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Press Release
Credit Suisse Group reports net income of CHF 1.3 billion for the third quarter of 2007
Income from continuing operations of CHF 1.3 billion, down 11% from the third quarter of 2006.
26% increase in pre-tax income from Private Banking partly offset declines in Investment Banking and Asset Management.
Record net income of CHF 7.2 billion for the first nine months of 2007.
Zurich, November 1, 2007 Credit Suisse Group today reported income from continuing operations and net income of CHF 1,302 million for the third quarter of 2007, reflecting lower results in Investment Banking and Asset Management. Private Banking remained strong, with significant increases in both income from continuing operations before taxes and net revenues compared to the third quarter of last year.
Brady W. Dougan, Chief Executive Officer of Credit Suisse Group, said: "The extreme market conditions that characterized the third quarter affected many of our businesses. However, our global diversification and balanced business mix helped us mitigate the impact on our overall performance, maintain solid profitability and deliver a record result for the first nine months of the year."
Commenting on the operating environment, Mr. Dougan continued: "We are seeing encouraging signs that activity in the credit markets is increasing, although it is too early to predict when all of the affected markets will return to more normal levels. The events of the third quarter have reaffirmed the importance of our integrated global model in driving revenues and enhancing efficiency throughout the entire market cycle."
Segment Results
Investment Banking
Investment Banking reported income from continuing operations before taxes of CHF 6 million in the third quarter of 2007, down from CHF 758 million in the same period of 2006. Its performance was significantly affected by the dislocation in the structured products and credit markets, which led to a sharp downturn in results in fixed income. The structured products businesses, including residential and commercial mortgages and collateralized debt obligations (CDOs), recorded a valuation reduction of CHF 1.1 billion, net of fees and hedges. Net revenues also reflected a valuation reduction of CHF 1.1 billion on leveraged loan commitments, net of fees and hedges. Lower fixed income trading results were partly offset by strong performances in interest products, life insurance finance and emerging markets trading. Lower equity trading results reflected a weak performance in proprietary trading, including a loss of approximately CHF 300 million in quantitative trading strategies, partly offset by strong results in the cash equities, equity derivatives and prime services businesses. Fixed income and equity trading also benefited from fair value gains of CHF 622 million due to the widening credit spreads on Credit Suisse debt. Total underwriting and advisory results were down, reflecting lower revenues in debt underwriting, partly offset by higher revenues in equity underwriting and advisory compared to the third quarter of 2006.
Total operating expenses fell by 40% in the third quarter of 2007, as compensation expenses declined in line with lower revenues. The compensation/revenue ratio was 40.0%, compared to 53.5% in the third quarter of 2006. For the first nine months of 2007, the compensation/revenue ratio was 50.0%. For the first nine months of 2007, the pre-tax income margin was 27.7%, compared to 25.1% for the same period of 2006.
Private Banking
Private Banking, which comprises the Wealth Management and Corporate & Retail Banking businesses, reported income from continuing operations before taxes of CHF 1,289 million for the third quarter of 2007, up 26% compared to the same period of 2006.
The Wealth Management business reported income from continuing operations before taxes of CHF 900 million for the third quarter of 2007, up 32% compared to the third quarter of 2006. Net revenues rose 27%, driven by strong improvements in recurring revenues, reflecting higher net interest income and higher commissions and fees - particularly from managed assets - as well as in transaction-based revenues, mainly reflecting higher brokerage and product issuing fees. The 24% increase in total operating expenses during the quarter was primarily attributable to ongoing strategic investments in the global presence of Wealth Management and higher performance-related compensation. The pre-tax income margin was 38.4% in the third quarter of 2007, compared to 37.1% in the third quarter of 2006. For the first nine months of 2007, the pre-tax income margin was 40.7%, compared to 39.7% for the same period of last year.
The Corporate & Retail Banking business reported a 15% rise in income from continuing operations before taxes to CHF 389 million in the third quarter of 2007 compared to the same period of 2006. Net revenues rose 17%. The increase in total operating expenses of 17% compared to the third quarter of 2006 reflected an increase in compensation and benefits as well as higher total other operating expenses. Provisions for credit losses reflected net releases of CHF 16 million. The pre-tax income margin was 39.7% in the third quarter of 2007, compared to 40.3% in the third quarter of 2006. For the first nine months of 2007, the pre-tax income margin was 41.5%, compared to 39.5% for the same period of last year.
