m in CHF m in CHF m in CHF m in CHF m in CHF m
1997 1996
Net interest income 1,250 1,028 1,221 315 29 713
Income
Net commission and service income 1,789 1,309 1,442 1,030 347 279 Statement 1.42 1.22
Net trading income 498 1,985 479 1,679 19 306
Balance
Other ordinary income 161 45 236 44 –75 1
Sheet 1.45 1.34
3,698 4,367 3,378 3,068 320 1,299

Personnel expenses 1,446 2,341 1,447 1,614 –1 727
Other operating expenses 637 622 624 484 13 138
Total operating expenses 2,083 2,963 2,071 2,098 12 865

1,615 1,404 1,307 970 308 434
GROSS OPERATING PROFIT BEFORE TAXES

% of total 53% 47% 57% 43%
Taxes 125 398 106 311 19 87
% of total 24% 76% 25% 75%

1,490 1,006 1,201 659 289 347
GROSS OPERATING PROFIT AFTER TAXES

% of total 60% 40% 65% 35%

Mortgage Other Without
ANALYSIS OF LOAN COLLATERAL Total
collateral collateral collateral
AT 30 JUNE 1997 in CHF m
in CHF m in CHF m in CHF m

Due from clients 140,505
9,206 85,842 45,457
Mortgages 68,150
68,150
residential properties 40,025
business and office properties 3,101
commercial and industrial properties 11,934
other properties 13,090

208,655
77,356 85,842 45,457
TOTAL

At 31 December 1996 229,452
77,881 105,848 45,723

SECURITIES AND PRECIOUS METALS 30 June 1997 31 Dec. 1996 Change Change
TRADING PORTFOLIOS in CHF m in CHF m in CHF m in %

Interest-bearing securities and rights 65,206 57,323 7,883 14
listed on stock exchange 31,037 47,960 –16,923 –35
unlisted 34,169 9,363 24,806 265
– of which own bonds and medium-term notes 792 23 769 3,343
Equities 30,000 26,085 3,915 15
– of which own shares 2,031 1,893 138 7
Precious metals 1,761 1,972 –211 –11

TOTAL SECURITIES AND PRECIOUS METALS
96,967 85,380 11,587 14
TRADING PORTFOLIOS

– of which securities rediscountable or
– pledgeable at central banks 37,637 22,022 15,615 71

The interim statement as per 30 June 1997 conforms to the listing rules of the Swiss Exchange, rule number 12.

15

OUTLOOK
Given the very good results for the first half of Winterthur. The merger will create a financial
the year, the market expects good results for the services group which is even more balanced in
year as a whole. We are pleased that our good terms of stable income sources and better
first-half performance was not only achieved placed to meet the challenges ahead arising
against the backdrop of favourable financial mar- from the ongoing consolidation in the global
kets, but also showed clear signs of operational financial services industry. The terms of the
improvement as a result of the restructuring transaction have been confirmed to be fair by
process throughout the Group. Further benefits four independent advisers to the two companies.
from the ongoing implementation of the restruc- Not only will the proposed merger create a lead-
turing programme can be expected to feed ing and one of the strongest global bancassur-
through in the second half of this year. The ance groups, it also immediately improves the
restructuring progresses on schedule and will be financial performance of Credit Suisse Group
finalized by the end of 1998. While we do not and therefore creates shareholder value from the
expect the favourable market environment to very outset.
continue indefinitely, we are confident of achiev- Given the importance of this transaction for
ing good overall results for 1997. your company, we kindly ask you to vote person-
The next corporate event of major importance ally, or by proxy, and to support the proposal of
for the future development of your company is the Board of Directors. We look forward to wel-
the Extraordinary General Meeting on 5 Septem- coming you to the Extraordinary General Meeting
ber 1997, when you will be invited to vote on the on 5 September 1997.
proposed merger of Credit Suisse Group and

Yours sincerely

Rainer E. Gut Lukas Mühlemann
Chairman of the Board of Directors Chief Executive Officer

CREDIT SUISSE GROUP
Paradeplatz 8 P.O. Box 1 8070 Zurich Switzerland
Telephone: + 41 1 212 16 16 Fax: + 41 1 333 25 87 Internet: www.credit-suisse.com

credit-suisse Credit Suisse Group Interim Report 1997

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