Annual Report 2012 - Credit Suisse · 2017-07-07 · Annual Report 2012 - Credit Suisse Group AG &...

Annual Report2012Credit Suisse Group AG & Credit Suisse AG

Financial highlights

in / end of % change

2012 2011 2010 12 / 11 11 / 10

Net income (CHF million)

Net income attributable to shareholders 1,349 1,953 5,098 (31) (62)

of which from continuing operations 1,349 1,953 5,117 (31) (62)

Earnings per share (CHF)

Basic earnings per share 0.82 1.37 3.91 (40) (65)

Diluted earnings per share 0.81 1.36 3.89 (40) (65)

Return on equity (%)

Return on equity attributable to shareholders 3.9 6.0 14.4 – –

Core Results (CHF million) 1

Net revenues 23,606 25,429 30,625 (7) (17)

Provision for credit losses 170 187 (79) (9) –

Total operating expenses 21,557 22,493 23,904 (4) (6)

Income from continuing operations before taxes 1,879 2,749 6,800 (32) (60)

Core Results statement of operations metrics (%) 1

Cost/income ratio 91.3 88.5 78.1 – –

Pre-tax income margin 8.0 10.8 22.2 – –

Effective tax rate 26.4 24.4 22.8 – –

Net income margin 2 5.7 7.7 16.6 – –

Assets under management and net new assets (CHF billion)

Assets under management from continuing operations 1,250.8 1,185.2 1,205.3 5.5 (1.7)

Net new assets 10.8 46.6 62.4 (76.8) (25.3)

Balance sheet statistics (CHF million)

Total assets 924,280 1,049,165 1,032,005 (12) 2

Net loans 242,223 233,413 218,842 4 7

Total shareholders’ equity 35,498 33,674 33,282 5 1

Tangible shareholders’ equity 3 26,866 24,795 24,385 8 2

Book value per share outstanding (CHF)

Total book value per share 27.44 27.59 28.35 (1) (3)

Tangible book value per share 3 20.77 20.32 20.77 2 (2)

Shares outstanding (million)

Common shares issued 1,320.8 1,224.3 1,186.1 8 3

Treasury shares (27.0) (4.0) (12.2) – (67)

Shares outstanding 1,293.8 1,220.3 1,173.9 6 4

Market capitalization

Market capitalization (CHF million) 29,402 27,021 44,683 9 (40)

Market capitalization (USD million) 32,440 28,747 47,933 13 (40)

BIS statistics (Basel II.5) 4

Risk-weighted assets (CHF million) 224,296 241,753 247,702 (7) (2)

Tier 1 ratio (%) 19.4 15.2 14.2 – –

Core tier 1 ratio (%) 15.5 10.7 9.7 – –

Dividend per share (CHF)

Dividend per share 0.75 5 0.75 6 1.30 6 – –

Number of employees (full-time equivalents)

Number of employees 47,400 49,700 50,100 (5) (1)

1 Refer to “Credit Suisse reporting structure and Core Results” and “Core Results” in II – Operating and financial review for further information on Core Results. 2 Based on amountsattributable to shareholders. 3 A non-GAAP financial measure. Tangible shareholders’ equity is calculated by deducting goodwill and other intangible assets as shown on our balancesheet from total shareholders’ equity. 4 Under Basel II.5 since December 31, 2011. Previously reported under Basel II. Refer to “Capital management” in III – Treasury, Risk, Balancesheet and Off-balance sheet for further information. 5 Proposal of the Board of Directors to the Annual General Meeting on April 26, 2013. Refer to “Capital trends and capitaldistribution proposal” in II – Operating and financial review – Core Results – Information and developments for further information. 6 Paid out of reserves from capital contributions.