Asset Management
Asset Management reported income from continuing operations before taxes of CHF 45 million for the third quarter of 2007. This decrease of CHF 113 million compared to the third quarter of 2006 was mainly attributable to fair value reductions on securities and lower private equity and other investment-related gains. Net revenues declined by 14% compared to the third quarter of 2006. Total operating expenses increased by 3%. The pre-tax income margin was 7.6% in the third quarter of 2007, compared to 22.8% in the third quarter of 2006. For the first nine months of 2007, the pre-tax income margin was 27.0%, compared to 19.7% for the same period of last year. As of September 30, 2007, assets under management totaled CHF 714.1 billion, a decrease of 4.7% from June 30, 2007.
Net New Assets
The Wealth Management business generated net new assets of CHF 9.7 billion in the third quarter of 2007. The Asset Management business reported an outflow of CHF 20.9 billion, reflecting outflows of CHF 27.3 billion in money market assets and CHF 0.8 billion in equities, partly offset by inflows of CHF 3.5 billion in balanced assets, CHF 2.0 billion in alternative investments and CHF 1.7 billion in fixed income assets. Credit Suisse's total assets under management were CHF 1,571.3 billion as of September 30, 2007, down 3.5% from June 30, 2007.
Results for the first nine months of 2007
Credit Suisse Group posted record net income of CHF 7,220 million for the first nine months of 2007. Income from continuing operations increased by 27% compared to the same period of 2006. Diluted earnings per share from continuing operations rose to CHF 6.43 in the first nine months of 2007, compared to CHF 4.91 in the first nine months of 2006, and the return on equity improved to 22.5% from 21.7%. Both Investment Banking and Private Banking generated record pre-tax income for the first nine months of 2007.
Enquiries:
- Media Relations Credit Suisse, Tel. +41 844 33 88 44, media.relations@credit-suisse.com
- Investor Relations Credit Suisse, Tel. +41 44 333 71 49, investor.relations@credit-suisse.com
- Credit Suisse
- As one of the world's leading banks, Credit Suisse provides its clients with investment banking, private banking and asset management services worldwide. Credit Suisse offers advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as retail clients in Switzerland. Credit Suisse is active in over 50 countries and employs approximately 47,000 people. Credit Suisse's parent company, Credit Suisse Group, is a leading global financial services company headquartered in Zurich. Credit Suisse Group's registered shares (CSGN) are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
Cautionary Statement Regarding Forward-Looking and Non-GAAP Information
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements. Such forward-looking statements may include, without limitation, statements relating to the following:
- Our plans, objectives or goals;
- Our future economic performance or prospects;
- The potential effect on our future performance of certain contingencies; and
- Assumptions underlying any such statements.
Words such as "believes," "anticipates," "expects," "intends" and "plans" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We do not intend to update these forward-looking statements except as may be required by applicable securities laws.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include:
- The ability to maintain sufficient liquidity and access capital markets;
- Market and interest rate fluctuations;
- The strength of the global economy in general and the strength of the economies of the countries in which we conduct our operations in particular;
- The ability of counterparties to meet their obligations to us;
- The effects of, and changes in, fiscal, monetary, trade and tax policies, and currency fluctuations;
- Political and social developments, including war, civil unrest or terrorist activity;
- The possibility of foreign exchange controls, expropriation, nationalization or confiscation of assets in countries in which we conduct our operations;
- Operational factors such as systems failure, human error, or the failure to implement procedures properly;
- Actions taken by regulators with respect to our business and practices in one or more of the countries in which we conduct our operations;
- The effects of changes in laws, regulations or accounting policies or practices;
- Competition in geographic and business areas in which we conduct our operations;
- The ability to retain and recruit qualified personnel;
- The ability to maintain our reputation and promote our brand;
- The ability to increase market share and control expenses;
- Technological changes;
- The timely development and acceptance of our new products and services and the perceived overall value of these products and services by users;
- Acquisitions, including the ability to integrate acquired businesses successfully, and divestitures, including the ability to sell non- core assets;
- The adverse resolution of litigation and other contingencies; and
- Our success at managing the risks involved in the foregoing.
We caution you that the foregoing list of important factors is not exclusive. When evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, as well as the information set forth in our Form 20-F Item 3 - Key Information - Risk factors.
This press release 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 Financial Review 3Q07 and Credit Suisse Group's Financial Statements 3Q07.
