INTERIM REPORTFIRST HALF 2000
Share performance
1996 1997 1998 1999 2000
Credit Suisse Group
Swiss Market Index
100
300
250
200
150
400350
ChangeShare data 30 June 2000 31 Dec. 1999 in %
Number of shares issued 273,911,468 272,206,488 1
Shares ranking for dividend 273,911,468 272,206,488 1
Average 273,278,067 271,310,760 1
Market capitalisation (CHF m) 88,884 86,153 3
Bookvalue per share (CHF) 123.27 119.84 3
1st half 2000 1st half 1999
Earnings per share (CHF) 13.21 9.85 34
Earnings per share fully diluted (CHF) 13.16 9.79 34
Share price (CHF) (at 25 August 2000: 381.0)
at 30 June/31 Dec. 324.5 316.5 3
half-year/year high 339.5 316.5 7
half-year/year low 265.5 212.0 25
Financial calendar
Publication of 2000 annual results Tuesday, 13 March 2001
Annual General Meeting 2001 Friday, 1 June 2001
4
FINANCIAL HIGHLIGHTS 1ST HALF 2000
Consolidated income statement
Revenue
Gross operating profit
Net profit
Cash flow
Return on equity (ROE)
Credit Suisse Group
Banking business
Insurance business
Insurance business return on invested capital (ROIC)
Consolidated balance sheet
Total assets
Total shareholders’ equity
– of which minority interests
Total risk-weighted assets (BIS)
BIS tier 1 capital
– of which non-cumulative preferred stock
BIS total capital
Assets under management
Total assets under management
– of which advisory
– of which discretionary
BIS ratios
BIS tier 1 ratio
Credit Suisse
Credit Suisse First Boston
Credit Suisse Group
BIS total capital ratio Credit Suisse Group
Staff numbers
Total staff
– of which in Switzerland banking business
insurance business
– of which outside Switzerland banking business
insurance business
Changein %
29
31
35
25
Changein %
9
7
7
9
Changein %
13
6
50
1
0
458
1
Changein %
4
3
5
Changein %
4
13
–1
1
Changein %
4
0
2
5
7
1st half 1999 in CHF m
13,804
4,671
2,665
4,024
1st half 1999 in %
19.4
24.2
10.6
17.2
31 Dec. 1999in CHF m
722,746
34,368
1,747
213,298
28,261
200
40,843
31 Dec. 1999in CHF bn
1,182
629
553
31 Dec. 1999in %
6.8
9.9
13.2
19.1
31 Dec. 1999
63,963
20,885
6,569
17,249
19,260
1st half 2000in CHF m
217,848
6,133
3,610
5,049
1st half 2000in %
21.2
25.9
11.3
18.7
30 June 2000in CHF m
817,193
36,388
2,622
215,078
28,275
1,116
41,412
30 June 2000in CHF bn
1,227
649
578
30 June 2000in %
7.1
11.2
13.1
19.3
30 June 2000
66,379
20,953
6,717
18,080
20,629
5
Credit Suisse Group announced a net profit of CHF 3.6 bn after taxes andminority interests for the first half of 2000, thereby exceeding the very goodresult of the first six months of 1999 by 35%. The new Credit Suisse FinancialServices business area posted a net profit of CHF 948 m (up 36%); net profit at Credit Suisse Private Banking rose 61% to CHF 1.4 bn; Credit Suisse FirstBoston posted a net profit of CHF 1.2 bn (up 22%); Credit Suisse Asset Management reported cash earnings of CHF 161 m (up 39%). The Group’sreturn on equity advanced from 19% to 21%.
CONSOLIDATED HALF-YEAR RESULTS
6
The first-half 2000 results were characterised by strong performance and progressagainst strategic goals by all business units. Credit Suisse First Boston further expand-ed market share in its global business. Credit Suisse Private Banking showed goodgrowth and continued its leadership in e-commerce applications for private banking.Another milestone was the formal establishment of the Credit Suisse Financial Servicesbusiness area in April 2000. Credit Suisse Group also continued its strong investmentand focus in e-commerce and e-enabled business models.
A supportive equity capital market, particularly in the first quarter, resulted instrong growth in commissions and trading throughout the Group, particularly at Credit Suisse First Boston and Credit Suisse Private Banking, while capital marketslowed to a more normal level in the second quarter.
The Group’s assets under management have risen to CHF 1,227 bn since theend of 1999 – up CHF 45 bn or 3.8%. Net inflow of new funds was CHF 28 bn or2.4%, to which Credit Suisse Private Banking contributed CHF 12 bn (first-half 1999:CHF 8.9 bn), Credit Suisse Financial Services CHF 1.8 bn (first-half 1999: CHF 4.8 bn) and Credit Suisse Asset Management CHF 14.6 bn (first-half 1999: CHF 19.0 bn).
The Group’s revenue advanced 29% to CHF 17.8 bn against the first half of 1999. Commission and service fee income rose by 51% to CHF 7.5 bn and tradingincome by 49% to CHF 5.4 bn. Interest income fell by CHF 486 m or 17% to CHF2.3 bn, primarily owing to narrower interest margins at Credit Suisse First Boston.Income from insurance business grew by 22% to CHF 2.7 bn.
Operating expenses climbed 28% to CHF11.7 bn, with personnel expenses advancing33% to CHF 8.9 bn and other operatingexpenses rising 16% to CHF 2.8 bn. Theincrease in operating expenses can be attrib-uted primarily to performance-related staffbonuses, which rose to CHF 4.3 bn (up 51%),reflecting higher levels of revenue.
Gross operating profit rose by 31% toCHF 6.1 bn. Valuation adjustments, provisionsand losses declined by 31% to CHF 606 m.Extraordinary expenses increased from CHF 14 m to CHF 134 m. Of the increase, CHF103 m was due to the allocation of provisionsto the “Reserves for general banking risks”,based on the Group’s statistically driven creditloss model. After deducting taxes of CHF 1.1 bn(up 68%) and minority interests of CHF 101 m,the Group produced a net profit of CHF 3.6 bn,up 35% on the first six months of 1999.
year)
year)
year)
Equity)
year)
year)
Changein %
3.1
3.8
4.4
7.0
3.8
31 Dec. 1999in CHF bn
276.8
4.8
135.4
476.7
8.9
95.2
424.6
19.0
324.2
5.7
0.7
1,181.8
33.4
553.4
30 June 2000in CHF bn
285.5
1.8
141.4
494.9
12.0
104.7
443.2
14.6
334.2
6.1
0.2
1,226.7
28.0
577.7
OVERVIEW OF ASSETS UNDER MANAGEMENT
Credit Suisse Financial Services
– of which net new assets (1st half
– of which discretionary
Credit Suisse Private Banking
– of which net new assets (1st half
– of which discretionary
Credit Suisse Asset Management
– of which net new assets (1st half
– of which discretionary
Credit Suisse First Boston (Private
– of which net new assets (1st half
Credit Suisse Group (consolidated)
– of which net new assets (1st half
– of which discretionary
Net profit per share came to CHF 13.21 (up 34%), and book value per share has increased by 3% since the start of 1999 to CHF 123.27. As at 30 June 2000,Credit Suisse Group employed 66,379 staff (up 4%).
In March 2000, Credit Suisse Group announced the establishment of CreditSuisse Financial Services, and on 1 July 2000 the business area was formally estab-lished. It comprises the Credit Suisse Banking (private and corporate customers inSwitzerland), Credit Suisse Personal Finance (European on-shore business with affluent private clients), Credit Suisse e-Business (Internet-based services), WinterthurInsurance (non-life insurance), and Winterthur Life & Pensions (life insurance andpension fund solutions) business units and a shared Technology and Services unit. The Credit Suisse Private Banking, Credit Suisse First Boston and Credit Suisse AssetManagement business units remained unchanged.
Business unit resultsFor the first six months of 2000, the business units forming Credit Suisse FinancialServices as of 1 April 2000 posted a total net profit of CHF 948 m, a 36% increasecompared to the same period in 1999. In order to provide comparability, the followingreports on the results of the businesses forming the Credit Suisse Financial Servicesbusiness area are presented as in the management structure which was in place until30 June 2000.