Annual Report 2012

5 Message from the Chairman and the Chief Executive Officer

8 Credit Suisse at a glance

I9 Information on the

company

10 Strategy13 Our businesses22 Organizational and regional

structure24 Regulation and supervision37 Risk factors

II47 Operating and financial

review

48 Operating environment51 Credit Suisse55 Core Results (including

Overview of results)68 Private Banking &

Wealth Management79 Investment Banking84 Corporate Center85 Assets under management88 Critical accounting

estimates

III95 Treasury, Risk, Balance

sheet and Off-balancesheet

96 Liquidity and fundingmanagement

102 Capital management121 Risk management149 Balance sheet, off-balance

sheet and othercontractual obligations

IV153 Corporate Governance

and Compensation

154 Corporate Governance186 Compensation

V221 Consolidated

financial statements – Credit Suisse Group

223 Report of the StatutoryAuditor

225 Consolidated financialstatements

233 Notes to the consolidatedfinancial statements

379 Controls and procedures380 Report of the Independent

Registered PublicAccounting Firm

VI381 Parent company

financial statements – Credit Suisse Group


385 Parent company financialstatements

387 Notes to the financialstatements

399 Proposed appropriation ofretained earnings andcapital distribution

400 Report on the conditionalincrease of share capital

VII401 Consolidated

financial statements – Credit Suisse (Bank)


405 Consolidated financialstatements

413 Notes to the consolidatedfinancial statements

493 Controls and procedures494 Report of the Independent

Registered PublicAccounting Firm

For the purposes of this report, unless the context otherwise requires, the terms “Credit Suisse Group”, “Credit Suisse”, “the Group”, “we”, “us” and “our” meanCredit Suisse Group AG and its consolidated subsidiaries. The business of Credit Suisse AG, the Swiss bank subsidiary of the Group, is substantially similar tothe Group, and we use these terms to refer to both when the subject is the same or substantially similar. We use the term “the Bank” when we are referring onlyto Credit Suisse AG, the Swiss bank subsidiary of the Group, and its consolidated subsidiaries. Abbreviations and selected qterms are explained in the List ofabbreviations and the Glossary in the back of this report. Publications referenced in this report, whether via website links or otherwise, are not incorporated intothis report. In various tables, use of “–” indicates not meaningful or not applicable.

VIII495 Parent company

financial statements – Credit Suisse (Bank)


499 Financial review500 Parent company financial

statements 503 Notes to the financial

statements512 Proposed appropriation of

retained earnings

IX513 Additional information

514 Statistical information534 Other information

A-1 Appendix

A-2 Selected five-yearinformation

A-4 List of abbreviationsA-6 Glossary

A-10 Investor informationA-12 Financial calendar and

contacts

Corporate Responsibility Report 2012 Company Profile 2012

Corporate Responsibility Report and Company ProfileFor a detailed presentation on how the Group assumes its diverse social andenvironmental responsibilities when conducting its business activities, refer tothe Corporate Responsibility Report 2012. This publication is complemented by our Responsibility Chronicle that adds a multimedia dimension to the publication by providing a selection of reports, videos and picture galleries thatfocus on our international projects and initiatives. The Company Profile 2012 isenclosed in the Corporate Responsibility Report and contains key financial figuresas well as strategic information. www.credit-suisse.com/responsibility

Annual ReportThe Annual Report 2012 is a detailed presentation of the Group’s annual finan-cial statements, company structure, corporate governance and compensation practices, treasury and risk management framework and a review of our operatingand financial results.

Cover: Inside courtyard of Uetlihof 2, Credit Suisse, Zurich, Switzerland.Annual Report2012

Brady W. Dougan, Chief Executive Officer (left) and Urs Rohner, Chairman of the Board of Directors.

5

Significant progress in transforming our bank We took further significant steps in 2012 to adapt our organi-zation to new regulatory requirements and the changing mar-ket environment, as well as to evolving client needs: p We further reduced our Basel III risk-weighted assets by

CHF 55 billion, ending 2012 with Group-wide risk-weighted assets of CHF 284 billion. With that we areclose to our target of less than CHF 280 billion in risk-weighted assets by year-end 2013.

p We strengthened our capital position by adding CHF 12.3billion in pro-forma Look-through Swiss Core Capital** andour capital program is on track to achieve the end-2018requirement of a 10% Swiss Core Capital ratio by mid-2013.

p We lowered our cost base by CHF 2.0 billion compared tothe adjusted* annualized run-rate for the first half of 2011and we are underway to achieve our CHF 4.4 billion run-rate reduction target by end-2015.

p We adapted the business models and organizational struc-ture of our businesses. We created an integrated PrivateBanking & Wealth Management division with a strongglobal footprint that will continue to be a key revenuedriver for the bank. We transformed our Investment Bank-ing division to be Basel III compliant and remain focusedon our market-leading, high-return businesses.

