Post on 07-Jun-2015
ANNUAL REPORT 1997/1998
Swiss Market IndexCredit Suisse Group
100
150
200
CHF
1993 1994 1995 1996 1997 3/1998
300
250
50
0
SHARE PERFORMANCE
CHF bn
91 92 93 94 95 96 97
60
50
40
30
20
10
0
MARKET CAPITALISATION as at 31 December
90
Financial Calendar
1998 Annual General Meeting Friday 29 May 1998
Financial statements for 1st half 1998 Wednesday 9 September 1998
Media conference for 1998 results Tuesday 16 March 1999
1999 Annual General Meeting Friday 28 May 1999
FINANCIAL HIGHLIGHTS 1997
1997 1996 ChangeConsolidated income statement in CHF m in CHF m +/– %
Revenue 21,024 16,667 26
Net operating profit after minority interests 3,395 2,145 58
Net profit/loss 397 –2,082 –
Cash flow 6,026 4,164 45
ROE (net operating profit after minority interests) in % in %
Credit Suisse Group 14.2 9.8
Banking business 16.2 9.6
Insurance business 10.2 11.0
31 Dec. 1997 31 Dec. 1996 ChangeConsolidated balance sheet in CHF m in CHF m +/– %
Total assets 689,568 624,396 10
Total shareholders’ equity 25,651 22,861 12
– of which minority interests 2,005 1,844 9
BIS ratios in % in % +/- %
BIS tier 1 ratio
Credit Suisse 6.6 n.a.
Credit Suisse First Boston 8.5 n.a.
Credit Suisse Group 10.9 10.4
BIS total capital ratio Credit Suisse Group 16.8 15.1
ChangeHuman resources at year-end 1997 1996 +/– %
Total staff 62,242 60,540 3
– of which in Switzerland banking business 21,442 23,553 –9
insurance business 7,108 6,547 9
– of which outside Switzerland banking business 13,235 11,268 18
insurance business 20,457 19,172 7
1996 figures adjusted for the Winterthur merger
ChangeShare data 1997 1996 +/–%
Number of shares issued at year-end 266,128,097 194,307,590 37
Shares ranking for dividend at year-end 265,750,460 194,186,189 37
Average 262,952,238 190,011,086 38
Market capitalisation (CHF m) at year-end 60,060 26,701 125
Earnings per share, operating result (CHF) 12.9 8.4 64
Earnings per share, reported result (CHF) 1.5 – 8.2 –
Share price (CHF)
at year-end 226 137.5 64
for inclusion in Swiss tax returns 224 135 66
year high 238 139.25 71
year low 133.75 105.75 26
Dividend (CHF) 5* 4 25
* proposal of the Board of Directors to the AGM on 29 May 1998 12
25%
22%
30%
23%
REVENUE COMPOSITION 1997
Balance sheet businessCommissionTrading
Insurance
1
RAINER E. GUT, CHAIRMAN OF THE BOARDOF DIRECTORS, AND LUKAS MÜHLEMANN, CHIEF EXECUTIVEOFFICER
TO OUR SHAREHOLDERS
2
Dear shareholder
In 1997 Credit Suisse Group posted strong operating results. All business areas con-
tributed to this performance. The Group showed a 58% increase in net operating profit
to CHF 3.4 bn. With a 26% rise in revenue compared with 1996 to CHF 21 bn and a
36% increase in gross operating profit to CHF 7.3 bn, Credit Suisse Group once again
proved its strong earnings power.
In 1997 Credit Suisse Group took exceptional items totalling CHF 1.4 bn. These
were taken for the merger with Winterthur, the integration of BZW, the ongoing restruc-
turing of banking operations in Switzerland and for IT restructuring in preparation for the
introduction of the euro and the year 2000. In addition, the Group decided to make a
contribution of CHF 1.6 bn to the reserves for general banking risks. With this action,
Credit Suisse Group is even better positioned to take a possible provision in respect of
Swiss lending without impacting future financial results. After taking into account these
exceptional and precautionary charges, Credit Suisse Group posted consolidated net
profit after tax and minority interests of CHF 397 m.
In view of the very favourable operating results, the Board of Directors proposes
increasing the dividend by 25% from CHF 4 to CHF 5 per share.
The refocusing of Credit Suisse Group initiated in summer 1996 is largely com-
pleted. The four banking units, each geared to specific customer segments and markets,
have been operational since the start of 1997. The advantages of the new organisa-
tional structure – precise focus on client needs, transparent accounting along business
unit lines, exploitation of cost synergies and additional earnings potential – have already
borne fruit. In line with the strategy to concentrate on core business, Credit Suisse
Group also divested its non-banking holdings. Consequently, the sale of Electrowatt
Ltd. was brought to a close and the two IT firms Fides Informatik and Citymax were
sold.
Rainer E. Gut Lukas Mühlemann
Chairman of the Board of Directors Chief Executive Officer
April 1998
An important event in 1997 was the merger between Credit Suisse Group and Winterthur
to create one of the largest global providers of integrated banking and insurance ser-
vices. The programmes aimed at tapping the extensive synergy potential offered by
pooling banking and insurance activities are progressing to plan: for example, products
combining banking and insurance expertise have been launched. In addition, after posi-
tive experience in pilot offices, 80 Credit Suisse branches and Winterthur agencies are
to be co-located over the next few months. A major milestone was reached in April
1998 with the merger of CS Life, Winterthur-Columna and Winterthur Life to form a
new division “Individual and Group Life” at Winterthur. The products of this division will
be distributed through the sales networks, including electronic channels, of Winterthur
and the banking business units of Credit Suisse Group.
In November 1997 Credit Suisse First Boston acquired BZW’s European equity
and investment banking businesses from the British bank Barclays, enabling the firm to
considerably strengthen its position in the UK home market.
1997 saw the launch of a wide range of innovative products. In mid-April Credit
Suisse launched Direct Net, becoming the first Swiss bank to offer Internet banking:
25,000 customers are already using this distribution channel for their banking business.
Meanwhile, Credit Suisse First Boston underwrote the first asset-backed securities to
be listed in Switzerland with a value of CHF 1 bn. Furthermore, for the third year in a
row our investment funds were awarded the title “Best Management Group” in their
category by Standard & Poor’s Micropal.
Credit Suisse Group has had a very good start to 1998. Although the Asian crisis
will continue to have an impact on certain financial markets, the Group is looking for-
ward to a positive business environment in 1998 and continued progress in reaching its
performance targets.
1997 was a demanding year for our staff. We would like to express our gratitude
for their hard work and commitment.
We would also like to thank our shareholders and customers for the trust they
have placed in us.
3
THE STRUCTURE OF CREDIT SUISSE GROUP
Credit Suisse Group is a global financial services company, providing a
comprehensive range of banking and insurance products. Active on every
continent and in all major financial centres, Credit Suisse Group comprises
five business units, each geared to the requirements of specific customer
groups and markets:
Credit Suisse: corporate and individual customers
in Switzerland
Credit Suisse Private Banking: services for private investors in Switzerland
and internationally
Credit Suisse First Boston: global investment banking
Credit Suisse Asset Management: services for institutional investors worldwide
Winterthur: worldwide insurance business
3 locations in Switzerland
56 locations internationally
Subsidiaries
Credit SuisseFinancial Products (80%)
7 locations in Switzerland
12 locations internationally
Subsidiaries
BEA Associates
Credit Suisse Trust and Banking
244 locations in Switzerland
Subsidiaries
Neue Aargauer Bank (98.6%)*
Credit Suisse Leasing
Credit Suisse ImmobilienLeasing
50 locations in Switzerland
50 locations internationally
Subsidiaries
Bank Leu*
Affida Bank*
Bank Heusser*
Credit Suisse Fides*
Clariden Bank*
Bank Hofmann*
Bank für Handel & Effekten
Credit Suisse Trust*
694 locations in Switzerland
present in over 30 countries
Subsidiaries incl.
Winterthur Life
Winterthur-Columna
Winterthur International
DBV-Winterthur Holding
Winterthur Holding Italia
Hispanowin S.A. (Spain)
Winterthur-Europe Assurances
Winterthur (UK) Holdings
Winterthur U.S. Holdings
HIH Winterthur (Australia)
CREDIT SUISSE FIRST BOSTONCREDIT SUISSE WINTERTHUR
* direct holding of Credit Suisse Group
4
THE FIVE BUSINESS UNITS OF CREDIT SUISSE GROUP
CREDIT SUISSE
CREDIT SUISSE ASSET MANAGEMENT
CREDIT SUISSE PRIVATE BANKING
Credit Suisse serves corporate and individual customers in Switzerlandthrough a multichannel strategy and anefficient branch network covering all
major locations. Thanks to an innovativerange of products and services, especiallyin direct and internet banking, it ranksamong the market leaders in its segment.
Credit Suisse Private Banking is one ofthe largest private banking operations inthe world. It has a strong market presencein Switzerland and around the globe and
offers a comprehensive investmentadvisory service and individual financialsolutions geared to the specific needs of private banking clients.
CREDIT SUISSE FIRST BOSTON
Credit Suisse First Boston is a leadingglobal investment banking firm, providingfinancial advisory, capital raising and
financial products for users and suppliersof capital around the world.
Credit Suisse Asset Management is a leading global asset manager focusing on institutional and mutual fund investors,
providing first-class international manage-ment through domestic operations.
WINTERTHUR
Winterthur Group is one of the leadinginsurance companies in Europe and one of the largest internationally activeinsurance companies in the world. It
offers private and corporate customers tailor-made insurance and pension solutions at the local and internationallevel.
5
CREDIT SUISSE GROUP BUSINESS REVIEW AND CONSOLIDATED RESULTS
Credit Suisse Group – including Winterthur, which is shown in the
consolidated results for the first time – announced a 58% increase
in net operating profit after tax and minority interests to CHF 3.4 bn
in 1997. All business units achieved significant improvements in their
performance. The Board of Directors proposes increasing the dividend
by 25% from CHF 4 to CHF 5 per share. After exceptional items of
CHF 1.4 bn (after tax) for covering, among other things, the merger with
Winterthur and the integration of BZW, and a CHF 1.6 bn increase in the
reserves for general banking risks, Credit Suisse Group showed a
consolidated net profit of CHF 397 m. This compares with a technical
loss of CHF 2.1 bn in 1996.