Winterthur produced a 24% growth in net profit to CHF 625 m. This result wasachieved despite a challenging operating environment and continued moderate realisa-
15,863
39,115
8,544
STAFF NUMBERS BY BUSINESS UNIT
CSFSCSPBCSFB
CSAM
2,067
CreditSuisseGroup
17,848
8,917
2,798
11,715
6,133
642
606
4,885
44
134
1,084
3,711
101
3,610
Adjustmentsincluding
CorporateCenter
–248
254
– 419
–165
– 83
151
– 82
–152
9
111
–198
–56
33
– 89
CreditSuisseAsset
Management
733
308
225
533
200
32
0
168
0
0
39
129
0
129
1,066
n/a
1,092
CreditSuisse
FinancialServices
4,533
1,727
1,152
2,879
1,654
104
283
1,267
30
9
287
1,001
53
948
16,723
12.0%
16,198
– 66
CreditSuisse
FirstBoston
9,624
5,754
1,453
7,207
2,417
331
301
1,785
0
0
545
1,240
0
1,240
10,748
23.1%
10,786
–15
CreditSuissePrivate
Banking
3,206
874
387
1,261
1,945
24
104
1,817
5
14
411
1,397
15
1,382
3,069
n/a
3,152
–22
OVERVIEW OF BUSINESSUNIT RESULTS
1st half 2000in CHF m
REVENUE
Personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
GROSS OPERATING PROFIT
Depreciation and write-offs on non-current assets
Valuation adjustments, provisions and losses1)
PROFIT BEFORE EXTRAORDINARY ITEMS/TAXES
Extraordinary income
Extraordinary expenses
Taxes
NET PROFIT BEFORE MINORITY INTERESTS
– of which minority interests
NET PROFIT (after minority interests)
Average allocated equity capital
Return on average equity capital
Equity capital allocation as of 1 July 20001) net of allocation (-)/release (+) of reserves for general banking risks
1)
7
30%
13%
42%
15%
REVENUE COMPOSITION
Balance sheet businessCommission and service feesTrading
Insurance
53%
25%
18%
REVENUE CONTRIBUTION BY BUSINESS UNIT
CSFSCSPBCSFB
CSAM
4%
33%26%
37%
PROFIT CONTRIBUTION BY BUSINESS UNIT
CSFSCSPBCSFB
CSAM
4%
8
tion of capital gains (total investment return was a sustainable 6.2%). Non-life businessachieved rate increases in many markets and good growth partially offset by higherclaims. In life business, an aggressive pricing environment in Switzerland – particularlyin single-premium sales – was partially offset by good growth in annual life premiumsand in other European markets. The annualised return on invested capital increased to18.7%.
Credit Suisse generated a net profit of CHF 366 m, thereby exceeding theresult for the first half of 1999 by CHF 165 m or 82%. While revenue climbed 16% toCHF 2.0 bn, driven particularly by high commissions from securities transaction vol-umes, operating expenses advanced by only 6%. The cost/income ratio (excl. goodwillamortisations) further improved, falling 4.9 percentage points to 61.5%.
The Personal Financial Services Europe project has been operating success-fully in Italy since May 1999 and will be launched in other European markets over thenext twelve months. Overall, the project reported a start-up pre-tax loss of CHF 56 min the first half of 2000, resulting from capital expenditure establishing the business,including corresponding marketing activities. Credit Suisse (Italy) significantly expandedits client base from 12,400 to 16,100 and assets under management reached CHF 5 bn as at the end of June 2000, an increase of 25% since year-end 1999. TheCredit Suisse (Italy) finance portal was launched in April of this year. Within the nextfew weeks, Credit Suisse Group will launch a pan-European e-commerce platform,offering clients across Europe comprehensive financial information, investment fundsfrom leading fund management companies and online brokerage on the world’s mainstock exchanges. Youtrade, Switzerland’s leading online broker with more than 20,000clients and a market share of around 35% as at 30 June, once again exceeded expec-tations and broke even 14 months after its inception.
Credit Suisse Private Banking increased net profit by 61% compared with thesame period in 1999 to CHF 1.4 bn. Revenue climbed by 42% to CHF 3.2 bn, attrib-utable primarily to a CHF 618 m increase in commission income to CHF 2.1 bn. Oper-ating expenses advanced 17% to CHF 1.3 bn, of which personnel expenses rose 23%to CHF 874 m, the result primarily of a 53% increase in performance-related pay.Assets under management climbed by 3.8% to CHF 495 bn in the first six months of2000, of which CHF 12 bn (first-half 1999: CHF 8.9 bn) or 2.5% can be attributed tonet inflow of new funds and 1.3% to market-related and structural growth.
Credit Suisse First Boston further increased its key market shares and pro-duced a net profit of CHF 1.2 bn (up 22%) or USD 761 bn (up 9%). Revenue rose by30% to CHF 9.6 bn (or by 15% to USD 5.9 bn). The 38% increase in operatingexpenses to CHF 7.2 bn (or a 23% rise to USD 4.4 bn) reflects investment in organicgrowth in Equity business and Investment Banking as well as higher bonus provisionsresulting from increased earnings. The 34% (in USD: 42%) drop in earnings fromFixed Income business to CHF 2.3 bn (USD 1.4 bn) was more than compensated forby the 96% (in USD: 74%) increase in earnings from Equity business to CHF 4.8 bn(USD 2.9 bn). Earnings from Investment Banking expanded 59% (in USD: 41%) toCHF 2.4 bn (USD 1.5 bn). Geographically, 48% of earnings were generated in NorthAmerica, 35% in Europe and 17% in other regions, reflecting Credit Suisse FirstBoston’s strong global presence. Return on equity further improved from 21% to 23%.
Credit Suisse Asset Management posted a net profit of CHF 129 m, a 16%increase against the first half of 1999. On a cash earnings basis (excluding goodwillamortisation and other non-cash items), income rose by 38% to CHF 161 m. Compari-son with the first six months of 1999 is impacted by the acquisition of Warburg PincusAsset Management in July 1999. Revenue expanded by 59% to CHF 733 m. Higherpersonnel costs and investment in IT produced operating expenses of CHF 533 m – arise of 67%. Discretionary assets under management were up 3.1% to CHF 334 bn;
this is the combined effect of an increase of CHF 14.6 bn (first half of 1999: CHF19.0 bn), or 4.5%, resulting from net new business, and a reduction of CHF 4.5 bn, or1.4%, resulting from market movements including foreign exchange. Total assets undermanagement rose 4.4% to CHF 443 bn.
OutlookCredit Suisse Group anticipates a good overall result for the year as a whole. It cannotbe assumed, however, that the favourable market conditions of the first six months willcontinue in the second half of the year; investment in new business activities and tech-nologies could also influence the annual result.
CREDIT SUISSE GROUP ORGANISATION AND EXECUTIVE BOARD AS OF 1 JULY 2000
Chairman and Chief Executive Officer:Lukas Mühlemann
Chief Risk Officer andVice-Chairman of the Executive Board:Hans-Ulrich Doerig
Chief Financial Officer:Philip Ryan
Chief Executive Officer: Allen D. Wheat
Vice-Chairman of the Executive Board: Richard E. Thornburgh
Chief Executive Officer: Oswald J. Grübel
Chief Executive Officer: Phillip M. Colebatch
Chief Executive Officer: Thomas Wellauer
Chief Financial Officer: Erwin W. HeriTechnology and Services: Ulrich Körner
Chief Executive Officer: Manfred Broska
Chief Executive Officer: Rolf Dörig
Chief Executive Officer: Olivier Steimer
Chief Executive Officer: Thomas Wellauer
Chief Executive Officer: Markus Dennler
9
COMPREHENSIVE FINANCIAL SERVICES
For the first half year 2000, Credit Suisse Financial Services posted a total netprofit of CHF 948 m, a 36% increase compared to the same period in 1999.Total assets under management grew by CHF 8.7 bn or 3%, to CHF 285.5 bnand the annualised return on invested capital increased to 16.9%.
In April Credit Suisse Group announced the formation of the business area Credit Suisse FinancialServices by combining Credit Suisse, Winterthur and its Personal Financial Services Europeinitiative in order to more closely integrate banking, insurance and e-commerce. The new businessarea consequently adapted its structure to reflect these objectives and on 1 July formed fivebusiness units (Winterthur Insurance, Winterthur Life & Pensions, Credit Suisse Banking, Credit Suisse Personal Finance and Credit Suisse e-Business) plus a Technology & Services unit.Credit Suisse Financial Services serves close to 17 million clients with around 40,000 employeesand approximately 17,000 tied agents.
Credit Suisse Financial Services turned in a strong performance for the first half year. All business units contributed to this result: Winterthur, comprising Winterthur Insurance andWinterthur Life & Pensions in the new structure, produced a strong 24% growth in net profits toCHF 625 m in a challenging market environment and Credit Suisse (Credit Suisse Banking in thenew structure) increased net profit by 82% to CHF 366 m benefiting from a combination ofstrong revenue growth and continued expense control. The Personal Financial Services Europeinitiative, comprising Credit Suisse Personal Finance and part of Credit Suisse e-Business in thenew structure, is continuing its expansion; ongoing investments in technology and marketing ledto a reported loss of CHF 43 m.