Throughout this transformation, we generated solid revenuesand an underlying* return on equity of 10% for the full year2012, and we maintained our strong market share momen-tum.

Message from the Chairmanand the Chief Executive Officer

Dear shareholders, clients and colleagues

2012 was a year of transition for the financial services indus-try, as banks sought to adapt to new regulatory requirements,changing macroeconomic conditions and evolving client needs.Especially following the escalation of the Eurozone debt crisis,there was further debate about the mode and pace of imple-mentation of the Basel III regulatory framework and the Swiss“Too Big to Fail” legislation. In Switzerland, developments inthe cross-border wealth management business were driven bythe focus on finding a politically acceptable basis for the futureof this business and ongoing efforts to resolve legacy tax mat-ters, particularly with other European countries and the US.

In response to this changing industry landscape, we tookswift and decisive action during 2012 – building on the strate-gic steps we have been taking since 2008. In 2012, we sub-stantially strengthened our capital position, lowered our costbase, reduced balance sheet assets both in terms of totalassets and risk-weighted assets, and adapted the organiza-tional structure of our businesses. Throughout this transfor-mation, we maintained our strong market share momentumacross businesses, continued to invest in key markets andachieved consistent pre-tax income during 2012 on an under-lying* basis.

We now have a business model that is focused on thoseareas of business, where we can create value for clients andshareholders in the new environment. We are confident thatthe combination of a leading global wealth and asset manage-ment business for both private and institutional clients and afocused investment bank, together with our universal bank inour Swiss home market, provides us with a broad-based busi-ness structure and balanced income streams.

Developments in our individual businessesIn Private Banking & Wealth Management, we made goodprogress in adapting our business to the new environmentwhile continuing to achieve strong client momentum andimproving profitability. We are confident that the organizationalsteps that we announced in November 2012 to better managethe alignment of the products, advice and services that wedeliver to clients will further increase our productivity and effi-ciency. The integrated Private Banking & Wealth Managementdivision, which is led by Hans-Ulrich Meister and RobertShafir, comprises our Wealth Management Clients businessand Asset Management business, as well as our Corporate &Institutional Clients business in Switzerland. With its strongglobal presence, our Wealth Management Clients business isin a good position to operate successfully in the new regula-tory environment and to generate attractive returns despiteongoing margin pressure in the industry. Our Asset Manage-ment business is focused on liquid, scalable alternative invest-ment products and multi-asset class solutions and on closecollaboration with our other businesses. Asset Managementhas a particularly strong position in our Swiss home market.

In Investment Banking, we have transformed our businessmodel and are one of the first global banks to be Basel IIIcompliant. In 2012, we generated higher revenues and higherreturns on significantly less risk-weighted assets and on asubstantially reduced expense base. In November 2012, weannounced the appointment of Gaël de Boissard, head ofFixed Income, to the Executive Board to lead the InvestmentBanking division with Eric Varvel, who is continuing to run theEquities and Investment Banking departments within the divi-sion. The new organizational structure for Investment Bankingreflects the importance of the Equities and Underwriting &Advisory businesses. At the same time, it also recognizes theprogress we have made in evolving our Fixed Income businessto the new environment and the strength of this business forCredit Suisse. The streamlined organization builds on thestrategic steps we have taken since 2008 and helps us toexecute our business strategy, including continued marketshare growth, reallocation of capital toward a better balancebetween Private Banking & Wealth Management and Invest-ment Banking, and further progress in reducing costs.

We have also adapted our Shared Services functions to thechanging business priorities. Shared Services provides supportin the areas of finance, operations, human resources, legaland compliance, risk management and IT. In 2012, we cre-ated a combined Finance, Operations and IT function thatenables the bank to accelerate progress towards a commoninfrastructure, achieve greater coordination to partner with thebusiness efficiently and improve client access to our industry-

leading products. We also transferred further services to ourCenters of Excellence around the globe. We expect the strate-gic importance of these centers to increase further in future.