6
Strong operating performance With a 26% rise in revenue compared with 19961 to
CHF 21 bn (CHF 16.8 bn from banking operations) and a 36% increase in gross oper-
ating profit to CHF 7.3 bn, Credit Suisse Group once again proved its strong earnings
power. The Group recorded a very good net operating profit after tax and minority inter-
ests of CHF 3.4 bn, 58% up on the previous year2. The cost/income ratio3 in banking
operations was improved from 70.8% to 67.8%. On an operating basis, the consoli-
dated ROE increased from 9.8% to 14.2%. This corresponds to a ROE of 16.2% for
banking operations and 10.2% for insurance operations. Assets under management
increased to CHF 863 bn.
In view of the progress made in achieving its performance goals and the good
start to the current financial year, the Board of Directors proposes to the Annual
General Meeting to be held on 29 May 1998 that the dividend be increased by 25%
to CHF 5 per Credit Suisse Group registered share. Operating earnings per share
amounted to CHF 12.91.
Capital optimisation and balance sheet of the Group Capital optimisation was
singled out as a major objective as part of the refocusing of Credit Suisse Group. The
efficient use of capital in meeting customer needs, while at the same time creating
shareholder value, is a primary responsibility of each business unit, overseen by the
Corporate Centre.
1997 showed modest balance sheet growth in banking operations when compared
with the strong growth in revenue. At Credit Suisse the expansion in the commercial
loan book was relatively flat, due primarily to subdued economic conditions in Switzer-
land. At Credit Suisse First Boston overall balance sheet growth was 10%, owing partly
to the Swiss franc/dollar exchange rate. The increase in assets was in the securities
portfolio. At Credit Suisse First Boston significant efforts were undertaken to reposition
the balance sheet to achieve better risk-adjusted returns. An example of this effort was
1 basis for comparison with previous year (in general terms) at Group level: Credit Suisse Group incl. Winterthur2 basis for comparison with previous year of net operating profit at Group level: operating profit after tax and minority
interests (CHF 2.1 bn)3 including depreciation
the securitisation of USD 5 bn of commercial loans; capital was freed up from the
commercial loan book and reallocated to securities operations. At year-end 1997,
Credit Suisse Group’s BIS tier 1 capital is sufficiently strong, at 10.9%, to satisfy the
banking or insurance needs of the largest clients. The BIS total capital ratio stands at
16.8%.
The business unit accounts include the disclosure of allocated capital at 1 January
1998. Capital is allocated on the basis of minimum Swiss regulatory capital require-
ments, including a cushion to provide operating flexibility, while taking into account an
additional amount required to maintain an acceptable credit rating as assigned by major
rating agencies. In the case of private banking and asset management, the allocation
also includes an amount to cover operation risk. The capital allocation is reviewed
quarterly by the Credit Suisse Group Risk Coordination Committee.
All business units improve their operating results The Credit Suisse business
unit increased its revenue by 5% to CHF 2.7 bn and reduced its personnel expenses
by 10% to CHF 1.5 bn, resulting in gross operating profit more than doubling against
the previous year4 to CHF 501 m. The cost/income ratio improved from 103% to 85%.
Provisions for the performing loan portfolio were in line with expectations. In addition,
after a complete review of the problem loan portfolio, Credit Suisse took a further charge
of more than CHF 1.1 bn against previously identified problem loans against the back-
ground of a further deterioration of the Swiss economy in 1997. A release of the
reserves for general banking risks equal to this charge is included under extraordinary
income of Credit Suisse Group. The pre-tax loss5 was reduced by CHF 773 m to
CHF 296 m. The net operating loss after tax and minority interests came to CHF 278 m.
For 1998 we expect a further significant improvement in Credit Suisse’s results, leading
to a break-even result.
Credit Suisse Private Banking increased its revenue by 18% to CHF 3.6 bn in
1997, while assets under management increased by 18% to CHF 384 bn. The
cost/income ratio declined from 54% to 51%. Pre-tax profit rose from CHF 1.3 bn
to CHF 1.7 bn. Net operating profit after tax and minority interests amounted to
CHF 1.3 bn.
Credit Suisse First Boston posted very good results in 1997, with performance
in the second half equalling that of the first half despite the turbulence in the Asian
securities markets. Revenue rose 30% in dollar terms to USD 7.1 bn (CHF 10.3 bn).
The cost/income ratio declined from 69.5% to 68.9%. Total operating expenses
amounted to USD 4.8 bn (CHF 6.9 bn), up 30% in dollar terms. This can be explained
largely by strong business growth and the 31% increase in personnel expenses to
USD 3.5 bn (CHF 5 bn), a reflection of higher performance-related bonuses. Pre-tax
profit increased 29% from USD 1.4 bn to USD 1.8 bn (CHF 1.7 bn to CHF 2.6 bn).
Net operating profit after tax and minority interests amounted to USD 1.1 bn
(CHF 1.6 bn).
4 basis for comparison with previous year at business unit level: pro forma figures (Winterthur: actual figures)5 net of release of reserves for general banking risks
7
8
In respect of the Asian credit exposure of Credit Suisse First Boston, additional precau-
tionary provisions of USD 150 m (CHF 216 m) were taken at year-end 1997. These
are included in the operating results.
Against a background of buoyant financial markets Credit Suisse Asset
Management showed healthy investment performance and strengthened financial
results. Revenue increased by 22% to CHF 788 m. The cost/income ratio decreased
from 69.2% to 66.5%. Total assets under management grew by 21% to CHF 263 bn.
Pre-tax profit increased from CHF 166 m to CHF 264 m. Net operating profit after
tax and minority interests stood at CHF 214 m.
Winterthur (now also including CS Life), which was incorporated in Credit Suisse
Group’s consolidated results for the first time in 1997, put in a very good performance.
This was achieved on the back of favourable conditions in the international insurance
and financial markets. Despite a substantial strengthening of the technical provisions,
which rose from 177% to 182% in relation to net earned non-life premiums,
Winterthur increased its net operating profit after tax and minority interests by 31% to
CHF 674 m. Shareholders’ equity, excluding minority interests, rose by CHF 2.8 bn to
CHF 8 bn.
Exceptional items and increase in the reserves for general banking risks Credit
Suisse Group took exceptional items totalling CHF 1.4 bn after tax in 1997. These
exceptional items comprise CHF 300 m for the merger with Winterthur, CHF 237 m for
the integration of BZW and CHF 401 m for IT restructuring primarily in preparation for
the introduction of the euro and for the year 2000. Credit Suisse Group set aside a
further CHF 430 m for the ongoing restructuring of banking operations, primarily in
Switzerland. These provisions will benefit future earnings.
In addition, Credit Suisse Group has decided to make a contribution of CHF 1.6 bn
to the reserves for general banking risks in the consolidated accounts. With this action,
Credit Suisse Group is even better positioned to weather the possible deterioration in its
operating environment without impacting future financial results.
After taking into account these exceptional and precautionary charges, Credit
Suisse Group posted consolidated net profit after tax and minority interests of
CHF 397 m. This compares with a technical loss of CHF 2.1 bn in 1996.
Refocusing of Credit Suisse Group well advanced The refocusing of Credit
Suisse Group initiated in summer 1996 is moving forward rapidly. As part of this re-
organisation, Credit Suisse Group announced a reduction of 5,000 jobs by the end
of 1998, of which a total of 3,898 – 2,120 in Switzerland and 1,778 abroad – were
realised in 1997. The restructuring was carried out without redundancies in Switzerland.
At the same time, close to 4,000 new jobs were created, particularly outside Switzer-
land but also in growing areas of the Swiss business (e.g. direct banking, pension
business, private banking).
Merger with Winterthur: important objectives achieved The merger between Credit
Suisse Group and Winterthur is moving ahead systematically. The first measures as part
of this project have already been implemented, for example product launches, combining
banking and insurance expertise. In addition, after positive experience in pilot offices, at
least 80 Credit Suisse branches and Winterthur agencies will be brought together in
shared premises over the coming months, offering substantial potential for increased
revenue while also bringing cost savings.
Another important objective was achieved following the approval of a new strategy
for the further expansion of individual and group life operations: effective 1 April 1998,
CS Life (the life insurance company of Credit Suisse Group), Winterthur-Columna (the
joint subsidiary of Winterthur and Credit Suisse operating in group life business) and
Winterthur Life are to be combined to form a joint product centre and integrated into
Winterthur as an additional division “Individual and Group Life”. The newly formed divi-
sion combines assets of CHF 51.6 bn, premiums and contributions of CHF 9.3 bn,
and 300,000 individual and 50,000 corporate and group customers.
Business unit financial statements The business unit financial statements reflect
the organisational structure during 1997 and show the results of all business units as
OVERVIEW OF BUSINESS UNIT RESULTS
Credit Credit Credit AdjustmentsSuisse Suisse Suisse including Credit
1997 Credit Private First Asset Winterthur Winterthur Corporate Suissein CHF m Suisse Banking Boston Management Non-life Life Centre Group
REVENUE 2,730 3,610 10,264 788 3,046 2 1,186 2 –600 21,024
Personnel expenses 1,544 970 5,036 293 1,407 483 168 9,901
Other operating expenses 685 800 1,822 214 735 303 –712 3,847
TOTAL OPERATING EXPENSES 2,229 1,770 6,858 507 2,142 786 –544 13,748
GROSS OPERATING PROFIT 501 1,840 3,406 281 904 400 –56 7,276
Depreciation and write-offs on non-current assets 90 55 213 17 0 1 214 590
Valuation adjustments, provisions and losses1 707 113 562 0 0 0 56 1,438
PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES –296 1,672 2,631 264 904 399 –326 5,248
Extraordinary income1 17 36 51 9 0 24 137
Extraordinary expenses 46 46 114 23 42 3 –25 246
Taxes –48 341 872 36 497 –158 1,540
NET OPERATING PROFIT (before minority interests) –277 1,321 1,696 214 764 –119 3,599
– of which minority interests 1 7 123 0 90 –17 204
NET OPERATING PROFIT (after minority interests) –278 1,314 1,573 214 674 –102 3,395
Allocated equity capital at 1 Jan. 1998 4,150 1,900 9,900 130 7,924
Return on average allocated capital –7% n.a. 18% n.a. 10%1 net of release of reserves for general banking risks 1,108 56 22 1,186
2 defined as premiums earned (net), less claims incurred and actuarial provisions, less commissions (net), plus investment income from insurance business
3 unattributable interest expense
9
10
though they were independent legal entities. Financial data on the Corporate Centre
includes the costs of its own functions, income and expenses for real estate (including
bank premises) in Switzerland as well as all consolidation adjustments. Wherever pos-
sible, costs of the Corporate Centre have been allocated to the operating business units.