CreditSuisse
FinancialServices
4,533
1,727
1,152
2,879
1,654
104
283
1,267
30
9
287
1,001
53
948
16,723
12.0%
16,198
285.5
1.8
141.4
– 66
PersonalFinancialServices Europe
35
22
64
86
–51
5
0
–56
0
0
–13
– 43
0
– 43
60
n/a
81
6.0
0.8
2.6
Credit Suisse
1,952
745
429
1,174
778
32
283
463
30
9
117
367
1
366
4,476
16.4%
4,349
142.8
– 0.2
2.1
– 66
WinterthurLife
961
289
225
514
447
28
0
419
WinterthurNon-life
1,585
671
434
1,105
480
39
0
441
2)
2)
2)
2)
2)
2)
OVERVIEW OF BUSINESS AREACREDIT SUISSE FINANCIAL SERVICES
1st half 2000in CHF m
REVENUE
Personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
GROSS OPERATING PROFIT
Depreciation and write-offs on non-current assets
Valuation adjustments, provisions and losses1)
PROFIT BEFORE EXTRAORDINARY ITEMS/TAXES
Extraordinary income
Extraordinary expenses
Taxes
NET PROFIT BEFORE MINORITY INTERESTS
– of which minority interests
NET PROFIT (after minority interests)
Average allocated equity capital
Return on average equity capital
Equity capital allocation as of 1 July 2000
TOTAL ASSETS UNDER MANAGEMENT IN CHF BN
– of which net new assets
– of which discretionary1) net of allocation to (–)/release (+) of reserves for general banking risks2) defined as premiums earned (net), less claims incurred and expenses for processing claims as well as actuarial provisions, less commissions (net), plus investmentincome from insurance business; expenses from the handling of both claims and investments are allocated to revenue; personnel expenses non-life: CHF 168 m, life:CHF 66 m, other operating expenses non-life: CHF 118 m, life: CHF 53 m.
0
0
183
677
52
625
12,187
11.1%
11,768
136.7
1.2
136.7
10
Winterthur successfully managed the difficult conditions in most markets and evencontinued major investments in operational improvements and new technologies. Whileevidence of more rational pricing emerged in the UK and Spanish motor markets, poorconditions elsewhere were met with an ongoing determination to achieve adequate pricing and further a long-term reduction in costs.
Winterthur’s non-life businesses reported higher loss frequencies in Switzerlandand Germany, and material increases in the average costs of claims in Italy, France and the US. Winterthur’s Spanish operations registered a major turnaround compared tolast year with a 6-point improvement in the half-year combined ratio. Conversely, theresults from the motor business in Italy worsened as unprecedented governmentintervention has frozen the rates for third-party liability, removing insurers’ ability to adjustrates in response to steep increases in claims costs. Webinsurance, Winterthur’sproprietary European e-commerce channel, was expanded to Italy and Belgium in 2000,enabling Winterthur to sell motor, home and accident insurance directly via the Internet in eight European countries and in the United States.
In the UK, a number of important part-nerships delivered a strong new customer flowto Churchill, resulting in extraordinary 55%growth compared to the first half of 1999. Theacquisition of NIG Skandia was completed on 1 April and added CHF 350 m of premiums tothe mid-year accounts.
Winterthur’s life business continued toimplement value-creating pricing as competi-tors aggressively pursued growth strategies. As a result, single premium sales in Switzer-land, in particular, and mortgage endowmentsin the UK were reduced. By contrast,Winterthur’s annual life premiums grew 8.6%over the first half of 1999. New productlaunches in Switzerland and Italy are expectedto boost overall growth in the second half ofthe year.
Winterthur continued to reinforce itsstrong position in the life and pension marketsof Eastern Europe and Asia. The acquisition of Nicos Life (Japan) was finalised on 1 April 2000, marking Winterthur’s expansioninto the world’s largest life insurance market.With its announcement of the acquisition of
1st hin
1
2
NON-LIFE BUSINESS
Gross premiums
Net premiums
Premiums earned, net
Claims incurred, net
Dividends to policyholders incurred, net
Operating expenses, net(including commissions paid)
UNDERWRITING RESULT, NET
Net investment income
Interest on deposits and bank accounts
Other interest paid
Other income and expenses(including exchange rate differences)
PROFIT (before extraordinary items,tax, minority interests)
Assets under management as at 30.6./31.12.
Technical provisions as at 30.6./31.12.
Combined ratio (excl. dividend to policyholders)
Claims ratio
Expense ratio
Insurance reserve ratio
In the first half of 2000, Winterthur, comprising Winterthur Insurance andWinterthur Life & Pensions in the new structure, produced a robust 24%growth in net profit to CHF 625 m. This result was achieved with strongearnings development in both life and non-life businesses, continued moder-ate realisations of capital gains resulting in a total investment return of a sus-tainable 6.2%. Net premiums grew 4% overall, comprising a 13% increase innon-life business, aided by rate increases in a number of challenging non-lifemarkets and a 2% decrease in life business due to aggressive pricing compe-tition in Switzerland. Annualised return on invested capital increased to 18.7%.
INSURANCE FOR PRIVATE AND CORPORATE CUSTOMERS WORLDWIDE
1st half 1999in CHF m
7,677
7,020
5,841
– 4,458
–136
–1,805
–558
910
47
–34
– 9
356
31,131
23,041
107.2%
76.3%
30.9%
214.8%
Changein %
15
13
11
14
36
8
35
25
9
118
–
24
4
14
alf 2000 CHF m
8,816
7,900
6,459
–5,082
–185
–1,947
–755
1,142
51
–74
77
441
32,360
26,183
08.8%
78.7%
30.1%
05.8%
11
Colonial Life UK, the British subsidiary of the Australian Colonial, Winterthur also reinforced itsposition in the UK life market.
Major investment continued in Winterthur’s Euro Life e-commerce platform. The first unit-linked product family was successfully launched in Germany in July.
Results from non-life business: Gross premiums in non-life business grew at a strong 15%,benefiting from significant price increases in Spain, the UK, US and smaller European markets. The combined ratio (sum of the claims and expense ratio) increased slightly from 107.2% to108.8%, as a further improvement in the expense ratio, from 30.9% to 30.1% did not offset a 2.4 percentage point deterioration in the loss ratio to 78.7%. Net investment income increased by25% to CHF 1.1 bn. Overall, the result (before tax and minority interests) totalled CHF 441 m, a 24% increase over the comparable period last year.
Results from life business: Life premiums registered a 2% decline for the half-year. Theexpense ratio increased slightly to 10.3% owing to continued investments in the European Life e-platform and investments in new business. Claims incurred were up 31%, largely the result ofpayouts from big single premium contracts. These also reduced the corresponding actuarial provi-sions so that total outflow was 6% below last year’s sum. Net investment income was up 11% to CHF 3.1 bn. Overall, Winterthur’s life operations posted a strong 27% gain in net profits toCHF 419 m (before extraordinary items, tax and minority interests) in the first half of 2000.
Winterthur Group results first half 2000: Total gross premiums rose by 6% to CHF 17.2 bn as at 30 June 2000. Net investment income increased to CHF 4.3 bn for the half year ended 30 June2000; the average annualised return on assets was a sustainable 6.2%. Pre-tax operating profitincreased 25% to CHF 860 m. Modest increases in taxes and minority interests resulted in a slightlylower 24% rise in net profits to CHF 625 m.
1st half 1999in CHF m
8,534
8,490
7,683
–3,665
– 4,948
– 857
– 697
2,821
72
– 63
– 93
78
331
100,879
84,519
9.1%
112.1%
Changein %
–2
–2
–2
31
–33
36
11
11
13
5
27
–226
27
3
6
1st half 2000in CHF m
8,379
8,293
7,533
– 4,788
–3,309
–1,162
–776
3,122
81
– 66
–118
– 98
419
104,298
89,446
10.3%
107.5%
LIFE BUSINESS
Gross premiums
Net premiums
Premiums earned, net
Claims incurred, net
Change in actuarial provision, net
Allocation to participation, net
Operating expenses, net(including commissions paid)
Net investment income
Interest on deposits and bank accounts
Interest on bonuses credited to policyholders
Other interest paid
Other income and expenses (including exchange rate differences)
PROFIT (before extraordinary items,tax, minority interests)
Assets under management as at 30.6./31.12.
Technical provisions as at 30.6./31.12.
Expense ratio
Claims incurred and change in actuarial provision in relation to premiums earned
12
CORPORATE AND PRIVATE CUSTOMERS IN SWITZERLAND
The first six months of 2000 were very successful for Credit Suisse (CreditSuisse Banking in the new structure). Net profit rose by 82% year-on-year toCHF 366 m. Return on equity climbed from 9.2% to 16.4%. Revenue advanced16%, while operating expenses rose only 6%. The cost/income ratio improvedfurther from 66.4% to 61.5%.
