presentation at barclays global financial services conference, … · 2019. 1. 29. · financial...

Credit Suisse Presentation at Barclays Global Financial Services Conference David Mathers, Chief Financial Officer

September 12, 2012 New York,

Disclaimer

September 12, 2012 2

Cautionary statement regarding forward-looking statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties, and we might not be able to achieve the predictions, forecasts, projections and other outcomes we describe or imply in forward-looking statements. A number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions we express in these forward-looking statements, including those we identify in "Risk Factors" in our Annual Report on Form 20-F for the fiscal year ended December 31, 2011 and in "Cautionary statement regarding forward-looking information" in our second quarter report 2012 filed with the US Securities and Exchange Commission and in other public filings and press releases. We do not intend to update these forward-looking statements except as may be required by applicable laws.

Statement regarding non-GAAP financial measures This presentation also contains non-GAAP financial measures. Information needed to reconcile such non-GAAP financial measures to the most directly comparable measures under GAAP can be found in this presentation and in our second quarter report 2012.

Statement regarding Basel 3 disclosures As Basel 3 will not be implemented before January 1, 2013, we have calculated our Basel 3 risk-weighted assets and capital for purposes of this presentation in accordance with the currently proposed requirements and our current interpretation of such requirements, including relevant assumptions. Changes in the requirements upon implementation of Basel 3 would result in different numbers from those shown in this presentation.

Financial Services Industry facing structural changes against a backdrop of more difficult macro-economic conditions and increasing regulation


Regulatory change affecting a wide range

of businesses

Drive for simplified banking business model

and customer flows

Low growth macro-economic environment with repeated shocks

Focus on core businesses lines with high returns and strong

market positions

Meeting accelerated regulatory timetable

Continued drive for efficiencies and focus on consistent and

sustainable shareholder returns

1

2

3

Adapting to the new environment

September 12, 2012

Enhancing profitability in

Private Banking

Transforming Fixed Income business in

Investment Banking

Reducing costs across the firm

Proactively transitioning into

new capital structure

4

Private Banking results



PB

Long-term secular and structural trends:

Substantial reduction in transaction revenues and interest income

Growth in new international centers, particularly in Emerging Markets (Asia Pacific, LatAm)

Structural decline in Western European offshore business

Stability in Swiss onshore business

5'592 5'308

6M11 6M12

(5)%

Net revenues in CHF mn

3'914 3'807

6M11 6M12

(3)%

1'668 1'422

6M11 6M12

(15)%

Total operating expenses1 in CHF mn Pre-tax income1,2 in CHF mn

1 Assumes that share-plan-based awards had been awarded in lieu of PAF2 awards. 2 Including credit provisions of CHF 10 mn and CHF 79 mn in 6M11 and 6M12 respectively.



PB Industry outlook remains highly attractive, but asset levels have been impacted by market & FX movements

42.0 47.0 48.7

65.6

Long-term industry outlook1 UHNWI & HNWI wealth in USD tr

~6% p.a.

Growth driven by long-term secular trends

Emerging markets growth

Asset monetization

Generational transfer of wealth

2010 2011 2016

Changes in competitive landscape

Regulatory environment

Shift in regional wealth distribution

Scale/ability to invest increasingly important

1 Source: The Boston Consulting Group: Global Wealth Report 2012; HNWI: investable assets over USD 1 mn; growth includes both market performance and new wealth generation

Wealth management industry continues to grow

2007

852

162

(24)

(83)

(133)

774

AuM end 2007

Net new assets

AuM end 2Q12

~5% p.a.

Credit Suisse Wealth Management assets under management (AuM) development in CHF bn

Currency movements

Market movements

Other movements

Structural outflows from mature offshore business more than offset by growth in other businesses


Swiss booking center

Wealth Management net new assets in CHF bn

International booking centers


PB

Total

Growth rate

2010

+19

+31

+41

5.3%

2011

+18

+27

+37

4.9%

2009

+16

+27

+33

5.0%

Development of international booking centers strongly contributes to asset inflows

Western European cross-border business transformation is under way

Cross-border transformation including new tax treaties could result in CHF 25 to 35 bn outflows over the next few years

6M12

+2

+14

+11

2.9%

Continued strong NNA track record overall

Growth rate slightly below 6% target level in environment with subdued wealth creation