At year-end 1996, business unit financial data was prepared in order to give an
estimate of the general level of business unit profitability. As previously disclosed, the
indicative figures for 1996 were only best estimates for the year as records were not
kept along business unit lines in 1996. Subsequent to the presentation of the data, a
variety of decisions have been made with respect to the operations for 1997 regarding
the allocation of clients to business units, the discontinuation of certain business prac-
tices conducted in 1996 and a reallocation of capital among the business units. There-
fore, we have adjusted the business unit 1996 financial results to provide for a better
comparison of activities between 1997 and 1996.
Business unit financial results include operating financial information only. They
are commented upon in the relevant sections.
BUSINESS UNIT ACCOUNTING PRINCIPLES
The same accounting policies as used by the Group in its financial accounts were
adopted, unless explicitly stated otherwise.
INCOME STATEMENT
General To reconcile business unit accounts with legal entity accounts certain adjust-
ments were made in the Corporate Centre (included in the column “Adjustments includ-
ing Corporate Centre”).
Extraordinary expenses exclude exceptional items and the increase of the re-
serves for general banking risks, including their tax effects. Extraordinary income and
valuation adjustments, provisions and losses are shown net of release of reserves for
general banking risks.
For Credit Suisse Asset Management, the income statement was adjusted to take
into account the different closing dates/accounting periods of consolidated companies.
The difference is included in the column “Adjustments including Corporate Centre”.
Revenue For Credit Suisse First Boston, the business unit income statement differs
from the Group’s legal accounts because brokerage, execution and clearing expenses
are included within operating expenses (as is common with US competitors), rather
than netted against revenues.
Inter-business unit revenue splits Responsibility for each of our products is allocated
to one of the business units. When business units contribute to the success of another,
revenue allocations have been established to compensate such efforts. Revenue alloca-
tions are shown in the relevant income statement line.
Inter-business unit cost allocations Certain administration and IT tasks (“services”)
are concentrated in one business unit, which acts as a provider for the other business
units. Such services are compensated on the basis of service level agreements, and
transfer payments (which include personnel and other operating expenses) are reflected
in the income statement line “Other operating expenses”.
Real estate used by the bank All real estate in Switzerland, including bank premises,
is managed centrally. The costs, which are charged by applying market rent information
and an additonal charge if actual cost should exceed “market rent”, are included in
“Other operating expenses”.
11
12
Provisions for credit risk Business unit credit provisions that exceed the actuarial
credit provision were reversed against the reserves for general banking risks on a
Group level and netted in the business unit income statement line “Valuation adjust-
ments, provision and losses”.
Taxes Taxes are calculated for individual business units based on average tax rates
reflecting their geographical diversity. The difference between these and actual tax
expenses have been adjusted in the Corporate Centre’s account. For Credit Suisse,
tax credits on net loss and exceptional items are recognised.
BALANCE SHEET
General The business unit balance sheets include the appropriate proportion of real
estate occupied in Switzerland that is managed centrally.
RATIOS/KEY PERFORMANCE INDICATORS
Ratios per head have not been calculated as some Group-wide activities are providedcentrally by one of the business units and required staffing for services received is notreflected in the recipient business unit’s headcount.
We have performed certain procedures enumerated below in relation to the 1997 busi-
ness unit financial statements of Credit Suisse Group and its subsidiary undertakings
(“the business unit financial statements”) for which the Directors of Credit Suisse Group
are solely responsible. The business unit financial statements, which have been
prepared for illustrative purposes only, are set out on pages 9 to 29 of the annual
accounts.
We have performed limited review procedures with regard to the business unit financial
statements as follows:
– Reviewed the methodology for preparation of the business unit financial statements
as described therein and their proper application;
– Given the methodology for preparation, reviewed the consistent application of the
accounting policies; and
– Reviewed the reconciliation between the business unit financial statements and the
consolidated Group results presented in the audited financial statements for the
year.
Nothing has come to our attention as a result of the foregoing limited review proce-
dures that would lead us to believe that the business unit financial statements have not
been properly compiled on the basis of the preparation set out therein or are materially
misstated.
KPMG Klynveld Peat Marwick Goerdeler SA
Brendan Nelson Bruce A. Mathers
Chartered Accountant Chartered Accountant
Auditors in Charge
Zurich, 16 March 1998
REPORT OF THE GROUP’S AUDITORS ON THE BUSINESS UNIT FINANCIAL STATEMENTS
13
CORPORATE AND INDIVIDUAL CUSTOMERS IN SWITZERLAND
Credit Suisse posted total revenue of CHF 2.7 bn for the 1997 business
year, up 5% compared with 1996. The business unit consolidated its
strong market position and extended its lead in the Swiss direct banking
market. Staff costs were reduced as planned. As a result of the difficult
economic environment, credit provisions remained high due to additional
provisions for pre-existing non-performing loans. The net loss for the
year before extraordinary items and tax was reduced by CHF 773 m to
CHF 296 m.
14
The restructuring of Credit Suisse initiated in summer 1996 was largely accomplished
by the end of 1997. The streamlining of the branch network is also essentially complete,
with – as planned – 244 offices at the end of 1997, complemented by more than 550
Cash Service ATMs. With effect from 1 January 1998, the corporate and individual
customer business of Bank Leu, comprising around 100,000 customer relationships,
was transferred to Credit Suisse. The majority of initiatives designed to optimise credit
and risk management and adapt the IT infrastructure to the needs of the individual
business areas are under way.
In parallel with the restructuring process, a number of projects have been
launched with a view to focusing more closely on the needs of the customer. These
include the ongoing development of product strategies, closer collaboration with
Winterthur Group and the expansion of the range of services available as part of the
multichannel strategy. As a result, customers are able to carry out their banking
business in the manner they find most convenient: through the branch network, via
ATM, or by means of telephone or the Internet.
RATIOS/KEY PERFORMANCE INDICATORS
Allocated equity capital CHF m (1 Jan. 1998) 4,150
Cost/income ratio 85%
Return on average allocated capital –7%
Number of employees (31 Dec. 1997) 12,540
Pre-tax margin –12%
Personnel expenses/total operating expenses 69.3%
Personnel expenses/revenue 56.6%
Number of branches 244
Net interest margin 1.95%
Loan growth –0.18%
Deposit/loan ratio 94%
Assets under management CHF bn 111
Customer use of direct banking channels – telephone and Internet – again increased
substantially in 1997, with the telephone banking team alone dealing with some
420,000 enquiries. With the launch of DIRECT NET, Credit Suisse became the first
Swiss bank to offer a comprehensive range of Internet banking services. Since May
1997, around 1.5 m transactions have been carried out through this product and the
trend is sharply upward. Another new product that was very well received by customers
was BONVIVA, which was launched in May: around 80,000 customers signed up for
this package of services. In 1997 Credit Suisse also brought out a special service for
small and medium-sized businesses (SMBs) called START-UP, which provides support
in the establishment and restructuring of companies, including, in particular, manage-
ment coaching. In addition, through the creation of the SMB Service specialist unit, a
professional advisory service is now available for both companies and clubs and
associations. These moves were taken as SMBs are of particular importance for Credit
Suisse, reflected in the fact that 94% of loans in the corporate client segment were
made to these businesses.
INCOME STATEMENTPro forma
1997 1996 Changein CHF m in CHF m in %
Net interest income 1,875 1,870 0
Net commission and service fee income 609 522 17
Net trading income 188 120 57
Other ordinary income 58 77 –25
REVENUE 2,730 2,589 5
Personnel expenses 1,544 1,718 –10
Other operating expenses 685 662 3
TOTAL OPERATING EXPENSES 2,229 2,380 –6
GROSS OPERATING PROFIT 501 209 140
Depreciation and write-offs on non-current assets 90 286 –69
Valuation adjustments, provisions and losses* 707 992 –29
LOSS BEFORE EXTRAORDINARY ITEMS AND TAXES 296 1,069 –72
Extraordinary income* 17
Extraordinary expenses 46
Taxes –48
NET OPERATING LOSS (before minority interests) 277
– of which minority interests 1
NET OPERATING LOSS (after minority interests) 278
* net of CHF 1,108 m release of reserves for general banking risks
15
16
1997 results At CHF 96.4 bn, Credit Suisse’s total assets remain virtually unchanged
compared with 1996. The reduction in funds due from customers and in mortgage
lendings to CHF 22.9 bn and CHF 54.6 bn respectively is almost exclusively the result
of valuation adjustments.
Customer deposits increased by CHF 2.1 bn to CHF 60.3 bn. The contraction in
medium-term notes was more than compensated for by the shift into securities and
investment funds.
Both staff costs and other operating expenses developed as planned. The
cost/income ratio improved from 103% to 85%. As a result, gross operating profit
more than doubled, rising by CHF 292 m to CHF 501 m.
By drawing on the reserves set aside for repossessed property in 1996, Credit
Suisse was able to significantly reduce depreciation and write-offs on non-current
assets. Valuation adjustments, provisions and losses posted in 1997 include CHF 673 m
in respect of the statistically calculated risk cost of the credit portfolio (annual credit
provision) and CHF 34 m in respect of other losses. Additional write-downs for existing
non-performing loans totalling CHF 1.1 bn are netted against the release of reserves
for general banking risks for business unit presentation purposes. For 1998 an annual
credit provision of CHF 650 m has been budgeted consistent with the credit risk mana-
gement framework introduced in 1997.
The annual loss before extraordinary items and tax was reduced by CHF 773 m
to CHF 296 m. The loss for the first half of the year was CHF 177 m, while the loss
for the second half of the year was reduced by CHF 58 m to CHF 119 m. A break-even
result is anticipated for 1998.
