Morgan Stanley Financial Services Conference economic and ... › media › assets › ... · transition hybrid securities Deductions (e.g. DTA, pension) expected to be minimal over

Morgan Stanley Financial Services Conference

“Managing for value in an uncertain economic and regulatory environment”

David Mathers, Chief Operating Officer, Investment Bank

London

March 23, 2010

Slide 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, 2008 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 fourth quarter report

2009.

Slide 3

Phase One:

3Q07-4Q08

Aggressive risk reduction

Loss avoidance / minimization

Headcount reduction and continued expense discipline

Significant infrastructure investment

Phase Two:

2009

Driving the franchise forward:

Phase Three:

2010

Successful execution of client-focused, capital-

efficient strategy

Credit Suisse was an early mover in evolving investment banking strategy

Key client businesses

Repositioned businesses

Exit businesses

Significant market share gains across products and regions

Extend strong market share gains in equities

Grow client flows and expand distribution coverage in fixed income

Capitalize on high growth potential in targeted emerging markets

IBD growth and client strategy

Slide 4


Dislocated Asset Balances (period end in CHF bn)

3Q07 1Q09 2Q09 4Q09

4

36

59

5

(95)%

99

Leveraged finance

Subprime residential mortgages and CDO 1)

Commercial mortgages

1) Excluding US prime, US Alt-A and European/Asian residential mortgage exposures of CHF 5.5 bn

Investment Banking RWAs (period end in USD bn)

212

139Exit businesses26

113

140

17

123

154

3Q09

137

18

119

(34)%

3Q07 1Q09 2Q09 4Q093Q09

Slide 5

Phase One:

3Q07-4Q08

Phase Two:

2009

Phase Three:

2010








efficient strategy



Exit businesses






Slide 6

Fixed income sales & trading and underwriting revenues–

Key Client Businesses 1)

Growth in key client businesses

CHF bn

2007

Equity sales & trading and underwriting revenues –

Key Client Businesses 1)

1) Excludes impact from movements in spreads on own debt.

2008 2009

7.6

6.1

7.8

10.2

2.8

7.7

2007 2008 2009

Strong 2009 results and market share gains in cash equities and prime services

Improved results in flow and corporate derivatives

Market share gains not fully reflected in 2009 revenues given both market levels and subdued client activity; primary issuance was also relatively subdued during 2009

Strong 2009 results in global rates and FX, US RMBS and investment grade credit

Significant opportunity to increase share in flow products such as FX and global rates

Such market share gains should help to offset less favorable conditions in some business areas, such as rates, in 2010

Slide 7

Fixed income sales & trading and underwriting revenues –

Repositioned Businesses

Improved results driven by leveraged finance, emerging markets and corporate lending

Repositioned businesses developed into client-based franchises with lower capital usage

Revenues increased by 20% from 2007, despite a 46% reduction in RWAs

Turnaround of repositioned businesses

CHF bn

2007

Equity sales & trading and underwriting revenues –

Repositioned Businesses

Higher revenues in convertibles and quantitative and liquid strategies

Revenues reflected reduction in risk positions and refocused operating models

Revenues increased by 9% from 2007, despite a 75% reduction in RWAs

CHF bn

2008 2009

1.2

(1.6)

4.23.5

(2.9)

1.1

2007 2008 2009

Slide 8

Phase One:

3Q07-4Q08

Phase Two:

2009

Phase Three:

2010








efficient strategy



Exit businesses







Slide 9

Positive medium-term outlook for market share and/or market environment in many key businesses …Relative revenue contribution from major business lines

Relative revenue contribution in 2009

2009 market environment

Cre

dit S

uiss

e m

arke

t sha

reS

tron

g

Revenue growth potential from increasing market share

Revenue growth potential from improving environment

Risk of revenue reduction from normalizing environment

Worse than historic levels Better than historic levels

Ups

ide

pote

ntia

l

Prime services

Cash equities

RMBS trading

Emerging markets

Rates

Equity capital markets

Equity derivatives

M&A FX Commodities

General direction of movement of business within same-colored segments

Note: Excludes 1Q09 rebound revenues.

Leveraged finance

Investment grade

s

Slide 10

... leading to constructive medium-term outlook for overall revenue baseInvestment Bank 2009 revenues (in CHF bn)

Revenue growth potential from increasing market share

Revenue growth potential from improving environment

Risk of revenue reduction from normalizing environment

More sustainable revenues with good growth prospects

Greatest risk of revenue reduction

Reported revenues

1) 2009 reported revenues from all businesses, excluding rebound revenue of CHF 1.3 bn in 1Q09

Adjusted revenues

19.2 1)

5.3

12.2(4.1)

5.8

23.4

Wind-down losses and

other

Potential normalization of

environment

Potential from improved

environment

Potential from higher market

share

Slide 11

Strategic growth initiatives in key businesses

Rates

Market activity expected to be lower in 2010 than 2009

Business Expected market environment Strategic initiatives

Emerging

Markets

Continued favorable outlook given relative strength of emerging market economies

Capitalize on high-growth potential in targeted regions, particularly intermediating flows between emerging market economies Expand flow sales business and drive client connectivity across regions and with Private Banking−

40 planned flow sales hires (+45% of total EMG sales force)

Market share goal: top 5 in all regions in flow sales and maintain top position in IBD

Focus on growing client flows and expanding distribution coverageSignificant sales force expansion −

40 planned flow sales hires (+34%)Market share goals: top 3 in Americas and top 5 in EMEA and Asia

Leveraged

Finance

Significant high yield refinancing opportunity

Significant sales force expansion across Credit −

20 planned flow sales hires (+29%)Market share goals: top 3 in Americas and top 5 in EMEA