Swiss booking center: 6M12 includes close to CHF 8 bn outflows related to Clariden Leu integration

Mature markets (offshore)

(9) (8) (10) (5)

75% of total inflows in international booking centers Note: 75% contribution is calculated excluding outflows related to Clariden Leu integration

Switzerland (onshore)

& Emerging Markets (offshore)

Efficiency and growth initiatives within Private Banking on track



PB

Pre-tax income (PTI) impact1

in CHF mn

1 External effects (e.g. continued low interest rates, higher credit provisions) are a risk to partially offset the benefit from the initiative-driven increase

Initiatives with CHF 800 mn PTI impact by 2014 well on track, thereof 55% driven by cost and 45% by revenue measures

Various short-term measures already implemented with CHF 110 mn impact in 6M12

Long-term strategic measures initiated and largely on track with substantial impact expected during 2013/14 and beyond

Net reduction of 1,100 FTE since end June 2011

Overall

Onshore examples

Brazil: Full acquisition of Hedging Griffo completed – 2nd largest wealth manager in Brazil with AuM of CHF 21 bn

Japan: Concluded acquisition of local business – doubling AuM to approx. CHF 5 bn; 2nd largest foreign wealth manager

Italy: Profitability program on track – successful onshore strategy with CHF 18 bn AuM

220 220 220

2014

800

580

2013

600

380

2012

300

80

6M12 realized benefit, annualized

Proactive step to enhance profitability amongst adverse secular trends; integration of all activities to be completed by the end of 2012

Annual pre-tax income improvement of CHF 125 mn targeted

Clariden Leu integration


September 12, 2012


Private Banking


Investment Banking




9

(5%) +5%

+4% 8%

12%

Continued improvement in normalized return in Investment Banking driven by increased capital and operating efficiency


1 Assumes that share-plan-based awards had been awarded in lieu of PAF2 awards

Transforming Fixed Income business in IB

6'936 5'869

6M11 6M12

Total operating expenses1 in USD mn

8'766 7'663

6M11 6M12

Net revenues in USD mn

331 206

6M11 6M12

Risk-weighted assets in USD bn

1'834 1'816

6M11 6M12

Pre-tax income1 in USD mn

Impact on normalized return

Investment Banking normalized after-tax return on Basel 3 allocated capital1

6M11 Revenue decline

Cost improve-

ment

RWA reduction

6M12 normalized

return

(13)%

(15)%

(38)%

(1)%

Fixed Income: delivering optimized business model



Optimized business model to focus on core franchise

− Sustain leading franchises (e.g. high yield, securitized products, key emerging markets)

− Exit activities where we lack scale or have poor Basel 3 return profiles (e.g. CMBS origination, emerging markets hard currency trading, longevity rates trades)

− Grow franchises with compelling opportunities (e.g. rates, foreign exchange)

Optimized risk positions and reduced volatility

− 60% inventory reduction from 2Q11 in Credit related businesses

− Substantially smaller position sizes lead to reduced hedge requirements and therefore simplified and less volatile risk management and hedging strategies

Basel 3 risk-weighted assets reduced by USD 129 bn since mid-2011; fixed income contribution to Group RWA to remain below 40%

Target ongoing after-tax Basel 3 Return on Capital of 15%1

18% reduction in expense base while protecting key investments

Further benefit expected from reduction in firm-wide shared services expenses

Close to meeting our targeted 20% reduction in direct headcount from mid-2011

Client Focused

Build successful client franchise

Capital Efficient

Achieve strong Basel 3 returns

Cost Efficient

Increase flexibility

1 Capital allocated based on 10% of average Basel 3 risk-weighted asset balances

Increased capital efficiency and more balanced business mix in Fixed Income


1 Primarily comprises of revenues from businesses we are exiting and funding costs

Revenues in USD mn

Basel 3 RWA in USD bn

Fixed income sales & trading in USD

268

2Q11 2Q12

139 Securitized

Products

Commod.