Gross operating profit grew 34%, with all important income streams, particularly com-missions from securities transactions, posting significant increases. Mortgage claimsrose by 2% or CHF 1.2 bn in the first half of the year, while in the investment sectorthe bank improved its market share in fund sales. Assets under management climbedto CHF 143 bn, up 1.4% or CHF 2 bn. Fund holdings advanced by over 9% to CHF 35.2 bn.
Investment savings continued to prove popular among private customers, with afurther increase in average invested assets. Securities investments in the pension provi-sion segment advanced sharply in the first six months to CHF 2.3 bn. Credit Suisselaunched the Flex Investment Account, an attractive account for specific savings tar-gets. It has an interest rate which is geared to the money market and reset every threemonths. Credit card business also continued to perform well. 340,000 cards from theEurocard portfolio were integrated successfully and the bank also succeeded in acquir-ing about 60,000 new card customers.
In corporate banking, trade financing continued its good performance aided bythe improved economic environment in Switzerland. Foreign exchange trading alsoposted a further rise. At the end of May 2000the bank set up Credit Suisse Fleet Manage-ment AG in partnership with Deutsche LeasingAG. The new company offers medium-to-largenational and international firms comprehensivevehicle fleet management services with a 24-hour-a-day mobility guarantee. The first con-tracts have already been signed.
In Direct Banking, the number ofInternet Banking customers rose by 30% inthe first half-year to around 220,000.Yourhome, Credit Suisse’s homes and homeownership Internet portal, recorded 300,000visitor sessions. Over 100 firms are interestedin working with yourhome. E-business isexpanding continuously and new businessmodels are being developed, as evidenced bythe launch of the independent joint financeportal with bluewin and TA-Media.
1st INCOME STATEMENT
Net interest income
Net commission and service fee income
Net trading income
Other ordinary income
REVENUE
Personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
GROSS OPERATING PROFIT
Deprecation and write-offs on non-current asse
– of which amortisation of goodwill
Valuation adjustments, provisions and losses*
PROFIT BEFORE EXTRAORDINARY
1st half 1999in CHF m
1,105
458
107
15
1,685
680
424
1,104
581
21
6
303
257
19
5
69
202
1
201
–12
Changein %
6
31
65
–33
16
10
1
6
34
52
0
–7
80
58
80
70
82
0
82
half 2000in CHF m
1,166
599
177
10
1,952
745
429
1,174
778
32
6
283
463
30
9
117
367
1
366
– 66
ts
ITEMS AND TAXES
Extraordinary income
Extraordinary expenses
Taxes
NET PROFIT
– of which minority interests
NET PROFIT (after minority interests)
* net of allocation to (-) / release of (+) reserves for general banking risks
13
Results first half 2000: At CHF 100.8 bn, Credit Suisse’s total assets haveincreased by 1% since 31 December 1999. Customer lending expanded by 1% to CHF 91.9 bn. In the same period, customer assets contracted by 5% to CHF 61.6 bn. Investment funds became increasingly popular among private customers.In the corporate customer segment, fiduciary deposits posted a pleasing rise.
The 16% increase in revenue to CHF 1,952 m was generated mainly by non-interest business. Commission and service fee income, primarily from securities trading,rose by 31%. Trading income – income from trading in foreign exchange, foreign bank-notes and precious metals on behalf of customers – jumped 65%. Interest businessposted a 6% improvement. Operating expenses grew at a modest 6%, resulting in a34% increase in gross operating profit to CHF 778 m. This marked increase inefficiency lead to a further improvement in the cost/income ratio (excl. amortisation ofgoodwill) of 4.9 percentage points to 61.5%.
Valuation adjustments, provisions and losses came to CHF 283 m. This includescredit risk costs of CHF 261 m for statistically expected losses and CHF 22 m forother provisions. Actual valuation adjustments in credit business fell by 25% against thefirst six months of 1999 and were CHF 66 m below the statistically expected figure.The risk structure of the credit portfolio improved still further.
Net profit increased by 82% to CHF 366 m and the ROE improved to 16.4%.
RATIOS/KEY PERFORMANCE INDICATORS
1st half 2000 1999
Average allocated equity capital CHF m 4,476 4,409
Allocated equity capitalCHF m (1 July/1 January) 4,349 4,611
BIS tier 1 ratio*30.6./31.12. 7.1% 6.8%
Cost/income ratio 61.8% 66.8%– excl. amortisation of goodwill 61.5% 66.4%
Return on average equity capital 16.4% 9.2%
Number of employees at 30.6./31.12. 11,472 11,404
Pre-tax margin 24.8% 16.1%
Staff expenses/operating expenses 63.5% 61.6%
Staff expenses/total income 38.2% 40.4%
Number of branches at 30.6./31.12. 239 239
Net interest margin 2.36% 2.37%
Loan growth 1.5% 3.8%
Deposit/loan ratio 30.6./31.12. 67.0% 71.4%
Assets under managementCHF bn at 30.6./31.12. 143 141
* legal entity Credit Suisse
14
30 June 2000in CHF m
1,103
551
893
1,314
27,687
64,242
24
1,316
32
2,165
355
1,152
100,834
3,076
20,047
34,072
27,521
3,587
5,494
719
1,207
340
4,771
100,834
31 Dec. 1999in CHF m
1,374
489
654
1,080
27,816
63,024
21
1,711
31
2,237
292
1,174
99,903
1,938
16,689
36,330
28,530
3,883
5,563
504
1,501
135
4,830
99,903
Changein %
–20
13
37
22
0
2
14
–23
3
–3
22
–2
1
59
20
– 6
– 4
– 8
–1
43
–20
152
–1
1
BALANCE SHEET
Cash and other liquid assets
Money market claims
Due from banks
Due from other business units
Due from customers
Mortgages
Securities and precious metals trading portfolio
Financial investments
Participations
Tangible fixed assets
Accrued income and prepaid expenses
Other assets
TOTAL ASSETS
Due to banks
Due to other business units
Due to customers in savings andinvestment accounts
Due to customers, other
Medium-term notes
Bonds and mortgage-backed bonds
Accrued expenses and deferred income
Other liabilities
Valuation adjustments and provisions
Capital
TOTAL LIABILITIES
Personal Financial Services Europe project (PFS): With the “Personal Financial Ser-vices Europe” initiative which will be carried forward in the new structure of Credit SuissePersonal Finance and Credit Suisse e-business, Credit Suisse Group aims to strengthenits presence in selected European markets and to extend its leading position in e-commerce in Switzerland to the rest of Europe. It offers a complete range of productsfor wealth creation and protection, a targeted combination of personal advice and Internet-based facilities and a comprehensive service to private clients who have upwards of CHF 80,000 (EUR 50,000) to invest. In the first half of 2000, the initiative comprised thepilot market, Italy (Credit Suisse (Italy)), the pan-European e-commerce platform projectand the online broker, youtrade.
Credit Suisse (Italy) continued to chart a successful course. Assets under manage-ment increased by more than 25% to CHF 5 bn in the first half of 2000, while the num-ber of clients rose from 12,400 to 16,100. This sound foundation will be strengthenedwith the opening of new Investment Centres in major Italian cities and the vigorous exten-sion of the range of products on offer. Expansion will be driven forward in other selectedmarkets – Germany, Spain and the UK – by means of organic growth and small-scaleacquisitions.
Progress on establishing the pan-European e-commerce platform also continues.The Credit Suisse Italy finance portal – offering a broad range of financial and productinformation – was launched in April of this year. In the next few weeks, Credit Suisse willlaunch a Luxembourg-based online service which will offer investment funds from leadingfund management companies in addition to comprehensive financial information and online brokerage on the world’s main stock exchanges. The service will be expandedcontinuously – the next phase being localised services in specific markets.
With more than 20,000 clients as at 30 June, youtrade once again exceededexpectations and broke even after just 14 months. Youtrade is Switzerland’s leading onlinebroker, with a market share of around 35%.
Overall, the Personal Financial Services Europe project (Credit Suisse (Italy),youtrade and the pan-European e-commerce platform), reported a start-up loss (pre tax)of CHF 56 m in the first half of 2000 as a result of capital expenditure on establishing thebusiness.
PERSONAL FINANCIAL SERVICES EUROPE
30 June 2000
0.9
20,049
–
31 Dec. 1999
0.5
9,603
–
31 Dec. 1999
4.0
12,395
230
30 June 2000
5.1
16,117
297
30 June 2000
6.0
36,366
297
31 Dec. 1999
4.5
21,998
230
KEY PERFORMANCE INDICATORS
CS Italy (total) youtrade PFS
Assets under management (in CHF bn)
Number of clients
Personal bankers
15
During the first six months of 2000, Credit Suisse Private Banking producedcontinued strong results which exceeded the very good performance of thesecond half of 1999. Net profit increased by 61% to CHF 1,382 m compared tothe prior year period. Assets under management grew by 3.8% to CHF 495 bnover the end of 1999, with net new business accounting for CHF 12 bn. Credit Suisse Private Banking continued its leadership as a technological andfinancial innovator by providing new services through its Internet portal
SERVICES FOR PRIVATE INVESTORS IN SWITZERLAND AND ABROAD
16
www.cspb.com.