Slide 12

Broaden client footprintSignificant investment in technologyBuild out eCommerce platform and industrialize infrastructureSales force expansion−

30 new planned flow sales hires (39%)Market share goal: top 5 in all regions

Foreign

Exchange

Volatility expected to be lower in 2010 vs. 2009

Prime Services

More stable environment with recovering confidence in hedge fund products

Consolidate our Top 3 market shareSelectively increase client base; continue our differentiated approach to adding new clients Growth plans in listed derivatives, Delta One, fund administration and prime brokerageContinued investment in technology

M&A

Stability of world economies resulting in improved CEO confidence and renewed willingness to engage in strategic dialogue

Build on strength of local and regional teams to sustain market share gains in EMEA and APACBuild on recent progress in the Americas

Equity

Derivatives

Expand flow and corporate footprintBuild scale in APACRe-orient product suite, in line with new demands from clients

Broadly stable outlook for 2010

Business Expected market environment Strategic initiatives

Strategic growth initiatives in key businesses

Slide 13

Re-engineered leveraged finance and emerging markets business models

Credit qualityImproved deal flex terms & covenantsLower leverage

Lower single

name / industry

concentration

Focus on more diversified commitments to reduce concentration

Lower quantum

of debt

Avoid larger positions / “mega”deals

Commitment

period / time-to-

market

Shorter time-to-market and blackout periodsEnsure ability to distribute risk pre-closing

Controlling our

own destiny

Favor lead-left statusSeek provisions to break syndicate in the event of “right” roles

Repositioning Leveraged Finance

Client-focused

business

Network ‘capital sources’ with ‘capital needs’ across emerging marketsMaintain broad business base

DistributionGreater focus on distributing rather than retaining assets

Sales and tradingFocus on flow product in line with capital-efficient modelLeverage local market expertise

Capital-efficient

Ensure capital usage is efficient, nimble and consistent Greater internal focus on return metrics

‘One Bank’Leverage emerging market strength across Investment Bank, Private Bank and Asset Management

Repositioning Emerging Markets

Slide 14

Significant new client momentum

1) Defined as clients who generated revenues in 2009, but did not generate revenues in 2006; excludes M&A fees and primary securities issuance

New clients as a % of total Securities client base 1)

43%

43% of the current Securities client base are new clients added since 2006

Revenues from new clients have been from across the product spectrum, with the bulk coming from:

− Emerging markets

− Equity derivatives

− Prime services

− AES

− Global rates

Revenue contribution from new clients expected to increase as relationships mature

Clients who generated revenues in 2009, but did not generate revenues in 2006

Clients who generated revenues in 2009 and 2006

Slide 15

Credit Suisse

response

Well positioned for an evolving industry landscape

Maintained very

strong capital base

CS IB well positioned for

these changes

Strategy and business

model adjusted early

Leverage

Reduced balance sheet

by 24% from 4Q07

Already well in excess of

2013 Swiss minimum

leverage ratio

Basel Committee rules

still to be finalized

Capital

Leading tier 1 ratio

Capital-generative

model

“Grandfather" or

transition hybrid

securities

Deductions (e.g. DTA,

pension) expected to be

minimal over time

Liquidity

Strong and stable

deposit base

High-quality / liquid

balance sheet

Diversified and

conservative funding

structure – increased

long-term debt duration

Compensation

Early mover e.g.

−

PAF in 2008

−

G-20 compliant a year

early in 2009

−

Specific clawback

provisions for

underperformance

Compensation accrued

on risk adjusted basis

Responsible approach

to 'UK bonus tax'

16.3% tier 1 capital ratio

positions Credit Suisse

well for future changes

Credit Suisse already

well advanced in

implementation

Existing funding

approach in line with

planned direction of

industry

Commitment to fair,

performance-oriented

and competitive

compensation

Slide 16

Credit Suisse well positioned for an uncertain economic and regulatory environment

Recognized early the need to change our model

Significant reduction of dislocated assets and reallocation of RWAAccelerated implementation of our client-focused, capital-efficient strategy

Significant market share momentum in 2009

Achieved meaningful market share gains in key businesses but significant opportunity remains

Focused strategy for future growth

Continued commitment to expand client-related businesses across the Investment BankIncrease market share across targeted products and geographiesContinued discipline in capital allocation to support expansion of client businesses; aligned with compensation process

Well-positioned for change in regulatory landscape

Strategy and business model adjusted earlyMaintained strong capital base and liquidity positionCompensation model already aligned with proposed regulation

Slide 17

Slide 18

Repositioned businesses Exit businesses

Emerging Markets – maintain leading business but with more limited risk/credit provisionLeveraged Finance – maintain leading business but focus on smaller/quicker to market deals

Corporate Lending – improved alignment of lending with business and ability to hedge

Cash equities Electronic trading Prime servicesEquity derivatives – focus on flow and corporate trades

Appendix: Realignment of the Investment Bank

Equity Trading – focus on quantitative and liquid strategies

Convertibles – focus on client flow

Highly structured derivatives

Illiquid principal trading

Equ

ities

Fixe

d In

com

eA

dvis

ory

Develop existing strong

market positions

Maintain competitive advantage but reduce risk and volatility

Release capital and resources; reduce volatility

Global Rates

Currencies (FX)

High Grade Credit / DCM

US RMBS secondary trading

Commodities trading (joint venture)

Strategic advisory (M&A) and capital markets origination

Mortgage origination and CDO

Non-US RMBS

Highly structured derivatives

Power & emission trading

Origination of slow to market, capital-intensive financing transactions


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Morgan Stanley Financial Services Conference economic and ... › media › assets › ... · transition hybrid securities Deductions (e.g. DTA, pension) expected to be minimal over