Lehman Brothers Financial Services Conference New York September 9, 2008 David Mathers, Head of Finance, Investment Banking
May 26, 2015
Lehman Brothers Financial Services Conference
New YorkSeptember 9, 2008
David Mathers, Head of Finance, Investment Banking
Lehman Brothers ConferenceSlide 2
Cautionary statement
Cautionary statement regarding forward-looking and non-GAAP information
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, 2007 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.
This presentation contains non-GAAP financial information. Information needed to reconcile such non-GAAP financial information to the most directly comparable measures under GAAP can be found in Credit Suisse Group's second quarter report 2008.
Lehman Brothers ConferenceSlide 3
Financial Performance
Risk Reduction
Financial Markets
Key Competitive Advantages
Lehman Brothers ConferenceSlide 4
Private Banking continues to deliver good results
Solid results across most Investment Banking and Asset Management businesses
Credit Suisse has significant earnings power
Benefit from a diversified and integrated global business
Well-positioned to create long-term value and seize opportunities that arise from market dislocation
Lehman Brothers ConferenceSlide 5
All divisions profitable
Asset ManagementPre-tax income in CHF m
Investment BankingPrivate Banking
2,502
(3,460)
281 299
(468)
1671,381 1,324 1,220
2Q07 1Q08 2Q08
! Good results evidencing the strength of business
! Strong asset gathering and hiring trends across all regions
! Continue to implement international growth strategy
! 2Q08 operating earningsof CHF 650m 1)
! Most areas with good results! Immaterial net valuation
reductions of CHF 22m ! Significant progress in
reducing risk exposure
! Stable fee-based gross margin
! Strong inflows in alternative investments
! Reduced 'liftout' assets
1) Excluding a fair value adjustment on own debt of CHF (503)m and a net litigation credit of CHF 134m
Lehman Brothers ConferenceSlide 6
Continued momentum in Wealth Management
Good net asset inflows Gross margin on AuM at high level
1513
1012
1514
Net asset inflowsof CHF 50.2bn with
6.4% net growth rate
1Q08
86
30
Recurring
Transaction-based
CHF bn basis points
2Q081Q07 2Q07 3Q07 4Q07
117117 116112113118
1Q08 2Q081Q07 2Q07 3Q07 4Q07
Lehman Brothers ConferenceSlide 7
Fixed income trading with continued difficult market conditions; Strong equity trading resultFixed income trading net revenuesCHF m
6M07 6M08 2Q07 1Q08 2Q08
6,0543,282
(1,576)
320
(1,256)
! Increased revenues in RMBS, Europe high grade and life finance
! 2Q08 revenues benefit from substantial reductions in writedowns
! Reported revenues of CHF 320 m include writedowns of CHF 391m 1) and a fair value reduction on own debt of CHF 453m
1) Does not include offsetting gains of CHF 369m reported in debt underwriting and other revenues
6M07 6M08 2Q07 1Q08 2Q08
4,646
2,475
1,379
2,255
3,634
(9)%
(22)%
+64%
Equity trading net revenues
! Prime services generated near-record revenues with growing client balances and new mandates
! Near-record revenues in equity derivatives, driven by strength in all regions and products
! Strong result in the global cash business, driven by increased client flows and growth in AES
Lehman Brothers ConferenceSlide 8
Underwriting fees still adversely affected by market conditions
Underwriting feesCHF m
6M07 6M08 2Q07 1Q08 2Q08
1,438
713
136 216352
Advisory and other feesCHF m
6M07 6M08 2Q07 1Q08 2Q08
1,143632
396 364
760
724417 413 172 245
Debt underwriting
Equity underwriting
! Equity underwriting impacted by lower levels of industry-wide equity issuance, particularly in areas of historical strength for CS, and lower market share
! Credit environment has continued to impact high-yield and leveraged lending issuance
! High Grade performed well
! Solid advisory results as increase in strategic M&A partly compensated for decline in sponsor activity
! Global M&A volume down from strong 2Q07 ! #5 in announced M&A for 1H08 and #4 in
the Americas
Lehman Brothers ConferenceSlide 9
Financial Performance
Risk Reduction
Financial Markets
Key Competitive Advantages
Lehman Brothers ConferenceSlide 10
Significant progress in reducing risk positions
Leveraged finance Commercial mortgages
Residential mortgages 1) CDO trading 2)
3Q07 4Q07 1Q08 2Q08
59.2
35.1
UnfundedFunded
-76%Origination-based
(exposures shown gross)
Trading-based
(exposures shown net)
Net writedowns:2007 (0.8)1Q08 (1.7)2Q08 (0.1)
Exposures and writedowns in CHF bn
20.8
3Q07 4Q07 1Q08 2Q08
35.925.9
-58%
19.3
3Q07 4Q07 1Q08 2Q08
16.2
8.7
Other
Subprime
-67%
5.5
4Q07 1Q08 2Q08
4.6
1.9-76%
1.1
Net writedowns:2007 (0.6)1Q08 (0.8)2Q08 (0.5)
Net writedowns:2007 (0.5)1Q08 (0.1)2Q08 0.0
Net writedowns:2007 (1.3)1Q08 (2.7)2Q08 0.5
14.4 15.0
5.4
1) All non-agency business, including higher quality segments; global total; and year-end positions related to US subprime; total IB subprime is CHF 1.9bn (across RMBS & CDOs)
2) Exposures computed per 0% IDR methodology
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Financial Performance
Risk Reduction
Financial Markets