BALANCE SHEETPro forma
31 Dec. 1997 1 Jan. 1997 Changein CHF m in CHF m in %
Cash and other liquid assets 993 1,363 –27
Money market claims 7,116 4,087 74
Due from banks 309 3,247 –90
Due from other business units 3,139 12 –
Due from customers 22,855 24,323 –6
Mortgages 54,631 55,889 –2
Securities and precious metals trading portfolio 100 119 –16
Financial investments 2,364 2,613 –10
Participations 51 76 –33
Tangible fixed assets 2,377 2,322 2
Accrued income and prepaid expenses 476 167 185
Other assets 1,986 2,079 –4
TOTAL ASSETS 96,397 96,297 0
Money market liabilities 0 33 –100
Due to banks 586 1,190 –51
Due to other business units 16,971 14,482 17
Due to customers in savings and investment accounts 37,149 36,367 2
Due to customers, other 23,117 21,797 6
Medium-term notes 6,708 8,045 –17
Bonds and mortgage-backed bonds 5,595 5,891 –5
Accrued expenses and deferred income 820 652 26
Other liabilities 1,046 2,704 –61
Valuation adjustments and provisions 354 496 –29
Equity capital 4,051 4,640 –13
– of which minority interests 10 8 25
TOTAL LIABILITIES 96,397 96,297 0
17
1997 was a successful initial year for Credit Suisse Private Banking.
Profit before extraordinary items and tax rose by 24% to CHF 1,672 m.
The new organisational structure has proved successful. Assets under
management increased by 18% to CHF 384 bn.
SERVICES FOR PRIVATE INVESTORS IN SWITZERLAND AND INTERNATIONALLY
18
In 1997 Credit Suisse Private Banking reorganised its structure in line with the re-
focusing of Credit Suisse Group. The restructuring of the sales network has been com-
pleted. Credit Suisse Private Banking is now represented in 50 locations in Switzerland
and 50 outside Switzerland.
Both asset management and investment advisory products and services have
been optimised, as have the regional marketing strategies.
In offshore business, new financial advisory products for the Trust Services
business area have been developed. Lending operations have been reorganised.
In addition to mortgage-backed loans, lending covered by marketable collateral was
especially important. Credit Suisse Private Banking also reinforced its international
activities in 1997. In early September the business unit acquired a 70% stake in the
Parisian private bank Banque Hottinguer, substantially strengthening its position in the
French market.
RATIOS/KEY PERFORMANCE INDICATORS
Allocated equity capital CHF m (1 Jan. 1998) 1,900
Cost/income ratio 50.6%
Number of employees (31 Dec. 1997) 8,464
Pre-tax margin 46%
Personnel expenses/total operating expenses 54.8%
Personnel expenses/revenue 26.9%
Fee income/revenue 64.5%
Fee income/total operating expenses 131.5%
Assets under management CHF bn 384
1997 results Credit Suisse Private Banking put in a very good performance, posting
profit growth of 24% before extraordinary items and tax and an 18% increase in assets
under management. This increase in assets was due to market performance (14%) and
net new business (4%).
Operating expenses increased at a lower rate than revenue, rising by 10% to
CHF 1,770 m. Expenses rose more sharply during the second half of the year com-
pared with the first half as a result of accelerated front-office expansion and investment
in IT projects to support product development. Nevertheless, the cost/income ratio im-
proved from 54% to 51%. Increased risks in business in Asia (CHF 42 m) and the
reorganisation of Bank Leu’s lending portfolio resulted in higher credit provisions. These
provisions were offset by the release of reserves for general banking risks.
BALANCE SHEET INFORMATION31 Dec. 1997
in CHF m
Total assets 81,349
Due from customers 25,406
– of which secured by mortgages 9,815
– of which secured by other collateral 12,187
INCOME STATEMENT1997 1996 Change
in CHF m in CHF m in %
Net interest income 792 759 4
Net commission and service fee income 2,328 1,937 20
Net trading income 389 303 28
Other ordinary income 101 72 40
REVENUE 3,610 3,071 18
Personnel expenses 970 807 20
Other operating expenses 800 802 0
TOTAL OPERATING EXPENSES 1,770 1,609 10
GROSS OPERATING PROFIT 1,840 1,462 26
Depreciation and write-offs on non-current assets 55 55 0
Valuation adjustments, provisions and losses* 113 58 95
PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 1,672 1,349 24
Extraordinary income* 36
Extraordinary expenses 46
Taxes 341
NET OPERATING PROFIT (before minority interests) 1,321
– of which minority interests 7
NET OPERATING PROFIT (after minority interests) 1,314
* net of CHF 56 m release of reserves for general banking risks
Pro forma
19
GLOBAL INVESTMENT BANKING
In 1997 Credit Suisse First Boston increased its revenue by 30% to
USD 7.1 bn, posting net operating profit before exceptional items and
minority interests of USD 1.2 bn. Through targeted investment
programmes and acquisitions, the firm significantly strengthened its
position as one of the world’s leading investment banks.
20
The year began with the firm’s major reorganisation as part of Credit Suisse Group’s
restructuring. This has been successfully completed.
In November, Credit Suisse First Boston announced agreement to purchase the
UK and Continental European equities, equity capital markets, and corporate finance
advisory businesses of BZW. The acquisition significantly expands the firm’s position in
Europe while adding the UK as an important third home market. This was followed,
in early 1998, by the acquisition of certain of BZW’s equity and investment banking
businesses in Asia and the agreement to acquire 100% of First Pacific, one of Australia’s
leading equity firms. These moves accelerate and complement the firm’s expansion plans
in the Asia/Pacific region.
As important as these structural changes was the adoption of major organic
investment programmes to strengthen the firm and position it to tap future growth
opportunities and control them profitably. Credit Suisse First Boston’s customer busi-
nesses in investment banking, sales and research are being particularly expanded, while
in the support departments major programmes are also under way to address industry
issues such as the year 2000 and the euro, while rejuvenating the infrastructure and
the control environment to raise productivity and cope with the pace of change. Strate-
gically, the cumulative effect of these moves is to further strengthen Credit Suisse First
Boston’s position among the industry leaders.
RATIOS/KEY PERFORMANCE INDICATORS
Allocated equity capital CHF m (1 Jan. 1998) 9,900
BIS tier 1 ratio* 8.5%
Cost/income ratio 68.9%
Return on average allocated capital 18%
Number of employees (31 Dec. 1997) 11,863
Pre-tax margin 25%
Personnel expenses/total operating expenses 73.4%
Personnel expenses/revenue 49.1%
* applies to the Credit Suisse First Boston legal entity
1997 results Credit Suisse First Boston recorded revenue of USD 7.1 bn
(CHF 10.3 bn), an organic growth rate of 30% in USD, or 53% in CHF, which is
greater than any other leading global investment bank. A strong focus on profitability
produced very good net operating profit of USD 1.2 bn (CHF 1.7 bn), before minority
interests and exceptional items, and ROE increased to 18%. Key cost ratios, partic-
ularly relating to pre-tax profit margins and personnel expenses/revenue, remained in
line with other leading investment banks. The BIS tier I ratio was maintained at 8.5%.
Credit Suisse First Boston’s balance sheet (in dollar terms) was virtually unchanged
against the pro forma figures at 1 January 1997. This was due to conservative balance
sheet management, aimed at keeping the relationship of equity to assets (net and
gross of reverse repos) relatively constant on an equity base growing slowly (in dollar
terms), held back by a depreciating Swiss franc (over 70% of the equity is held in Swiss
francs) and extraordinary charges.
The goal for the year was to make more profit from the same asset base. This
was achieved by starting to shift from loans to securities holdings (up over USD 10 bn),
shifting from low-margin corporate loans to higher-margin trading-oriented loans (real-
estate-related and high-yield) and increasing asset turnover. The USD 10 bn decline in
securities lending/reverse repos was a temporary move, unreflective of underlying activity.
INCOME STATEMENTPro forma Pro forma
1997 1996 Change 1997 1996 Changein CHF m in CHF m in % in USD m in USD m in %
Fixed Income 4,866 2,874 70 3,379 2,356 43
Equity 1,745 1,017 71 1,212 834 45
Credit Suisse Financial Products 1,680 1,160 45 1,167 950 23
Corporate and Investment Banking 2,130 1,669 27 1,479 1,368 8
Private Equity and other –157 –18 – –109 –15 –
REVENUE 10,264 6,702 53 7,128 5,493 30
Personnel expenses 5,036 3,265 54 3,497 2,676 31
Other operating expenses 1,822 1,218 50 1,265 999 27
TOTAL OPERATING EXPENSES 6,858 4,483 53 4,762 3,675 30
GROSS OPERATING PROFIT 3,406 2,219 53 2,366 1,818 30
Depreciation and write-offs on non-current assets 213 175 22 148 143 3
Valuation adjustments, provisions and losses* 562 314 79 390 258 51
PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 2,631 1,730 52 1,828 1,417 29
Extraordinary income* 51 35
Extraordinary expenses 114 79
Taxes 872 606
NET OPERATING PROFIT (before minority interests) 1,696 1,178
– of which minority interests 123 85
NET OPERATING PROFIT (after minority interests) 1,573 1,093
* net of CHF 22 m release of reserves for general banking risks
21
22
The USD 10 bn rise in funding from bonds and mortgage bonds reflected the
USD 5 bn Triangle loan securitisation, which in accounting terms stayed on balance
sheet, and a number of innovative Upper Tier II debt issues during 1997, which
strengthened Credit Suisse First Boston’s total capital ratio significantly.
Revenue percentages in the comments on the divisional results below refer to the
underlying dollar-based growth.
Corporate and Investment Banking Division (CIBD) Investment banking revenues
increased by 8%. These increases were driven by improved results across the board.
The increases in investment banking revenues were offset, in part, by declines in
revenues from corporate lending activities. These declines reflected CSFB’s strategy,
initiated in 1997, to reallocate capital resources from corporate lending to other busi-
nesses. The strong focus on client relationships was demonstrated through successful
delivery of many landmark transactions, as recognised by numerous Deal-of-the-Year
and other awards from financial publications around the world. The ROE was poor
primarily due to lower returns from the lending business. In addition USD 150 m
(CHF 216 m) was provided at year-end for Asian-related credit exposure.