Emerging Markets

Credit

Macro (Rates, FX)

Wind-down and other1

Business performance

Improved business mix with largest increases in Rates and Foreign Exchange (despite weaker 2Q) and emerging markets

Reduced Securitized Product and Credit positions (with associated smaller/simpler hedges) resulted in less volatility in 6M12

Resourcing

Basel 3 RWA reduced by 48% on flat revenues

Optimizing inventory levels (since 2Q11):

− 28% in non-agency RMBS

− 65% in Investment Grade

− 55% in High Yield


(48)%

6M11 6M12

3,463 3,502

16%

29%

26%

29%

(6)%

22%

32%

27%

35%

(19)%

3% 6%

+1%

Fixed Income Division1 delivered better results in 6M12


6M11 6M12

Headcount2

6M11 6M12

Basel 3 RWA

6M11 6M12

Revenue/Basel 3 RWA usage5

6M11 6M12

Total expenses6

6%

15%

6M11 6M12

Basel 3 return on capital (after-tax)3

1 Internal reporting structure differs from externally reported data due to certain business adjustments. 2 Direct headcount excludes shared services allocations and SPS (mortgage servicing agency). 3 Capital allocation based on 10% of average Basel 3 risk-weighted asset balances. Assumes that share-plan-based awards had been awarded in lieu of PAF2 awards. 4 Excludes businesses currently in “wind down”. 5 Annualized revenue to average Basel 3 RWA balances. 6 Assumes that share-plan-based awards had been awarded in lieu of PAF2 awards

Total Fixed Income Division

9%

25%

6M11 6M12

Ongoing businesses4

(48)%

(18)%

(18)%

+75%



September 12, 2012


Private Banking


Investment Banking




14

Achieved CHF 2 bn expense reduction target 18 months early; further CHF 1 bn savings identified and target raised to CHF 3 bn


1.6

0.4 0.1

0.9 3.0

Expense reductions by end 2013 in CHF bn

Investment Banking Prioritization around high-return core businesses Delayering of management structure Rightsizing of business to subdued market environment

Private Banking Clariden Leu merger Streamlined front-to-back efficiencies

Asset Management Simplification of

operating platform Offshoring

Infrastructure Single operations functions Reprioritized offshoring effort Rightsizing and hard alignment

to business goals in IT and across shared services

Delayering of management structure

Total expense reduction target:

CHF 2 bn achieved

CHF 3 bn goal for end 2013

Target continued cost reductions beyond the 2013 goal

Reducing costs

across the firm

Note: By end 2Q12 annualized, the achieved CHF 2.0 bn cost reduction represents CHF 1.4 bn in Investment Banking, CHF 0.2 bn in Private Banking, CHF 0.1 bn in Asset Management and CHF 0.3 bn in Infrastructure


September 12, 2012


Private Banking


Investment Banking




16

September 12, 2012

CHF 3.8 bn Mandatory convertible

CHF 2.3 bn Tier 1 participation

securities

CHF 1.7 bn Hybrids exchange

Converting into 233.5 million Credit Suisse shares in March 2013 Fully underwritten by strategic investors 96.6% of subscription rights take-up

To qualify as part of the Swiss capital requirement (Swiss core capital ratio)

Accelerated exchange of some existing Tier 1 capital notes (hybrids) into high trigger Buffer Capital Notes (BCNs)

CHF 0.2 bn Aberdeen

Sale of the residual 7% stake in Aberdeen Asset Management

July 2012 announcement – Completed capital actions

CHF 0.7 bn Lower deductions

Threshold deductions will be reduced as the capital actions significantly increase available CET1 capital

17

Status

Completed

CHF 0.9 bn APPA exchange

& debt repurchases

(combined)

One-time offer to employees to exchange deferred cash compensation awards (APPA) into Credit Suisse shares

Public tender offer to repurchase CHF 4.8 bn in outstanding capital and senior debt securities

Overall capital benefit of CHF 930 mn, exceeding plan by CHF 130 mn

Completed

Completed

Completed

Completed

Proactively transitioning

into new capital

structure

Completed

September 12, 2012

CHF 0.5 bn Real estate sales

CHF 1.95 bn Changes in equity

CHF 1.1 bn Strategic

divestments1

Purchase offers received for two major sites Bulk of real estate disposals close to signing

Assumes that 2H12 net income equals consensus estimates2

Includes capital benefit from obligation to deliver shares for share-based compensation awards

Divestments in line with accelerated implementation of strategy in Asset Management alternative investments towards more liquid strategies

All projects in line with timetable for announcement until end 2012

July 2012 announcement – Progress on additional capital actions

18

CHF 2.3 bn Lower deductions

Lower threshold deductions and additional reductions in deferred tax assets on net operating losses