Credit Suisse Private Banking remained an Internet first mover by adding further innov-ative services to its financial portal at www.cspb.com. Launched in March 2000,Estate Lab offers users an overview of exclusive properties in several European coun-tries and comprehensive advice on virtually all aspects of buying and selling real estate.A number of new fund providers are now offering their products via Fund Lab, theinteractive fund data base, bringing its total number of funds to over 800. InsuranceLab, which now largely covers the Swiss life insurance market, positions Credit SuissePrivate Banking as a premier provider of Swiss life insurance products. The new toolFinancial Check-Up Online permits users to assess online their personal financialsituation quickly and simply and gives specific advice on how to optimise their finances.The range of interactive services available under Investors’ Circle was broadened toinclude Portfolio Tracker, which enables clients to continuously follow the performance
of their chosen securities and portfolios.During the first half of 2000, Credit
Suisse Private Banking also introduced aseries of innovative products and servicesfor its clients. In response to increaseddemand for alternative investment vehicles,Absolute Europe AG and Absolute Technolo-gy AG were launched to complement thealready very successful Absolute InvestmentAG. All three companies invest in broadlydiversified, return-oriented strategies with lowcorrelation to the stock and bond marketsand the ability to generate high returns irre-spective of prevailing market trends. DreamTeam, a new product package aimed specifi-cally at leading sportsmen and women whichwas introduced in March, provides a broadrange of asset management and insuranceservices specially tailored to meet the particularneeds of this profession. In a new develop-ment, Credit Suisse Private Banking now alsooffers comprehensive support to entrepreneurswho are considering selling their business orraising growth capital for their company.
Credit Suisse Private Banking continuedto expand internationally, opening a branch in Valencia, Spain and a representative office in Jakarta, Indonesia. At the end ofJune 2000, Credit Suisse Private Bankinghad 51 branches in Switzerland and 38 officesabroad.
income
n-current assets
ill
and losses*
ARY
ts)
reserves
ther ordinary fee income
Changein %
46
41
46
45
42
23
5
17
66
14
0
167
64
– 44
100
69
61
67
61
1st half 1999**in CHF m
420
1,510
289
31
2,250
713
368
1,081
1,169
21
4
39
1,109
9
7
243
868
9
859
– 9
1st half 2000in CHF m
612
2,128
421
45
3,206
874
387
1,261
1,945
24
4
104
1,817
5
14
411
1,397
15
1,382
–22
INCOME STATEMENT
Net interest income
Net commission and service fee
Net trading income
Other ordinary income
REVENUE
Personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
GROSS OPERATING PROFIT
Deprecation and write-offs on no
– of which amortisation of goodw
Valuation adjustments, provisions
PROFIT BEFORE EXTRAORDINITEMS AND TAXES
Extraordinary income
Extraordinary expenses
Taxes
NET PROFIT
– of which minority interests
NET PROFIT (after minority interes
* net of allocation to (-) / release of (+)for general banking risks
** reclassification of trust income from oincome to net commission and servicebeginning from January 1, 2000
During the first half, the volume of securities transactions surged to extraordinary levelswhich was effectively handled by the systems and operations teams. Credit SuissePrivate Banking and Credit Suisse Group will be embarking on a project to reengineerthe securities operating platform to position the securities business for the volumes andbusiness developments of the future.
Results first half 2000: In a challenging market environment, particularly in thesecond quarter, assets under management increased by CHF 18 bn or 3.8% comparedto year end 1999. Net new business accounted for CHF 12 bn, or 2.5%. Total assets under management amounted to CHF 495 bn at the end of June 2000.Total revenue rose by 42% to CHF 3,206 m, reflecting strong growth in income fromcommission and service fees (up 41%), trading (up 46%) and net interest income (up46%).
The 17% increase in operating expenses to CHF 1,261 m is due mainly to higherpersonnel expenses, especially higher performance-related remuneration. The number of staff increased by 173 to 8,544. Investment in new technologies con-tinue to grow, and accounts for the majority of the 5% rise in other operating expensesto CHF 387 m. Tax expenditure increased by 69% to CHF 411 m. There was amarked improvement in the cost/income ratio from 49% for the half-year 1999 to 40%for the six months ended on 30 June 2000, which was the result of the very rapidrevenue growth in the first quarter of 2000. Net profit grew by 61% to CHF 1,382 m.Net profit in relation to average assets under management rose from 41 to 57 basispoints.
BALANCE SHEET INFORMATION
30 June 2000 31 Dec.1999in CHF m in CHF m
Total assets 102,531 99,651
Due from customers 35,982 31,902– of which secured by mortgages 8,109 7,667– of which secured
by other collateral 23,928 22,731
RATIOS/KEY PERFORMANCE INDICATORS
1st half 2000 1999
Average allocated equity capital CHF m 3,069 2,689
Allocated equity capitalCHF m (1 July/1 January) 3,152 2,875
Cost/income ratio 40.1% 49.0%– excl. amortisation of goodwill 40.0% 48.8%
Number of employees 30.6./31.12. 8,544 8,371
Pre-tax margin 56.4% 49.4%
Fee income/total income 66.4% 67.1%
Fee income/operating expenses 168.8% 139.7%
Assets under management CHF bn 30.6./31.12. 495 477
Growth in assets under management 3.8% 9.2%– of which net new business* 2.5% 2.2%– of which performance and
structural effects 1.3% 7.0%
After-tax profit/average AuM 57 bp 41 bp
* excluding dividends and interests
17
The first half of 2000, despite mixed markets, produced record six-monthresults for Credit Suisse First Boston. Revenues, compared to the first halfof 1999, rose 15% to USD 5.9 bn (CHF 9.6 bn); net profit was a record USD761 m (CHF 1,240 m) while the ROE was 23% versus the previous year’s 21%.The consistent investment in building the equity business and investmentbanking is continuing to show returns as evidenced by improved marketshare, significant growth in revenue and improved margins in equity prod-ucts.
GLOBAL INVESTMENT BANKING
18
Credit Suisse First Boston’s performance is measured not only against financial targetsbut also in terms of market share across products and regions. Credit Suisse FirstBoston continues to rank amongst the top 4 or 5 investment banks in the world asdetermined by market share achievements. Significant progress has been made in thepast three years in strengthening its competitive position in: equity new issuance,merger & acquisition advisory, debt new issuance, equity research rankings in thirdparty polls and secondary equity sales penetration.
At June 30, 2000, Credit Suisse First Boston had market share rankings in equitynew issuance of #5, #5 in M&A advisory, and #4 ranking in debt new issuance. CreditSuisse First Boston’s rankings in IPO’s was #4 and particularly in tech IPO’s was #1.The percentage market share in M&A was 23% and 8% in equity new issuance. The equity research rankings as measured by Institutional Investor in the U.S. was #5
Changein %
– 42
74
41
–76
–
15
28
8
23
–3
34
23
– 46
6
0
0
1
9
–
9
1st half 2000in CHF m
2,336
4,804
2,389
19
76
9,624
5,754
1,453
7,207
2,417
331
44
301
1,785
0
0
545
1,240
0
1,240
–15
1st half 1999in CHF m
3,564
2,450
1,506
74
–174
7,420
4,010
1,200
5,210
2,210
219
32
497
1,494
0
0
478
1,016
2
1,014
58
Changein %
–34
96
59
–74
–
30
43
21
38
9
51
38
–39
19
0
0
14
22
–
22
1st half 2000in USD m
1,433
2,947
1,466
12
46
5,904
3,530
891
4,421
1,483
203
27
185
1,095
0
0
334
761
0
761
– 9
1st half 1999in USD m
2,458
1,690
1,038
51
–120
5,117
2,766
827
3,593
1,524
151
22
343
1,030
0
0
330
700
1
699
40
INCOME STATEMENT
Fixed Income
Equity
Investment Banking
Private Equity
Other
REVENUE
Personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
GROSS OPERATING PROFIT
Depreciation and write-offs on non-current assets
– of which amortisation of goodwill
Valuation adjustments, provisions and losses*
PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES
Extraordinary income
Extraordinary expenses
Taxes
NET PROFIT
– of which minority interests
NET PROFIT (after minority interests)
* net of allocation to (-)/release of (+) reserves for general banking risks
The business unit income statement differs from the Group's legal accounts in presenting brokerage, execution and clearing expenses as part of operating expenses incommon with US competitors, rather than netted against revenues.
compared to the previous ranking of #6; #4 in Europe versus the previous year of #6;and in non-Japan Asia #6 versus a #15 ranking one year ago.