Key Competitive Advantages
Lehman Brothers ConferenceSlide 12
60
65
70
75
80
85
90
95
100
105
110
Jan-07 May-07 Aug-07 Dec-07 Apr-08 Aug-08
S&P 500 FTSE 100 MSCI World
0
5,000
10,000
15,000
20,000
25,000
30,000
Equity market performance
Market conditions continue to be difficult
Leveraged Finance spread trends
CMBS spread trends
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
Jan-07 May-07 Sep-07 Dec-07 Apr-08 Aug-08
AAA AA BBB
1,952
814
176
ABX priceEquity trading volume (NYSE and NASDAQ)
Trading volumeIndexed price change
-
100
200
300
400
500
600
700
800
900
Jan-07 May-07 Aug-07 Dec-07 Apr-08 Aug-08
CDX.NA.HY
iTraxx Europe Crossover
714
549
0
10
20
30
40
50
60
70
80
90
100
110
Jan-07 May-07 Aug-07 Dec-07 Apr-08 Aug-08
ABX HE AAA 06-02ABX HE BBB 06-02
66
5
Notes:1) All data through August 29, 2008
Lehman Brothers ConferenceSlide 13
Global announced M&A volumes
M&A less severely affected than underwriting
2005 2006 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08to
date
1) 3Q08 to date includes all of July and August 2) Source: Thomson / SDC3) Source: Standard & Poor's4) Leveraged loan volume as of August 21, 2008, High-yield volume includes all of July and August
Global CMBS origination volumesCommercial Mortgage Alert / Thomson
2005 2006 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08to
date
Thomson / SDC
1,4721,190
858730 836
Global ECM origination volumesDealogic / Equidesk
292
168
294
124
265
(USD bn)(USD bn)
(USD bn)
191149
1,7811,523
2005 2006 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08to
date
Leveraged finance origination volumesHigh-yield new issuance 2)
Leveraged loan volume 3)187
75
85
10
78
33466
4925
(USD bn)
47
120
75
30
Quarterly avg Quarterly avg
Quarterly avg2005 2006 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
todate
Quarterly avg
5975
110
74
384
4)
81
60649
10 11
1)
0.5
1) 1)
Lehman Brothers ConferenceSlide 14
Financial Performance
Risk Reduction
Financial Markets
Key Competitive Advantages
Lehman Brothers ConferenceSlide 15
Credit Suisse�s competitive advantages
Diversified product offeringContinue build-out in key business areas, such as Derivatives and Prime Services
Emphasis on client-led businessesClient account management
�Integrated Bank� collaboration
Geographically diverseStrong presence across developed and
emerging markets
History of innovationStrong track record: AES, Life Finance
Continue to reinvent our business
Key competitive strengths of Credit Suisse Examples / Actions / Track Record
1/2
Lehman Brothers ConferenceSlide 16
Credit Suisse competitive advantages
Ability to adapt to weaker macro environment
Continued focus on efficiency,expense management
Diversified funding base, price credit correctly
Stable funding base; conservative liquidity management
Investment in people
Rebalance headcount between businesses
Momentum toward market-leading status
Key competitive strengths of Credit Suisse Examples / Actions / Track Record
2/2
Lehman Brothers ConferenceSlide 17
Clients and collaboration
ClientAccount
Management
! Bank-wide Key Client Coverage program continues to mature on a global basis and actively involves the most senior leaders of the Bank
! Roughly 400 individual key client plans in place to increase wallet share, coordinate opportunities across the bank and increase senior management focus
Collaboration
! Joint venture with Private Bank organized to maximize cross divisional leverage and delivery of the Integrated Bank
! Investment Bank is significant contributor to Integrated Bank revenues
�Approx. 48% of total 2007 Integrated Bank revenues of CHF 5.9 billion came from Investment Bank collaboration with other divisions
�Majority of collaboration revenue from equity cash, equity derivatives and global rates/FX
Client-led business
Lehman Brothers ConferenceSlide 18
Product innovation
! Revenues up over 50% vs. H107
! Recently registered first 1 billion share day in US AES (July 17)
! CrossFinder: #2 dark pool in US (more than160 million average daily shares crossed)
AES Quarterly Revenue Growth Life Finance Quarterly Revenue Growth
! Dominant market position in trading and distributing both longevity and mortality risk
! Trading in both physical (life settlements, premium finance) and synthetic (swaps, structured notes) forms
! Expanding internationally (Europe in 2008, Asia in 2009)
Innovation
47%
2Q07 1Q08 2Q084Q073Q07
201%
2Q07 1Q08 2Q084Q073Q07
Lehman Brothers ConferenceSlide 19
APAC = Asia / Pacific, EMEA = Europe, Middle East and Africa
Continued geographic diversification
Expansion of global footprint
In 2007 and 1H08, we strengthened our presence in the following countries:
Australia China Kazakhstan UkraineAustria India Panama United States Brazil Israel Turkey Pakistan
New York
Santiago
Bogotá
Buenos Aires
Monterrey
San FranciscoLos Angeles
Irvine Atlanta
LondonParis
Madrid
Zurich
Hong Kong
Pune
Singapore
Wroclaw
Montreal
Toronto
Milan
Russian Federation
Melbourne
SydneyPerth
Ukraine
Bangkok
Beijing
JakartaKuala Lumpur
DallasHouston
Mexico City
BostonChicago
MiamiNassau
MontevideoSão Paulo
Rio de Janeiro
Cayman Islands
Kazakhstan
U.A.E.