1 May be announced but potentially not closed by year-end 2012 2 As per Bloomberg

"Look through" Swiss core capital ratio of 9.4% by end 2012


into new capital

structure

14.5

20.2

3.8 0.6

0.4 0.2 0.7

Proactively aligning our capital structure to meet the new requirements


End 2Q12

"Look through" Basel 3 Common Equity Tier 1 capital in CHF bn

Note: Assumes constant exchange rate as of July 31, 2012. 1 Deferred cash compensation awards. 2 Does not include retained earnings post 2Q12. 3 Assumes exchange of remaining CHF 4.1 bn hybrid tier 1 instruments into Buffer Capital Notes as per February 2011 agreement. 4 USD 3 bn securities with a haircut of 20%.

"Today"2

July 31, 2012

Mandatory convertible

Debt repurchases

Gain on sale of residual stake in

Aberdeen

Lower capital

deductions


into new capital

structure

Strengthened capital position by CHF 5.7 bn, or 40%

Exchange of APPA1

"Today"2

July 31, 2012 End

2010

8.6

2.8

2.3 11.1

4.3

11.2 5.5

Basel I/II capital with limited effectiveness under Basel 3 in CHF bn

Tier 1 participation securities

Decreased by CHF (15.3) bn

Buffer Capital Notes (high strike CoCos)3

Tier 1 participation securities4

Hybrid tier 13

Upper/lower Tier 2

Conducted a series of repurchases, exchanges/upgrades and new issuances

Debt repurchases resulted in a non-dilutive CET1 gain of CHF 1 bn in YTD 2012

25.1

20.7

Credit Suisse with a strong capital position under Basel 3


Estimated1 Basel 3 look-through Core Capital ratios at end 2012 in %

1 Source: Based on 2Q12 company financial statements and results transcripts for Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, JPM Chase, Morgan Stanley and UBS. Based Morgan Stanley Research note “Credit Suisse Group – Risk/reward post capital raise” on July 18, 2012 for Bank of America, Citigroup, Goldman Sachs, HSBC and Société Générale; note for UBS, based on RWA guidance CHF 325 bn and fully applied CET1 capital of CHF 28.3 bn, including CHF 1 bn IAS 19R incremental impact. 2 Includes existing USD 3 bn securities (with a haircut of 20%) as FINMA has ruled that under the Swiss TBTF regime these will qualify as part of the Swiss capital requirement in excess of the Basel 3 G-SIB Common Equity Tier 1 (CET1) ratio


into new capital

structure

8.6

9.1 9.0 9.0 8.9 8.8

8.6 8.4 8.3

7.9 7.9

7.2 7.0

Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11Credit Suisse post capital

actions2

Credit Suisse pre capital

actions

9.4

CET1 ratio

Swiss core capital2

Summary

Transition well advanced


Focus on core businesses lines with high returns and

strong market positions

Meeting accelerated regulatory timetable

Continued drive for efficiencies and focus on

consistent and sustainable shareholder returns

1

2

3

Repositioned high return and strong market share business in Fixed Income

Strengthened flow businesses in Equities

Captured growth in international booking centers in Private Banking

Exited sub-scale and poor return businesses

"Look through" CET1 capital increased to CHF 20 bn

Retired around 60% of "old style" capital, generating CHF 1 bn non-dilutive capital benefit in 2012 YTD

Expect to exceed 10% Swiss Core capital ratio in 2013

On track to achieve CHF 3 bn cost reduction target

Expect to deliver consistent and significant book value per share accretion

Priority to deliver significant cash dividends to shareholders once capital ratio exceeds 10%

September 12, 2012

Reducing capital allocation to Investment Banking, especially Fixed Income, as we transition to Basel 3

Keep future Investment Banking capital usage in USD bn at or below current levels Expect to achieve targeted

"look through" 10% Swiss core capital ratio during 2013

Consistent earnings capacity of business model to generate substantial levels of excess capital

23

61% 42%

14%

22%

25% 36%

3Q11 2Q12

Private Banking & Asset Management

Equities, Advisory, Underwriting

Fixed Income

Contribution to Basel 3 RWA

Investment Banking

<20%

>40%

<40%

Goal

September 12, 2012

presentation at barclays global financial services conference, … · 2019. 1. 29. · financial...

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