During the past six months, Credit Suisse First Boston lead managed the demu-tualization and IPO of MetLife with USD 5.2 bn of proceeds; advised on five of the tenlargest M&A deals globally including France Telecom on its USD 46 bn merger withOrange; lead managed the largest industrial investment grade debt offering in the USfor International Paper with USD 3 bn of proceeds. Credit Suisse First Boston alsoacquired Schroder’s Japanese equity business, which included approximately 100people facilitating Credit Suisse First Boston’s re-entry into the Japanese cash equitiesbusiness. Credit Suisse First Boston had exited the Japanese cash market in 1994.
Results first half 2000: Revenues reflect a good balance across all areas of CreditSuisse First Boston’s global business with revenue split 48% to North America, 35% toEurope and 17% to the rest of the world. The outstanding performance of the equitydivision, with revenues over 70% greater than the first half of 1999, has more thancompensated for a decline in fixed income revenues of 42% versus the prior year peri-od. Fixed income experienced difficult market conditions and substantially lower propri-etary trading results. The latter as a result of the strategic decision taken by CreditSuisse First Boston to reduce risk post 1998 events.
Competitive pay practices in the industry combined with the continued investmentin the customer businesses in equities and investment banking have resulted in the firsthalf compensation costs rising 28% versus the previous comparable period. Headcountin investment banking is up 17% while equity headcount is up 28% versus June 1999;total firm headcount is up 10% to 15,863. Non-compensation related expenses rose8% versus 1999 reflecting growth in the businesses and IT expense. The firm con-tinues to focus on the optimization of capital. Credit Suisse First Boston in the first halfof the year utilized 12% less regulatory capital in its businesses versus a year ago,while maintaining a very healthy tier 1 ratio of 11.2%. The improvement in the tier 1ratio is due to the implementation of historical simulation for measuring market risk. The individual divisions performed as follows (percentages reflect dollar figures):
Investment Banking (IBD): Revenues increased 41%, despite, as was the case forthe prior three years, a continued decrease in net interest income and fees from thelending business. Equity capital markets revenue in 2000 is up 105% from the first halfof 1999. Meanwhile M&A revenue increased 44%. All other product areas within IBDwere relatively flat to slightly down versus their first half 1999 levels.Expenses before incentive compensation accruals were up 28%reflective of the headcount increase. IBD net profit continues to beunsatisfactory due to the high level of investment spending.
Equity: Revenues increased 74%. The customer “cash” businesses,particularly in the US and Western Europe, have performed extremelywell doubling the prior year’s record revenues. The derivatives andconvertibles area has also generated outstanding results, chiefly inthe index arbitrage and convertible securities product areas. A mix-ture of generally increasing market shares in both primary and sec-ondary areas underlie the greater 2000 results in all geographicareas. The technology sector has also been a key contributor to thesuccess of the Equity division, and for IBD.
Fixed Income (FID): Revenues have decreased 42% versus thecomparable prior year period. ROE was 10% excluding the results of
RATIOS/KEY PERF
1st half
Average allocated equityin CHF m
Allocated equity capital in CHF m (1 July/1 Jan
BIS tier 1 ratio* 30.6./3
Cost/income ratio – excl. amortisation of g
Return on average equi
Number of employees p30.6./31.12.
Pre-tax margin
Staff expenses/total ex
Staff expenses/total inc
* legal entity Credit Suisse F
ORMANCE INDICATORS
2000 1999
capital 10,748 9,910
uary) 10,786 10,494
1.12. 11.2% 9.9%
78.3% 73.2%oodwill 77.9% 72.7%
ty capital 23.1% 20.5%
er 15,863 15,185
18.5% 20.1%
penses 79.8% 77.0%
ome 59.8% 54.1%
irst Boston
19
the discontinued Real Estate Investment group. Importantly, Credit Suisse FirstBoston’s global debt capital markets underwriting position remained at #4 and marketshare has continued to increase. The drop in revenue, vis-à-vis the prior year, is areflection of the difficult fixed income market which is hampered by rising interest rates,widening credit spreads and declining high yield new issuance activity. The “customerflow business” in the three major businesses (Rates, Credit Products, EmergingMarkets) remained solid, though slightly below levels of the same period in 1999.Results from proprietary areas declined materially; this reflected the risk reductionstrategy pursued since the end of 1998 as well as poor results in option books and incomparison to the very good results of the first half of 1999.
Private Equity (PE): During the first half, the division made twelve investments. PE signed contracts of sale on two transactions, which will close in the third quarter.Funds under management approximate USD 3.7 bn.
20
30 June 2000in CHF m
2,159
26,501
215,748
170,203
2,322
64,465
25,601
8,203
141,584
6,611
936
2,693
1,094
6,200
41,696
37,749
520,212
318,328
28,479
285,763
82,512
9,317
64
92,423
35,506
33,553
11,215
43,606
37,126
2,379
13,413
520,212
318,328
Changein %
86
16
28
27
– 6
19
8
12
15
4
– 9
7
–3
6
–3
– 4
18
16
–5
28
23
–2
– 42
33
13
–3
8
– 9
– 9
1
8
18
16
31 Dec. 1999in CHF m
1,161
22,893
169,030
134,406
2,478
54,132
23,783
7,352
122,837
6,354
1,023
2,515
1,128
5,823
43,055
39,413
439,781
275,224
30,118
222,802
67,150
9,536
110
69,550
31,357
34,478
10,410
47,956
40,644
2,366
12,455
439,781
275,224
BALANCE SHEET
Cash
Money market paper
Due from banks
– of which securities lending andreverse repurchase agreements
Due from other business units
Due from customers
– of which securities lending andreverse repurchase agreements
Mortgages
Securities and precious metalstrading portfolio
Financial investments
Participations
Tangible fixed assets
Goodwill
Accrued income and prepaid expenses
Other assets
– of which replacement value of derivatives
TOTAL ASSETS
TOTAL ASSETS (in USD m)
Money market liabilities
Due to banks
– of which securities borrowing and repurchase agreements
Due to other business units
Due to customers, in savingsand investment deposits
Due to customers, other
– of which securities borrowing andrepurchase agreements
Bonds and mortgage-backed bonds
Accrued expenses and deferred income
Other liabilities
– of which replacement value of derivatives
Valuation adjustments and provisions
Capital
TOTAL LIABILITIES
TOTAL LIABILITIES (in USD m)
21
During the first half of 2000, Credit Suisse Asset Management generatedrevenues of CHF 733 m compared to CHF 462 m for the same period last year. Discretionary assets under management increased by 3% to CHF 334 bn and total assets under management, including advisory,amounted to CHF 443 bn (up 4%) at 30 June 2000. Cash earnings were CHF 161 m versus CHF 116 m for the first six months of 1999.
SERVICES FOR INSTITUTIONAL, PRIVATE CLIENT AND MUTUAL FUND INVESTORS WORLDWIDE
22
Discretionary assets under management totalled CHF 334 bn, an increase of CHF 10.0 bn or 3.1% since the beginning of the year; the combined effect of an increase of CHF 14.6 bn, or 4.5%, due to net new business and reduction ofCHF 4.5 bn, or 1.4%, due to market movements including foreign exchange. Thestrongest net new business growth was in equity assets, which was also the assetsegment most affected by market movements. Particularly strong net new businessgrowth was achieved in Switzerland and in Australia. Mutual funds have grown by10.7% since the start of the year to CHF 134 bn reflecting strong growth primarily in the Luxembourg, Swiss and Australian domiciled mutual funds.
Results first half 2000: Total revenue growth of 59% was largely the result of higherassets under management for the first half of 2000 compared to the first half of 1999. This growth in assets reflected both organic growth as well as the impact of theacquisition of Warburg Pincus Asset Management in July 1999. Normalising for theeffect of this acquisition, revenues increased by 30%.
1st half 1999in CHF m
328
118
16
462
184
135
319
143
5
1
0
138
0
5
22
111
0
111
116
Changein %
44
114
–50
59
67
67
67
40
–
–
–
22
–
–
77
16
–
16
39
1st half 2000in CHF m
472
253
8
733
308
225
533
200
32
22
0
168
0
0
39
129
0
129
161
INCOME STATEMENT
Management and advisory fees
Net mutual fund fees
Other revenues
TOTAL REVENUE
Personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
GROSS OPERATING PROFIT
Depreciation and write-offs on non-current assets
– of which amortisation of goodwill
Valuation adjustments, provisions and losses
PROFIT BEFORE EXTRAORDINARYITEMS AND TAXES
Extraordinary income
Extraordinary expenses
Taxes
NET PROFIT
– of which minority interests
NET PROFIT (after minority interests)
CASH EARNINGS
Total Operating expenses were CHF 533 m versus CHF 319 m, up 67%, reflect-ing increased expenses due to the Warburg Pincus Asset Management acquisition as well as Credit Suisse Asset Management’s continued investment in the business. Total Operating Expenses increased by CHF 98 m, or 31%, due to the inclusion ofWarburg Pincus Asset Management and associated relocation and merger expenditure.Credit Suisse Asset Management’s investment spending has been in part to support itsrapidly growing mutual funds business as well as its E-commerce initiatives. CreditSuisse Asset Management has begun to offer institutional clients in the USA a secureinternet site for direct transmission of information. During 2000 Credit Suisse AssetManagement enhanced its Luxembourg family of funds by adding an institutional shareclass and a registered share form thereby broadening the base of potential investors inthe funds.