QatarNigeria
South Africa
Czech Republic
PhilippinesMalaysia
Tokyo
Geographically diverse
* Key IB offices in bold
+23%
+15%-19%
+16%
Credit Suisse 2007 net revenues by region
in CHF bn and up/down in % vs. 2006
4.0
10.410.4
11.5
Americas EMEA
APACSwitzerland
Lehman Brothers ConferenceSlide 20
Diversification into less correlated businesses
Prime Services Quarterly Revenue Growth
! Near-record revenue quarter for equity derivatives
! Record corporate and emerging markets activity
! Strong activity in US and EMEA flow derivatives
! Ongoing focus on infrastructure and efficiency
Diversified product offering
Equity Derivatives Quarterly Revenue Growth
! Near-record quarter with increased client balances and new client mandates
! CS viewed as a strong counterparty and a �safe haven� given strength and stability of funding and liquidity
! Well-positioned for �flight to quality,� with steady transfers of business from competitors boosting balances by over 15% in 1H08
68%
2Q07 1Q08 2Q084Q073Q07
7%
2Q07 1Q08 2Q084Q073Q07
Lehman Brothers ConferenceSlide 21
Disciplined cost management in Investment Banking
1) Excluding net litigation credit of CHF 134m in 2Q08
Macro environment
Other operating expenses (in CHF m)
! Other operating expenses1) decreased CHF 108m, or 5%, from 6M07, CHF 16m from 1Q08 and CHF 64m from 2Q07
! This reflects higher average headcount compared to 6M07, offset by cost reduction efforts, a stronger Swiss franc and, in 2Q08, lower commission spend
1)
1,097
2,178
1,0811)
6M07 6M08 3Q07 1Q08 2Q084Q07
1,232 1,300(11)%
2Q07
1,145
2,286
2,044
947
6M07 6M08 3Q07 1Q08 2Q084Q072Q07
172
149
175
184
145
153
168
G&A per head1) (in CHF 000�s)
(13)%
Lehman Brothers ConferenceSlide 22
Proactive reorientation of resources to capture growth
Headcount Change � 2Q 2007 to 2Q 2008
Investment in people
-50%
+50%
+100%
0%
Life Finance Commodities EQ Derivs. Prime Svcs. Lev Fin CMBS CDOs RMBS
Lehman Brothers ConferenceSlide 23
Conservative funding structure
Asset and liabilities by category, end of 2Q08
Assets Capital and liabilities
! Strong deposit base
! Long-term debt available to fund short-term trading book
! Benefited from 'flight to quality' during crisis, adding medium-term funding
! Integrated bank enables efficient access to retail funding and liquid markets globally
! All internal funding priced at market levels to ensure correct disciplines
CHF bn
Diversified funding base
1,230 1,230
Lehman Brothers ConferenceSlide 24
Well diversified unsecured funding mix
Unsecured funding by type / product
Retail &private banking
deposits 1)
50%Long-term
debt 2)
29%
Institutional deposits 3)
21%
! Well diversified funding distribution by client type and product
! Client deposits increased 15%, or CHF 37 bn, during 2007
! Centralized funding function covering both CDs and long-term borrowing ensures optimum efficiency in global market access
Total:CHF 541bn
1) Time, demand and saving deposits2) Structured notes, long-term bonds and subordinated debt3) Bank deposits, CDs, corporates
Diversified funding base
Lehman Brothers ConferenceSlide 25
Expense discipline
Recent market conditions validate Credit Suisse strategy
Benefits of integrated bank with a client focus
Importance of strong capital and liquidity position
Well-positioned to create long-term value and seize opportunities that arise from market dislocation
Innovative and diversified product offering
Geographic diversification
Efficient headcount management
Lehman Brothers ConferenceSlide 26