Fixed Income Revenues for the Fixed Income Division increased 43% in 1997, with
ROE exceeding 30% due to significantly improved results across most major product
lines. Particularly good performance was posted in the real estate activities of the
Principal Transactions Group (PTG) and the Emerging Markets Group (EMG). Fixed
income revenues also increased from improved results in high-yield corporate securities,
global foreign exchange and money markets, offset, in part, by declines in trading
governments and Swiss fixed-income securities.
Equity Revenues for the Equity Division increased 45% in 1997, with ROE exceeding
30% primarily as a result of significantly improved results in customer-driven businesses
complemented by strong trading results. Revenues were particularly strong in the
eastern European business, in Swiss activities and in the US-listed and OTC busi-
nesses. Results also improved substantially in the convertibles and risk arbitrage activi-
ties. Gross equity-related revenues, including those reported in CIBD and Credit Suisse
Financial Products, amounted to USD 1.55 bn (CHF 2 bn).
Credit Suisse Financial Products (CSFP) Revenues increased 23% in 1997, with
ROE exceeding 30%. This was primarily due to improved results in the swaps and
options, commodities, asset trading and credit derivatives businesses, offset, in part, by
declines in OTC equity derivatives and foreign exchange derivatives; however, both
of these businesses produced positive revenues in 1997.
Private Equity 1997 was a build year for this Division, still showing a slight loss,
successfully hiring key people and closing a large international fund.
BALANCE SHEETPro forma
31 Dec. 1997 1 Jan. 1997 Changein CHF m in CHF m in %
Cash and other liquid assets 2,021 1,533 32
Money market claims 16,119 14,690 10
Due from banks 138,351 128,567 8
– of which securities lending and reverse repurchase agreements 103,288 81,508 27
Due from other business units 5,933 0
Due from customers 103,993 125,310 –17
– of which securities lending and reverse repurchase agreements 62,030 85,745 –28
Mortgages 7,157 5,569 29
Securities and precious metals trading portfolio 102,385 81,527 26
Financial investments 9,343 6,066 54
Participations 262 283 –7
Tangible fixed assets 1,837 1,460 26
Accrued income and prepaid expenses 5,817 4,389 33
Other assets 53,690 38,428 40
– of which replacement value of derivatives 50,934
TOTAL ASSETS 446,908 407,822 10
Liabilities in respect of money market paper 17,719 11,169 59
Due to banks 183,043 215,403 –15
– of which securities borrowing and repurchase agreements 84,817 89,637 –5
Due to other business units 39,677 14,533 173
Due to customers, in savingsand investment deposits 463 400 16
Due to customers, other 97,374 95,458 2
– of which securities borrowing and repurchase agreements 56,797 51,525 10
Bonds and mortgage-backed bonds 33,551 17,156 96
Accrued expenses and deferred income 8,025 6,724 19
Other liabilities 53,875 36,139 49
– of which replacement value of derivatives 50,635
Valuation adjustments and provisions 2,706 2,062 31
Equity capital 10,475 8,778 19
– of which minority interests 1,201 880 36
TOTAL LIABILITIES 446,908 407,822 10
23
SERVICES FOR INSTITUTIONAL INVESTORS WORLDWIDE
During 1997 substantial progress was made towards creating an
integrated business. It was a year of strong investment performance,
strong asset growth and strengthened financial results. Assets under
management rose by 21% to CHF 263 bn.
24
Credit Suisse Asset Management’s business in Switzerland maintained its leading
position in 1997 and enjoyed strong growth in discretionary and advisory assets. The
London-based operation continued its strong performance in Global Fixed Income and
European Equities. The rapidly growing UK unit trust group exceeded GBP 1 bn
(CHF 2.4 bn). The unit’s US business received several large prestigious fixed-income
and high-yield mandates and was awarded the highest ranking in the Frank Russell
Universe for fixed income. Japan, one of the most important growth markets
for the business unit, has experienced another year of strong expansion (44%), ending
the year at over JPY 1,400 bn (CHF 15.5 bn). In Australia, assets under management
grew 57% to AUD 4.8 bn (CHF 4.5 bn). Credit Suisse Asset Management’s mutual
funds business was awarded “Best Management Group” in its category by Standard &
Poor’s Micropal for the third year in a row.
RATIOS/KEY PERFORMANCE INDICATORS
Allocated equity capital CHF m (1 Jan. 1998) 130
Cost/income ratio 66.5%
After-tax profit/average AUM 8.9 bp
Number of employees (31 Dec. 1997) 1,393
Pre-tax margin 32%
Personnel expenses/total operating expenses 57.8%
Personnel expenses/revenue 37.2%
Total assets under management CHF bn 263
Total discretionary funds CHF bn 186
– of which total mutual funds distributed CHF bn 60
Total advisory assets CHF bn 77
Growth in assets under management 21.1%
Growth in discretionary assets under management 17.5%
– of which is volume 6%
– of which is performance 11.5%
1997 results Discretionary assets under management grew 18% in 1997, 12% due to
market appreciation and foreign exchange movements and 6% stemming from net
new business. Net profit before extraordinary items and taxes increased 59% in 1997,
resulting from a 22% increase in revenue against an increase of 17% in total operating
expenses.
The growth in personnel expenses was offset by significant reductions in other oper-
ating expenses and in the cost for services from other business units of Credit Suisse
Group. The adjusted pre-tax gross margin improved from 26% in 1996 to 32%, while
after-tax profit to average assets under management improved from 7.8 basis points to
8.9 basis points.
INCOME STATEMENT Pro forma1997 1996 Change
in CHF m in CHF m in %
Management and advisory fees 481 375 28
Net mutual fund fees 265 247 7
Other revenues 42 24 75
REVENUE 788 646 22
Personnel expenses 293 223 31
Other operating expenses 214 211 1
TOTAL OPERATING EXPENSES 507 434 17
GROSS OPERATING PROFIT 281 212 33
Depreciation and write-offs on non-current assets 17 13 31
Valuation adjustments, provisions and losses 0 33
PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 264 166 59
Extraordinary income 9
Extraordinary expenses 23
Taxes 36
NET OPERATING PROFIT (before minority interests) 214
– of which minority interests 0
NET OPERATING PROFIT (after minority interests) 214
25
INSURANCE FOR PRIVATE AND CORPORATE CUSTOMERS WORLDWIDE
Winterthur Group recorded very good results in 1997, a year which also
saw some fundamental decisions for the future. The insurance areas of
Credit Suisse Group were included in Winterthur’s consolidated results
for the first time. Despite an increase in provisions, net operating profit
after minority interests rose by 31% to CHF 674 m. After taking into
account exceptional items totalling CHF 356 m, Winterthur posted an
annual profit of CHF 318 m. Shareholders’ equity excluding minority
interests grew by 53% to CHF 8 bn. The exploitation of potential in the
field of bancassurance ranks among the major challenges and
opportunities both for 1998 and in the years ahead.
26
Structure strengthened and management rejuvenated At the start of 1998
Winterthur Group revised its organisational structure and realigned its Executive Board.
A Corporate Centre was formed with responsibility for Group activities. The operational
divisions were regrouped in line with the strategic priorities.
In addition, effective 1 April 1998 a product centre for individual and group life
business was created, the result of the implementation of Credit Suisse Group’s
bancassurance strategy. The new division unites the relevant business activities of
Winterthur Life, Winterthur-Columna and CS Life. Its products will be distributed via
Winterthur’s sales network and those of the banking units of Credit Suisse Group. The
new division will rank among the leading providers of individual and group life insurance
solutions in Switzerland. The expansion of its operations into the international markets is
planned.
Merger moving ahead systematically The merger between Credit Suisse Group
and Winterthur in line with the bancassurance strategy is proceeding systematically and
successfully. The first measures have already been implemented, for example product
launches, combining banking and insurance expertise. In addition, after positive experi-
ence in pilot offices, at least 80 Credit Suisse branches and Winterthur agencies will
be brought together in shared premises over the next few months, offering substantial
potential for increased revenue while also bringing cost savings.
Very good year for operational business Aided by favourable conditions in the
international insurance and financial markets, the majority of Winterthur operating units
succeeded in improving their results and competitive position. In Switzerland, the
merger of non-life and life distribution strengthened the market position considerably
and boosted cross-selling. Moreover, Winterthur’s leading position in the Swiss market
was reinforced thanks to the establishment of Winterthur-Columna, the joint life and
pension company of Winterthur and Credit Suisse, and collaboration with the Swiss
post office.
At DBV-Winterthur in Germany, the participation portfolio was streamlined and business
geared more closely to market and customer needs. Co-operation with Commerzbank
is continuing to move forward successfully. In Italy and Spain the restructuring
measures, which were rapidly implemented, bore fruit, while, in Belgium, the purchase
of Josi in 1996 saw the start of a business refocusing. In eastern Europe, Winterthur is
active in the Czech Republic, Hungary and, since 1997, also in Poland. The main
features of 1997 in the South-East Asia/Pacific region were the successful business
performance in Hong Kong and the launch of operations in China. Winterthur Interna-
tional elaborated a more aggressive strategy, strengthening its structures and extending
its range of products and services to multinationals.
1997 results All figures cover the accounts of both Winterthur and CS Life. Net
operating profit after minority interests rose by 31% to CHF 674 m. After taking into
account exceptional items totalling CHF 356 m after tax for one-time costs in connec-
tion with the merger with Credit Suisse Group (CHF 300 m) and for IT restructuring in
preparation for the year 2000 and for the introduction of the euro (CHF 56 m),
Winterthur recorded an annual profit of CHF 318 m.
Gross premiums advanced by approximately 3% to CHF 28 bn. Recording 6%
growth, life operations showed substantially greater expansion than non-life business
(up 0.2%). Investments, which account for roughly 90% of total assets, increased by
13% to CHF 102 bn. The structure of the investment portfolio also changed, with the
stock allocation rising from 17% to some 23%. The real estate and mortgage portfolios
decreased slightly in proportion. The sharp rise in shareholders’ equity (excluding minority
interests) by 53% to CHF 8 bn reflects the excellent performance of the investment
portfolio, the profit for the year and the conversion of a convertible bond issue. The
technical provisions rose by 9% to CHF 91 bn.