Net profit increased by 16% to CHF 129 m. Cash earnings (net profit including depreciation and write-offs on non-current assets, and goodwill amortisation),increased by 39% to CHF 161 m compared to the same period of 1999.
RATIOS/KEY PERFORMANCE INDICATORS
1st half 2000 1999
Average allocated equity capital CHF m 1,066 241
Allocated equity capital CHF m (1 July/1 January) 1,092 1,054
Cost/income ratio 77.1% 70.1%– excl. amortisation of goodwill 74.1% 69.9%
After-tax profit/AUM 5.9 bp 6.9 bp
Cash earnings/average AUM 7.4 bp 7.3 bp
Number of employees 30.6./31.12. 2,067 2,000
Pre-tax margin 22.9% 28.8%
Staff expenses/total expenses 57.8% 57.7%
Staff expenses/total income 42.0% 39.8%
Total assets under management CHF bn 30.6./31.12. 443 425
Total discretionary fundsCHF bn 30.6/31.12 334 324
Total mutual fundsdistributed CHF bn 30.6./31.12. 134 121
Total advisory assetsCHF bn 30.6./31.12. 109 100
Growth in assets under management 4.4% 13.1%
Growth in discretionary assets under management 3.1% 17.9%
– of which net new business 4.5% 8.6%– of which performance –1.4% 9.3%
23
Changein %
48
–33
50
49
–17
9
57
14
88
51
49
3
3
4
14
22
–18
36
166
– 63
22
–10
41
–
29
33
16
28
31
36
108
–31
– 8
47
–30
–
68
36
74
35
Changein CHF m
3,728
–730
120
3,604
– 486
25
2,709
27
209
2,552
1,778
467
461
42
537
501
– 43
24
48
–24
4
– 40
246
–301
4,044
2,194
388
2,582
1,462
170
43
–272
–102
1,564
–19
120
437
988
43
945
1st half 1999in CHF m
7,767
2,216
240
7,406
2,817
286
4,741
194
238
4,983
3,618
13,525
14,065
1,019
3,819
2,260
238
67
29
38
18
398
595
126
13,804
6,723
2,410
9,133
4,671
472
40
878
1,350
3,321
63
14
647
2,723
58
2,665
1st half 2000in CHF m
11,495
1,486
360
11,010
2,331
311
7,450
221
447
7,535
5,396
13,992
14,526
1,061
4,356
2,761
195
91
77
14
22
358
841
–175
17,848
8,917
2,798
11,715
6,133
642
83
606
1,248
4,885
44
134
1,084
3,711
101
3,610
Interest and discount income
Interest and dividend income from trading portfolios
Interest and dividend income from financial investments
Interest expenses
NET INTEREST INCOME FROM BANKING BUSINESS
Commission income from lending activities
Commissions from securities and investment transactions
Commissions from other services
Commission expenses
NET COMMISSION AND SERVICE FEE INCOME
NET TRADING INCOME
Premiums earned, net
Claims incurred and actuarial provisions
Commission expenses, net
Investment income from insurance business
NET INCOME FROM INSURANCE BUSINESS
Income from the sale of financial investments
Income from investment activities
– of which from participations valued according to the equity method
– of which from other non-consolidated participations
Real estate income
Sundry ordinary income
Sundry ordinary expenses
OTHER ORDINARY INCOME/EXPENSES, NET
NET OPERATING INCOME
Personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
GROSS OPERATING PROFIT
Depreciation and write-offs of non-current assets
– of which amortisation of goodwill
Valuation adjustments, provisions and losses from banking business
DEPRECIATION, VALUATION ADJUSTMENTS, LOSSES
GROUP PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES
Extraordinary income
Extraordinary expenses
Taxes
GROUP PROFIT
Minority interests
NET PROFIT (AFTER MINORITY INTERESTS)
CONSOLIDATED INCOME STATEMENT
24
30 June 2000in CHF m
4,027
30,708
210,292
8,747
118,850
89,212
147,506
21,161
121,334
1,741
6,671
3,505
9,899
43,540
817,193
716
1,013
31 Dec. 1999in CHF m
3,141
28,994
164,901
6,457
104,931
86,553
126,746
18,828
117,222
1,823
6,828
2,990
9,023
44,309
722,746
1,792
928
Changein CHF m
886
1,714
45,391
2,290
13,919
2,659
20,760
2,333
4,112
– 82
–157
515
876
–769
94,447
–1,076
85
Changein %
28
6
28
35
13
3
16
12
4
– 4
–2
17
10
–2
13
– 60
9
ASSETS
Cash and other liquid assets
Money market claims
Due from banks
Receivables from the insurance business
Due from customers
Mortgages
Securities and precious metals trading portfolios
Financial investments from the banking business
Investments from the insurance business
Non-consolidated participations
Tangible fixed assets
Intangible assets
Accrued income and prepaid expenses
Other assets
TOTAL ASSETS
Total subordinated assets
Total due from non-consolidated participations
30 June 2000in CHF m
22,656
272,125
6,293
41,458
198,500
3,587
47,538
15,101
49,814
8,104
115,629
2,243
5,478
11,919
6,144
4,372
2,622
3,610
36,388
817,193
18,194
795
31 Dec. 1999in CHF m
22,120
198,324
6,268
44,007
182,249
3,885
47,905
14,916
52,577
8,566
107,561
2,131
5,444
11,696
6,977
1,152
1,747
5,221
34,368
722,746
18,194
749
Changein CHF m
536
73,801
25
–2,549
16,251
–298
–367
185
–2,763
– 462
8,068
112
34
223
– 833
3,220
875
–1,611
2,020
94,447
0
46
Change in %
2
37
0
– 6
9
– 8
–1
1
–5
–5
8
5
1
2
–12
280
50
–31
6
13
0
6
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities in respect of money market papers
Due to banks
Payables from the insurance business
Due to customers in savings and investment accounts
Due to customers, other
Medium-term notes (cash bonds)
Bonds and mortgage backed bonds
Accrued expenses and deferred income
Other liabilities
Valuation adjustments and provisions
Technical provisions for the insurance business
Reserves for general banking risks
Share capital
Capital reserve
Revaluation reserves from the insurance business
Retained earnings
Minority interests in shareholders’ equity
Net profit (after minority interests)
Total shareholders’ equity
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
Total subordinated liabilities
Total liabilities due to non-consolidated participations
CONSOLIDATED BALANCE SHEET
25
Changein %
3
–14
–18
3
–5
10
0
–25
14
Changein CHF m
189
–726
–569
116
– 990
11,837
0
–56
5,380
31 Dec.1999in CHF m
6,755
5,262
3,224
3,870
19,111
120,560
50
226
37,371
30 June 2000in CHF m
6,944
4,536
2,655
3,986
18,121
132,397
50
170
42,751
CONTINGENT LIABILITIES
Credit guarantees in form of avals, guarantees and indemnity liabilities
Bid bonds, delivery and performance bonds, letters of indemnity, other performance-related guarantees
Irrevocable commitments in respect of documentary credits
Other contingent liabilities
TOTAL CONTINGENT LIABILITIES
IRREVOCABLE COMMITMENTS
LIABILITIES FOR CALLS ON SHARES AND OTHER EQUITY
CONFIRMED CREDITS
FIDUCIARY TRANSACTIONS
31 Dec. 1999Negative gross
replacementvalue
in CHF bn
60.0
28.0
1.9
24.1
0.7
114.7
31 Dec. 1999Positive gross
replacementvalue
in CHF bn
62.2
25.2
2.1
22.7
0.8
113.0
31 Dec. 1999Notionalamount
in CHF bn
5,782.1
1,068.7
28.8
439.9
25.3
7,344.8
30 June 2000Negative gross
replacementvalue
in CHF bn
55.5
24.0
1.8
19.9
1.6
102.8
30 June 2000Positive gross
replacement value
in CHF bn
55.6
23.5
1.5
21.5
1.7
103.8
30 June 2000Notionalamount
in CHF bn
5,834.0
1,214.9
40.9
396.4
20.9
7,507.1
DERIVATIVE INSTRUMENTS
Interest rate products
Foreign exchange products
Precious metals products