KEY FIGURES 1997 1996 Changein CHF m in CHF m in %
Gross premiums 27,608 26,874 3
Net investment income 7,395 5,890 26
Net operating profit (after minority interests) 674 515 31
Annual profit 318 515 –38
Investments 102,119 90,401 13
Technical provisions 91,228 83,850 9
Debentures outstanding 922 1,451 –36
Shareholders’ equity (excl. minority interests) 7,924 5,172 53
Change1997 1996 in %
Number of employees (31 Dec.) 27,565 25,719 7
27
28
Annual comparisons by line of business limited As a result of the merger of
Neuchatel with the Winterthur companies in the 1997 financial year, annual comparisons
of accounts by line of business are limited.
1997 results in non-life business The key performance benchmark, the combined
ratio (the sum total of claims ratio, expense ratio and dividends to policyholders in-
curred) again fell slightly from 107.7% to 107.5%. However, in this respect it should
be noted that major allocations were made to the technical provisions, which can be
seen from the improvement in the insurance reserve ratio (ratio of technical provisions
to net earned premiums) from 177% to 182%. Net investment income increased by
33% on the previous year. Overall, the profit in non-life business (before extraordinary
items, taxes and minority interests) amounted to CHF 904 m.
BALANCE SHEET 31 Dec. 1997 31 Dec. 1996 Changein CHF m in CHF m in %
Investments 102,119 90,401 13
– non-life 28,122 25,687 9
– life 73,997 64,714 14
Policy loans 902 710 27
Deposits with reinsured companies 337 486 –31
Cash at banks and in hand 770 707 9
Receivables from insurance companies 833 681 22
Receivables from agents and policyholders 2,775 2,456 13
Sundry debtors 1,514 1,690 –10
Accrued income and prepaid expenses 2,314 2,166 7
Office and EDP equipment 345 329 5
Other assets 1,178 1,076 9
TOTAL ASSETS 113,087 100,702 12
Technical provisions 91,228 83,850 9
– non-life 24,205 23,079 5
– life 67,023 60,771 10
Deposits received from reinsurance ceded 750 691 9
Convertible bond and warrant issues 922 1,451 –36
Payables to insurance companies 707 975 –27
Payables to agents and policyholders 2,280 1,658 38
Sundry creditors 2,319 1,787 30
Accrued expenses and deferred income 1,771 948 87
Other liabilities 3,623 2,907 25
Shareholders’ equity 9,487 6,435 47
Minority interests 1,563 1,263 24
Shareholders’ equity after minority interests 7,924 5,172 53
TOTAL LIABILITIES 113,087 100,702 12
1997 results in life business Gross premiums rose by 6% to CHF 12.1 bn. The
expense ratio remained virtually unchanged at 10.4% (1996: 10.5%). Claims incurred
and the change in the actuarial provision rose more sharply than premiums, although
this could be more than compensated for by the outstanding financial results. Net
investment income rose by 23%. The profit in life business (before extraordinary items,
taxes and minority interests) amounted to CHF 399 m.
INCOME STATEMENT LIFE OPERATIONS1997 1996 Change
in CHF m in CHF m in %
Gross premiums 12,130 11,425 6
Net premiums 12,072 11,279 7
Premiums earned, net 11,961 11,236 6
Claims incurred, net –6,151 –5,558 11
Change in actuarial provision, net –7,305 –6,582 11
Allocation to participation, net –1,628 –1,532 6
Operating expenses, net (including commissions paid) –1,251 –1,187 5
Net investment income 5,029 4,079 23
Interest on deposits and bank accounts 118 109 8
Interest on bonuses credited to policyholders –124 –159 –22
Other interest paid –189 –151 25
Other income and expenses (including exchange rate differences) –61 120 –151
PROFIT (before extraordinary items, tax, minority interests) 399 375 6
Investments 73,997 64,714 14
Technical provisions 67,023 60,771 10
INCOME STATEMENT NON-LIFE OPERATIONS1997 1996 Change
in CHF m in CHF m in %
Gross premiums 15,478 15,449 0
Net premiums 13,694 13,414 2
Premiums earned, net 13,297 13,071 2
Claims incurred, net –10,154 –9,787 4
Dividends to policyholders incurred, net –295 –389 –24
Operating expenses, net (including commissions paid) –3,955 –3,998 –1
UNDERWRITING RESULT, NET –1,107 –1,103 0
Net investment income 2,144 1,614 33
Interest on deposits and bank accounts 128 129 –1
Other interest paid –71 –64 11
Other income and expenses(including exchange rate differences) –190 42 –551
PROFIT (before extraordinary items, tax, minority interests) 904 618 46
Investments 28,122 25,687 9
Technical provisions 24,205 23,079 5
29
Credit Suisse Group throughout its various business units pursues a
balanced and effective risk management policy framework with clear
goals of capital preservation and capital optimisation. The Group’s risk
management approach is aimed at meeting the challenges of a rapidly
changing market environment and at maximising the potential for the
most efficient allocation and management of economic capital
throughout the entire Group to the benefit of shareholders and other
stakeholders.
CREDIT SUISSE GROUP RISK MANAGEMENT
Overview of risk management Taking financial risks and proactively managing
these risks is the Group’s prime business. Credit Suisse Group perceives risk
management as an ongoing process. It starts with the definition of business policies
and strategies and proceeds with the identification, assessment, management and
control of all risks associated with the Group’s activities. The cycle closes with the
reaffirmation and validation of objectives and strategies.
The primary objectives of Credit Suisse Group’s proactive approach to risk man-
agement are to preserve the Group’s capital base and to optimise the allocation of
regulatory and economic capital to the individual business units. Credit Suisse Group
seeks to manage risks on a prudent basis. Strategic plans have been adopted to
enhance risk management capabilities to a “best practice” level throughout the Group
with the goal of staying at the forefront of the industry.
The Board of Directors is responsible for the determination of the general risk
policy and the strategic risk management organisation. Certain risk management and
control responsibilities have been delegated to the Group Chief Risk Officer and the
Group Risk Coordination Committee (GRCC). The GRCC defines overall Group risk
policies and approves general instructions and standards concerning risk management
at the business unit level. It also reviews Credit Suisse Group’s capital management
process. Group Risk Management works closely with both the GRCC and the individual
business units to ensure an effective and coherent implementation of the Group’s risk
management strategy.
Economic capitalEconomic capital at Credit SuisseGroup Risk Management is de-fined as an equity reserve or cushion for unexpected losses. It ensures that Credit SuisseGroup – even under extremeconditions – remains solvent andstays in business. It is importantto recognise that economic capital is distinct from regulatorycapital, which focuses on marketand credit risk. Conceptually,economic capital is comprehen-sive and covers all significantrisks.
30
As the main operating units, the business units of Credit Suisse Group are responsible
for the implementation of the Group’s risk management strategy. Each business unit
has a risk management structure in place – including the appropriate tools, systems,
procedures and controls – that is ideally suited to managing the risks taken in that
particular business unit. The key to successful risk management at the business unit
level has been the design of a complementary “top-down strategic” and “bottom-up
tactical” risk management approach with formal policies and procedures addressing all
areas of significant risk. This in turn has fostered a risk management culture – which is
an important part of Credit Suisse Group’s overall corporate culture – and the setting up
of a corresponding organisational and operational structure. The structure is robust and
flexible enough to cope with changes in the business environment and allows for the
global integration of the various risks that can affect the Group’s portfolio. The Group
also leverages the vast experience and know-how of Credit Suisse Financial Products,
a subsidiary of Credit Suisse First Boston, which is an acknowledged market leader in
risk management, particularly of complex transactions.
In the normal course of its banking and insurance activities, Credit Suisse Group
engages in transactions that give rise to various types of risks, including market risk
and credit risk, operational risk and insurance risk. These risks vary as to relevance
between the various business units. Group Risk Management attempts to harmonise
the risk management approach of the different risk types.
Market risk Market risk is the risk of loss arising from changes in the values of
financial instruments resulting from the movement of market rates, prices and volatili-
ties. The majority of Credit Suisse Group’s market risk is concentrated in the Credit
Suisse First Boston business unit, the Group’s globally active trader and provider of
corporate and investment banking services. Credit Suisse First Boston devotes con-
siderable resources to ensure that market risk is comprehensively captured and under-
stood, accurately modelled and effectively managed. Credit Suisse First Boston’s in-
dependent Market Risk Management (MRM) department consolidates exposures arising
from all trading portfolios and geographical centres and evaluates the firm’s aggregate
Value at Risk (VaR) on a daily basis. In addition, MRM undertakes regular scenario
analysis of all major portfolios.
20%
2%
59%
1%
1997 AVERAGE MARKET RISKS OF CSFB1
Total interest ratesTotal foreign exchangeTotal equity
Total commoditiesTotal cross risk
18%
1 excluding correlation effects between the risk factors
31
These measurement techniques can be summarised as follows:
– The Value at Risk method (VaR method) estimates the potential loss arising from the
portfolio for a predetermined probability and holding period, using market movements
determined from historical data.
– The Scenario Analysis method estimates the potential loss after stressing market
parameters. These market parameter movements are derived from past extreme
events and hypothetical scenarios.
Credit Suisse First Boston has used a VaR methodology to model market risk since
1995, Credit Suisse Financial Products since the business was established in 1990.
Credit Suisse First Boston’s VaR is defined as the 99th percentile greatest loss that
may be expected on the portfolio over a ten-day holding period. Two years of underlying
data are used to derive the market movements used for this calculation. During 1997
Credit Suisse First Boston began migrating from a variance-covariance methodology to
a historical simulation approach for its derivatives trading subsidiary Credit Suisse
Financial Products.
Market risk limits are structured at multiple levels – from trading desks up to the
business unit level – and can be regarded as risk flags which are used to identify
potential risk concentrations. Limits also assist in allocating risk clusters, e.g. to indivi-
dual business units or regions and trading desks.
The chart shows the relationship between daily trading revenue and one-day VaR
over the course of 1997. This type of comparison between daily revenue and the VaR
(“backtesting”) is the method proposed by the Basle Committee on Banking Super-
vision for the measurement of the accuracy of the VaR model.
Variance-covariance versus historical simulationVariance-covariancemethods are based oncalculating volatilities ofthe variables under con-sideration (e.g. equityindices, FX rates), andcorrelation matrices forchanges in these vari-ables. They assume thatthe changes in thesevariables are normally orlognormally distributed.
Historical simulationuses actual historicalchanges in these vari-ables over the observationperiod, and so avoids assumptions about theirdistribution. Historicalsimulation implicitly allowsfor correlations withouthaving to rely on a corre-lation matrix.
RELATIONSHIP BETWEEN DAILY REVENUE AND VaR ESTIMATE FOR CREDIT SUISSE FIRST BOSTON
Daily revenue
1st quarter 1997
CHF m
250
200
150
100
50
–
–50
–100
–150
–200
–250
–300
One-day VaR
2nd quarter 1997 3rd quarter 1997 4th quarter 1997
32
The VaR measure is intended to be larger than all but a certain fraction – determined by
the confidence level – of trading outcomes. The backtesting analysis shows less than
the model’s expected number of exceptions (none in 1997). This suggests that Credit
Suisse First Boston’s VaR model is sound and meets regulatory standards. The average
one-day VaR estimate was CHF 201.9 m, and the minimum and maximum levels were
CHF 139.2 m and CHF 257.7 m respectively.
The average daily trading revenue was CHF 25.1 m, and the minimum and
maximum levels were CHF –102.6 m and CHF 120.0 m respectively. Credit Suisse
First Boston’s frequency distribution of daily trading revenue for 1997 is illustrated on
the right.
The Basle Committee on Banking Supervision published the “Amendment to the
Capital Accord to Incorporate Market Risks” in January 1996. Following a review and
confirmation of compliance with the Swiss equivalent of the BIS guidelines by Credit
Suisse First Boston’s Banking Law Auditors, the Federal Banking Commission has
allowed Credit Suisse First Boston to commence using its internal VaR models to
calculate market risk capital with effect from 1 January 1998. The BIS ratios at
31 December 1997 (see Financial Highlights 1997 on page 1) have been calculated
under the old regulatory framework for market risk. The capital ratios for Credit Suisse
Group under the new regulatory framework are 10.3% (old: 10.9%) for the BIS tier 1
ratio and 15.8% (old: 16.8%) for the BIS total capital ratio.
Scenario analysis is an essential component of Credit Suisse First Boston’s mar-
ket risk measurement framework. Using this technique, market risk is measured by
dynamically revaluing each portfolio after stressing the market data parameters. The
market data is changed according to a predefined set of scenarios. Scenario analysis
supplements the VaR approach as it allows risk to be viewed in cases where, for
example, market conditions are disrupted. Many of the scenarios are based on extreme
macroeconomic events from the past, e.g. the 1987 stock market crash and the 1991
Gulf war. Scenarios also exist that can assess the impact of events that could occur in
the near future, e.g. postponement of European Monetary Union.
In the disrupted equity market conditions that began in the last quarter of 1997,
scenario results for emerging market difficulties were particularly useful. In addition,
a scenario which quantified the impact on projected losses of partially re-hedging
portfolios as markets fell and a scenario that measured the impact of a stock market
bounce back also provided management with useful information for managing the
business during the Asian crisis.
DISTRIBUTION OF CSFB’S DAILY TRADING REVENUE 1997
Frequency of trading revenue
0
0
50 100–50–100
5
10
15
20
25
30
35
40
45
No. of days
CHF m
33
Credit risk Credit risk is the risk that a borrower (or counterparty) is unable to meet
its financial obligations. In the event of a default, a bank generally incurs a loss equal to
the amount owed by the borrower less a recovery amount resulting from foreclosure,
liquidation or restructuring of the company. The majority of Credit Suisse Group’s credit
risk is concentrated in the Credit Suisse and Credit Suisse First Boston business units.
Over the past three years, Credit Suisse Group has been engaged in a review of
best practice in the area of credit risk management. This effort has culminated in a new
Credit Risk Management Framework for the Group. We believe that this new approach
to assessing and managing credit risk is at the cutting edge of current thinking in risk
management and will help drive the Group’s profitability over the coming years. Credit
Suisse Group has implemented the Credit Risk Management Framework for MIS pur-
poses in December 1996. The framework is continually being refined.
Credit Suisse Group’s Credit Risk Management Framework comprises four core
components: (i) an individual credit limit system, (ii) country and regional concentration
limits, (iii) a credit risk provisioning methodology and (iv) a portfolio optimisation and
pricing methodology.
A system of individual credit limits (i) is the traditional means of managing credit
risk. Credit Suisse Group’s limit system also aims at optimising portfolio diversification.
A comprehensive set of country and regional limits (ii) is in place to address concentra-
tion issues in the portfolio. The third aspect of the Credit Risk Management Framework
is an appropriate credit risk provisioning methodology (iii). Annual credit provisions
(ACP) equal expected credit losses (derived from historical actual losses averaged over
many years). The annual expected loss of the performing portfolio is a predictable risk,
which is essentially a cost of doing credit-related business. Actual losses which occur
in any one year may be higher or lower than this amount, depending on the economic
environment, interest rates, etc. In addition to the expected loss, an indicative worst
case loss is also calculated, which is called the incremental credit reserve (ICR). The
ICR is calculated over a one-year time horizon based on the 99th percentile of the cre-
dit default loss distribution and historical recovery rates. The difference between the
ICR and the ACP reflects the unexpected loss level. As this framework is used for
management information purposes only, the ICR is not shown as a separate position
on the legal financial statement. The fourth aspect of the Credit Risk Management
Framework is the pricing and optimisation of the portfolio and the consideration of risk
and reward (iv).
Credit Suisse Group’s Credit Risk Management Framework is a vital tool to man-
age the Group’s credit risk on an ongoing basis and provide shareholders with a more
transparent picture of the economies of credit risk borne by the Group. The framework
allows transactions involving credit risk to be more correctly priced by performing the
risk/return calculation to ensure that an adequate return is being achieved for the level
of risk taken, including the diversification impact on the portfolio.
Credit Suisse: funded loans (incl. mortgages)
AAA AA A BBB BB B <B
30
25
20
15
10
5
0
Credit Suisse First Boston: funded loans and related exposures
R1 R2 R3 R4 R5 R6 R7
Internal ratings R1-R7 are approximately equivalent to the respective external ratings
CREDIT EXPOSURE OF THE PERFORMING PORTFOLIO BY INTERNAL RATING as at 31 December 1997
% of performing
portfolio
Credit Suisse First Boston: funded and unfunded committed and funded uncommitted, loans and related exposures, mark-to-market receivables to counterparties.
AAA AA A BBB BB B/ CCC
<CC
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0 N1 N2 N3 N4 N5 N6 N7
Internal ratings N1-N7 are approximately equivalent to the respective external ratings
CSFB COUNTRY EXPOSURE BY INTERNAL RATING as at 31 December 1997
CHF m
34
The current implementation of the Credit Risk Management Framework covers substan-
tial parts of the credit exposures of Credit Suisse, Credit Suisse Private Banking and
Credit Suisse First Boston’s global non-bank on-balance sheet credit exposure.
Based on these exposures, the two charts to the right show the relationship between
the ACP budget 1997, actual credit losses 1997 and the ACP budget 1998, as
well as the change in the ICR between the end of 1996 and the end of 1997. Credit
Suisse Financial Products has fully implemented the Group’s Credit Risk Management
Framework.
CREDITRISK + – a state-of-the-art credit risk measurement and management tool
developed by Credit Suisse Financial Products – is a core component of this new
framework. CREDITRISK + was made available to the public in 1997.
Operational risk Operational risk is mitigated through effective and comprehensive
policies, procedures and a system of internal controls. These include risk management
information systems, computer systems, communication networks, fraud detection and
segregation of duties. Trading units, for example, are kept strictly separate from back-
office operations, with each area reporting to a different line of management. Indepen-
dent pricing controls are in place and technical and organisational control mechanisms
ensure that transactions carried out by traders are processed promptly, correctly and
without omission.
Settlement risk All business units engaging in trading activities monitor settlement
risk for its credit components. Late receipts of funds are monitored with the aim of
detecting possible default patterns in the making. To reduce settlement amounts, pay-
ment netting is extended to a wider number of counterparties. Netting, where legally
enforceable, has been named a priority for all business units. Operationally, settlement
risk is reduced by Credit Suisse Group’s new structure, resulting in fewer and more
specialised entities. In addition, the number of bank group limits of Credit Suisse Group
was reduced from more than 2,500 to less than 1,800 by the end of 1997.
Legal risk Credit Suisse Group’s business units are reducing and minimising legal risk
by using appropriate documentation – standard master agreements and individual trade
confirmations – and by continuous consultation with internal and external counsel to
analyse legal risk, improve documentation and strengthen transaction structures.
ACP budget 1997
CS
1,000
800
600�
400�
200
0
Actual credit losses 1997
PERFORMING PORTFOLIO: ACP BUDGET 1997, ACTUAL CREDIT LOSSES 1997 AND ACP BUDGET 1998
CHF m
ACP budget 1998
CSGCSPB CSFBBU BU BU
ICR 31 Dec. 1996
CS
2,000
1,500
1,000�
500
0
ICR 31 Dec. 1997
INCREMENTAL CREDIT RESERVE (ICR) AT THE END OF 1996 AND 1997
CHF m
CSGCSPB CSFBBU BU BU
In 1996 the ICR for CS and CSPB was calculated jointly and therefore a separate ICR is not shown for CSPB. The calculation of the ICR was refined during 1997.
35
36
Asset and liability management The balance sheet interest rate risk is monitored
and managed by the individual business units within specifically designated centres of
competence; responsibility lies with the respective Asset and Liability Management
Committees. The management of interest rate risk is primarily based on mark-to-
market methods. Swaps, FRAs and options are used as hedging instruments.
With regard to structural balance sheet risk, Credit Suisse and Credit Suisse
Private Banking use market risk measurement methodologies. For asset and liability
management purposes, VaR is calculated based on the 95% confidence level and a
twenty-day holding period. Two years of underlying data are used to derive the market
movements used for this calculation.
Large portions of the retail portfolios of Credit Suisse and Credit Suisse Private
Banking consist of non-maturing accounts (e.g. variable-rate mortgages and savings
products). Their factor sensitivities are modelled with replicating portfolios based on the
effective repricing behaviour of non-maturing accounts.
Winterthur Group As part of the ongoing integration process of Winterthur into
Credit Suisse Group, Group Risk Management is ensuring that Winterthur Group’s
risk management approach fits into the overall risk management structure of Credit
Suisse Group.