Equity/index-related products
Other products
TOTAL DERIVATIVE INSTRUMENTS
CONSOLIDATED OFF-BALANCE SHEET BUSINESS
SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
USD TRANSLATION RATES 1st half 2000 1st half 1999
Income statement 1.63 1.45
Balance sheet 1.6342 1.55
30 June 2000in CHF m
87,932
55,187
32,745
331
57,533
4,429
2,041
147,506
45,245
31 Dec. 1999in CHF m
79,636
49,458
30,178
151
45,152
3,392
1,958
126,746
43,297
Changein CHF m
8,296
5,729
2,567
180
12,381
1,037
83
20,760
1,948
Change in %
10
12
9
119
27
31
4
16
4
SECURITIES AND PRECIOUS METALS TRADING PORTFOLIOS
Interest bearing securities and rights
listed on stock exchange
unlisted
– of which own bonds and medium-term notes
Equities
– of which own shares
Precious metals
TOTAL SECURITIES AND PRECIOUS METALS TRADING PORTFOLIOS
– of which securities rediscountable or pledgeable at central banks
26
SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1st half 1999in CHF m
2,817
4,983
3,618
2,260
126
13,804
6,723
2,410
9,133
4,671
472
40
878
1,350
3,321
63
14
647
2,723
58
2,665
1st half 2000in CHF m
2,331
7,535
5,396
2,761
–175
17,848
8,917
2,798
11,715
6,133
642
83
606
1,248
4,885
44
134
1,084
3,711
101
3,610
1st half 1999in CHF m
0
0
0
2,260
–73
2,187
888
560
1,448
739
48
0
0
48
691
0
0
138
553
46
507
1st half 2000in CHF m
0
0
0
2,761
–219
2,542
960
661
1,621
921
67
4
0
67
854
0
0
183
671
52
619
1st half 1999in CHF m
2,817
4,983
3,618
0
199
11,617
5,835
1,850
7,685
3,932
424
40
878
1,302
2,630
63
14
509
2,170
12
2,158
1st half 2000in CHF m
2,331
7,535
5,396
0
44
15,306
7,957
2,137
10,094
5,212
575
79
606
1,181
4,031
44
134
901
3,040
49
2,991
Banking business Insurance business TotalSPLIT OF INCOME STATEMENT INTO BANKINGAND INSURANCE BUSINESS
Net interest income
Net commission and service income
Net trading income
Net income from insurance business
Other ordinary income/expenses net
NET OPERATING INCOME
Personnel expenses
Other operating expenses
Total operating expenses
GROSS OPERATING PROFIT
Depreciation and write-offs on non-current assets
– of which amortisation of goodwill
Valuation adjustments, provisions and losses
Total depreciation, valuation adjustments
GROUP PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES
Extraordinary income
Extraordinary expenses
Taxes
GROUP PROFIT
Minority interests
NET PROFIT (AFTER MINORITY INTERESTS)
STATEMENT OF SHAREHOLDERS’ EQUITY
SHAREHOLDERS’ EQUITY AT 1 JANUARY
Creation/release of reserves for general banking risks, net
Dividends paid
Capital increases, par value and capital surplus
Capital increases, minority interests
Acquisition of minority interests
Changes in scope of consolidation affecting minority interests
Foreign exchange differences
Change in revaluation reserves from the insurance business, net
Net profit (after minority interests)
Net profit minority interests
SHAREHOLDERS’ EQUITY AT 30 JUNE
Changein %
22
–
39
–70
366
– 94
–100
–102
22
35
74
20
Changein CHF m
6,206
156
–558
–526
725
254
–22
–1,011
–168
945
43
6,044
2000in CHF m
34,368
112
–1,977
223
923
–17
0
–22
– 933
3,610
101
36,388
1999in CHF m
28,162
– 44
–1,419
749
198
–271
22
989
–765
2,665
58
30,344
27
SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INVESTMENTS FROM THE INSURANCE BUSINESS
Non-life
Life
REAL ESTATE AT MARKET VALUE, TOTAL
Non-life
Life
MORTGAGES AT REDEMPTION VALUE, TOTAL
Non-life
Life
BONDS AND LOANS AT AMORTISED COSTS, TOTAL
Non-life
Life
SHARES AT MARKET VALUE, TOTAL
Non-life
Life
NON-CONSOLIDATED PARTICIPATIONS AT COST, TOTAL
Non-life
Life
SHORT-TERM INVESTMENTS AT PAR VALUE, TOTAL
Real estate at market
Bonds and loans at amortised cost
Shares at market value
Short-term investments at par value
INVESTMENTS WHERE THE INVESTMENT RISK IS BORNE BY THE POLICYHOLDERS, TOTAL
Less mortgages and non-consolidated participations not included in investments from the insurance business
TOTAL INVESTMENTS FROM THE INSURANCE BUSINESS
ADDITIONAL DATA ON INVESTMENTS
Non-life
Life
REAL ESTATE AT COST VALUE, TOTAL
Non-life
Life
SHARES AT COST VALUE, TOTAL
Non-life
Life
BONDS AND LOANS AT MARKET VALUE, TOTAL
Changein %
0
1
1
1
0
0
6
3
4
–1
–2
–2
4
0
3
22
91
42
7
28
22
14
21
0
4
1
1
1
6
6
6
6
2
3
Changein CHF m
7
125
132
14
–18
– 4
1,024
1,305
2,329
–76
–399
– 475
15
0
15
270
436
706
7
218
1,065
130
1,420
11
4,112
20
78
98
269
885
1,154
977
856
1,833
30 June 2000in CHF m
4,183
8,964
13,147
1,350
7,436
8,786
17,616
49,782
67,398
7,061
23,222
30,283
362
87
449
1,471
913
2,384
111
1,006
5,977
1,028
8,122
9,235
121,334
3,600
8,329
11,929
5,143
16,646
21,789
17,573
49,592
67,165
31 Dec. 1999in CHF m
4,176
8,839
13,015
1,336
7,454
8,790
16,592
48,477
65,069
7,137
23,621
30,758
347
87
434
1,201
477
1,678
104
788
4,912
898
6,702
9,224
117,222
3,580
8,251
11,831
4,874
15,761
20,635
16,596
48,736
65,332
28
SELECTED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
–
–
–
–
–
in US
ASSET QUALITYCREDIT EXPOSURE & PROVISION DEVELOPMENT
Non-performing loans (NPLs)1)
Capital provisions against NPLs2)
Coverage ratio of NPLs
30.06.2000
31.12.1999
NPLs as percentage of credit exposure
30.06.2000
31.12.1999
1) Includes loans and loan equivalents2) Excludes total interest of CHF 2,003 m (fully provided)
Reported Adjusted
TRADING BOOK RISK – 99% 1 DAY VAR
Period end
Average
Maximum
Minimum
Full year 1999in USD m
113.4
131.8
198.8
89.7
Half year 2000 in USD m
84.3
119.5
151.5
84.3
Half year 2000in USD m
84.3
141.6
201.9
84.3
Full year 1999in USD m
151.2
175.7
265.1
119.6
300
250
200
150
100
–50
0
50
D m
Daily trading income
1st quarter 1999
One-day VaR (99%)
2nd quarter 1999 3rd quarter 1999 4th quarter 1999
VAR MODEL BACKTESTING RESULTS
1st quarter 2000 2nd quarter 2000
No backtesting exceptions throughout all of 1999 and first half 2000All figures shown on reported basis; VaR impact of move to new historical simulation VaR model can be seen in mid April 2000
– At 30 June 2000 trading book risk was down 44% compared to 31 December1999. Risks were down 68% compared to the 1999 high.
– The decrease in the reported risk arose from true risk reductions and methodologychanges.
– In the second quarter of 2000 CSFB’s new historical simulation value-at-risk modelwas approved by the Swiss Federal Banking Commission; this reduced reported riskby approximately 25%.
– When the prior figures are adjusted for the new methodology, at 30 June 2000 thetrading book “real” risk is down 26% compared to 31 December 1999 and down58% compared to the 1999 high.
CreditSuisseGroup
in CHF m
10,505
6,449
61%
63%
2.8%
3.4%
CreditSuisse
FirstBoston
in CHF m
1,012
778
77%
84%
0.5%
0.9%
CreditSuisse
FinancialServices
in CHF m
9,363
5,581
60%
60%
7.4%
8.7%
CreditSuissePrivate
Bankingin CHF m
130
90
69%
75%
0.3%
0.3%
29
CREDIT SUISSE GROUP
Paradeplatz 8 P.O. Box 1 8070 Zurich SwitzerlandTel. + 41 1 212 16 16 Fax + 41 1 333 25 87 Internet www.credit-suisse.com