Winterthur Group’s risk management goals – capital preservation and capital
optimisation – are fully compatible with those of Credit Suisse Group. The overall risk
management policy framework focuses on identification, assessment, management
and control of all the risks associated with Winterthur Group’s activities.
Winterthur Group makes use of diversification effects and reinsurance – classic
reinsurance as well as alternative risk transfer products – to optimise its risk profile.
Product design is also used to manage Winterthur Group’s risk. Limit systems – in
addition to comprehensive internal investment policies and restrictions issued by
national or local insurance regulators – are used to control market risk and credit risk.
Certain financial risks are quantified with simulation models and scenario analysis.
This approach allows comparison and aggregation of different risk types – including
insurance risk – at the level of Credit Suisse Group.
Winterthur Group utilises derivative products for hedging purposes only, mostly in
connection with insurance products, investment transactions and bond issues.
Outlook It is part of Credit Suisse Group’s strategy to be a leader in the management
of market risk, credit risk, operational risk and insurance risk. Significant personnel and
technological resources are focused on ensuring that Credit Suisse Group continues to
enhance its risk management capabilities and thereby remains at the forefront of the
industry. To achieve this goal, Credit Suisse Group has developed an integrated frame-
work of best practice risk management, risk policies, methodologies and infrastructure.
Credit Suisse Group also intends to link together risk management, performance mea-
surement and capital allocation using a risk and economic capital management frame-
work, with economic capital usage as a common denominator for all risks. Together
with the proactive risk management culture and the appropriate quantitative tools, the
economic capital management framework will support the decision-making process of
Credit Suisse Group’s Executive Board, thus linking risk management to the Group’s
shareholder value strategy.
37
The historical investigation into the conduct of the Swiss banks during
the Second World War is of the utmost importance to Credit Suisse
Group, to the Swiss financial centre and ultimately to Switzerland as a
whole. The way we tackle the unresolved issues and problems now will
have a decisive impact on our future. Significant progress has already
been made: the Swiss banks have published the names of the holders of
dormant accounts worldwide, and the first payments have been made
from the humanitarian fund set up by the major banks for needy victims
of the Holocaust. The big banks involved in the US class actions have
expressed their willingness to enter into negotiations for a settlement.
THE ROLE OF THE SWISS FINANCIAL SERVICES INDUSTRY IN THE SECOND WORLD WAR
38
Historical investigations Since the spring of 1997, the discussion about the con-
duct of the Swiss banks during the Second World War, which originally focused on
moral issues, has gradually become less emotive. Over the last few months, the investi-
gations and other measures initiated by the banks, the Swiss business community and
the authorities have helped to foster an increasingly objective approach. In the long run,
these measures will be seen as the best response to questions about Switzerland’s
conduct in general and its handling of dormant accounts in particular.
Credit Suisse Group is determined to do whatever it can to aid the enquiries by
the experts of the Bergier Commission and Volcker Committee. In this spirit the bank
has restructured and expanded its archive, checked a huge number of documents and
made its files available for examination. Alongside these efforts, which have employed
up to 140 people at peak times, Credit Suisse Group’s own experts are working to give
the bank an overview of the most important historical facts.
Dormant accounts With hindsight it has to be conceded that for a long time the
Swiss banks devoted too little attention to the issue of dormant accounts, and that they
were often too inflexible and dogmatic, especially considering the highly sensitive back-
ground of the Second World War. In mid-1997 Credit Suisse Group established a spe-
cial subdivision for the investigation into dormant accounts. After the historical enquiries
have been concluded, this department’s main task will be to prevent accounts becom-
ing dormant in future and to minimise their number. Credit Suisse Group supports
efforts to create legislation which would allow the banks to hand over responsibility for
dormant assets to the authorities after a given period.
On 23 July 1997 the Swiss Bankers Association took the unprecedented step of
publishing worldwide a list of some 1,900 foreign holders of dormant accounts dating
from the Second World War era. On 31 October 1997 the names of more than 10,000
Swiss holders and 3,700 foreign holders of dormant accounts and savings books were
published. By December 1997 the first of the 6,000 claims submitted to the contact
offices had already been settled.
The banks’ investigation into dormant assets is being supervised by the Volcker Com-
mittee. The Swiss banks are determined that the historical investigation continues as
planned and that it can be concluded within a reasonable period of time.
Class actions in the USA The class actions against the three Swiss big banks have
not yet been accepted by the presiding judge. These actions have been accompanied
by threats of sanctions in a number of US states and cities. With the mediation of US
Undersecretary of State Stuart Eizenstat, talks with the plaintiffs and the World Jewish
Congress have begun. At the end of March 1998 the big banks expressed their willing-
ness to reach a fair settlement. They are negotiating exclusively on their behalf and only
in respect of the issues which concern themselves.
First payments out of the humanitarian fund The purpose of the humanitarian
fund for needy victims of the Holocaust – with resources at present of CHF 275 m
donated by the major Swiss banks, Swiss business and private individuals – is to pro-
vide rapid assistance to needy survivors of the Holocaust. Payments are initially being
concentrated in eastern Europe. On 18 November 1997 the first payments were made
through the World Jewish Restitution Organization to 80 Jewish victims of the Shoa
living in Riga, Latvia. In the meantime, further payments have also been made.
Important events and measures
February 1997 The three major Swiss banks launch the humanitarian fund
for needy victims of the Holocaust with a deposit of
CHF 100 m.
March 1997 The Swiss Federal Council proposes the creation of a
Solidarity Fund.
May 1997 The Eizenstat report is published. It deals with the
USA’s role in the handling of Nazi assets and on the
policy of the other Allies and neutrals in the Second
World War. Switzerland is examined in particular detail.
July 1997 A list of the names of 1,900 foreign holders of dormant
accounts is published around the world by the Swiss Bankers
Association.
October 1997 The Swiss Bankers Association publishes a second list
containing the names of more than 10,000 Swiss holders and
3,700 foreign holders of dormant accounts and savings books.
November 1997 First payments from the humanitarian fund for needy
victims of the Holocaust.
December 1997 Representatives of forty countries attend an international
conference on Nazi gold in London.
March/April 1998 Threats by US states and cities to impose sanctions on the
Swiss banks are put on hold. The big Swiss banks express
their willingness to enter into talks with class action lawyers
and the World Jewish Congress.
39
CREDIT SUISSE GROUP AND THE COMMUNITY
As an internationally active organisation, Credit Suisse Group operates
within a wide range of social and economic frameworks and is well
aware of its responsibilities towards the wider community. Switzerland
is of particular importance to Credit Suisse Group: with its nationwide
presence and 28,550 employees, it is one of the largest employers in the
country.
40
An attractive employer Credit Suisse Group aims to be an attractive employer for its
62,242 staff worldwide, offering stimulating employment and career opportunities in
banking and insurance. The merger with Winterthur has opened up new horizons for
Credit Suisse Group staff in the field of bancassurance. The Group places a great deal
of emphasis on training. In 1997 alone it took on around 400 new trainees and 200
graduate trainees in Switzerland. Credit Suisse Group places particular importance on
the promotion of equal opportunities in the workplace.
Commitment to the environment Credit Suisse Group has been actively committed
to environmental protection for over 20 years, incorporating ecological factors into its
operations. Particular attention is paid to reducing energy consumption and analysing
both credit and liability insurance applications for any potential environmental risks. In
1997 Credit Suisse Group became the first major bank in the world to be awarded an
environmental certificate, verifying that all its offices in Switzerland conform to the stan-
dards of ISO 14001.
Financial support – the Anniversary Foundation In 1997 Credit Suisse Group
supported a range of organisations and institutions dedicated to social, charitable,
humanitarian and cultural causes, with over 1,000 beneficiaries receiving a total of
around CHF 15 m. The Anniversary Foundation promoted numerous community
projects in different social and cultural fields.
Sponsorship and social commitment Thanks to the sponsorship activities of Credit
Suisse, some 28,000 people were able to attend over 200 sporting and cultural events
throughout Switzerland in 1997. In addition to its extensive involvement in gymnastics,
handball and classical music, Winterthur joined Credit Suisse as a sponsor of the Tour de
Suisse and the Swiss national football teams. It also held its traditional “WinConference”,
with members of the business community and the world of politics coming together to
discuss “Revolution-Resurgence”. Credit Suisse Private Banking focused on selected
cultural and sporting events in the fields of golf, equestrianism, the visual arts and clas-
sical music, while Credit Suisse First Boston supported more than 500 organisations.
Numerous members of staff also gave their time to charitable causes, non-profit
organisations and neighbourhood centres.
CREDIT SUISSE GROUP PROJECTS
Credit Suisse Group focused on three major projects in 1997: the
implementation of the restructuring of banking operations launched
the previous year, preparation for the introduction of the euro, and
the adjustments associated with the advent of the new millennium.
Refocusing of banking operations The strategic refocusing of Credit Suisse Group
into four business units geared to the needs of specific customer segments and mar-
kets was rapidly and successfully implemented, with most of the associated measures
completed by the end of 1997. In 1998 work will be carried out particularly on projects in
the field of processing and information technology.
The strategies developed in collaboration with the social partners in respect of job
reductions to be implemented in Switzerland by the end of 1998 are working extremely
well. At year-end 1997, the planned loss of 2,100 jobs in Switzerland and 1,800 abroad
was more or less compensated for by new positions created as a result primarily of new
acquisitions and an increase in business volume.
The euro Preparation for the introduction of the euro has been fully under way for
some time now. This preparatory work is focusing on the adaptation of EDP systems,
the euro-compatibility of products and payment options, the restructuring of forex trad-
ing and securities processing, the expansion of distribution channels within the EMU
member states and the reappraisal of investment and risk policies.
Ready for the year 2000 The IT adjustment work begun as early as 1996 in advance
of the change-over to the year 2000 is proceeding to plan, with Group-wide evalua-
tions, code analyses, corrections and tests carried out in the course of 1997. Numerous
programs have already been released for operational use. The Group will be able to
complete the necessary work on schedule.
Credit Suisse Group took an exceptional charge in its 1997 accounts for IT restructuring
in preparation for the introduction of the euro and for the year 2000 of CHF 401 m.
41