Our performance in 2012 For the full year 2012, we delivered underlying* Core pre-taxincome of CHF 5,008 million, more than double the CHF2,371 million in the prior year. Underlying* net income attribut-able to shareholders was CHF 3,577 million and underlying*return on equity was 10%. After taking account of significantnon-operating items, including fair value charges on own debtof CHF 2,939 million due to the improvement of our owncredit spreads, our reported Core pre-tax income was CHF1,879 million, net income attributable to shareholders wasCHF 1,349 million and return on equity was 3.9%.

In Private Banking & Wealth Management, net revenues ofCHF 13,541 million were stable compared to 2011, despitethe adverse impacts of continued low transaction levels andthe low interest rate environment. Total operating expenses ofCHF 9,584 million decreased 8% compared to the prior year,and 3% excluding the litigation provisions of CHF 478 millionin 2011 in connection with the German and US tax matters.The lower expenses reflect the efficiency measures we imple-mented throughout 2012, including the integration of ClaridenLeu. Private Banking & Wealth Management recorded netasset inflows of CHF 40.6 billion for the full year across allregions, particularly from emerging markets and the ultra-high-net-worth client segment. However, these inflows werepartly offset by significant items, including an outflow of a sin-gle low-margin client mandate in the amount of CHF 14.7 bil-lion in the first quarter of 2012, structural outflows of CHF6.9 billion in Western Europe and outflows of CHF 7.5 billionrelating to the integration of Clariden Leu. As a result, PrivateBanking & Wealth Management reported net new assets forthe full year 2012 amounting to CHF 10.8 billion.

For 2012, Investment Banking net revenues were CHF12,558 million, up 20% compared to the prior year. Thisincrease was primarily due to higher fixed income revenues,which reflected a more favorable market environment and thestrength of our repositioned franchise. Total operatingexpenses in Investment Banking declined by 4% compared tothe prior year, primarily due to the benefits of our efficiencymeasures. In 2012, Investment Banking reduced risk-weighted assets by USD 55 billion to USD 187 billion com-pared to 2011 and is continuing to make substantial progresstoward its target of reducing risk-weighted assets to belowUSD 175 billion by end- 2013. Investment Banking’s normal-ized* return on Basel III allocated capital improved to 14% in2012, excluding losses from the wind-down portfolio.

6

Editorial 7

* Underlying, normalized and adjusted results are non-GAAP financial measures. The table below includes a reconciliation of certain of these measures. For further information on the calculation of underlying, normalized and adjusted measures, including reconciliations for historical periods, the cost run rate on anadjusted annualized basis and Investment Banking’s normalized return on Basel III allocated capital for ongoing businesses, see the 4Q12 Results Presenta-tion Slides.

** As of January 1, 2013, Basel III was implemented in Switzerland along with the “Too Big to Fail” legislation and regulations thereunder. Our related disclo-sures are in accordance with the current interpretation of such requirements, including relevant assumptions. Changes in the final implementation of theserequirements in Switzerland or in any of our assumptions or estimates could result in different numbers from those shown herein. In addition, we have calcu-lated our 2012 pro forma Look-through Swiss Core Capital assuming the successful completion of the remaining CHF 0.8 billion of capital measures weannounced in July 2012.

Core Net income attributablepre-tax income to shareholders Return on equity (%)

in 2012 2011 2012 2011 2012 2011

Overview of significant items (CHF million)

Reported results 1,879 2,749 1,349 1,953 3.9 6.0

Fair value losses/(gains) from movement in own credit spreads 2,939 (1,616) 2,261 (1,151) – –

Realignment costs 680 847 477 640 – –

Gain on sale of stake in Aberdeen Asset Management (384) (15) (326) (13) – –

Gain on sale of non-core business (Clariden Leu integration) (41) – (37) – – –

Impairment of Asset Management Finance LLC and other losses 68 – 41 – – –

Gain on sale of real estate (533) (72) (445) (60) – –

Gain on sale of Wincasa (45) – (45) – – –

Losses on planned sale of certain private equity investments 82 – 72 – – –

Litigation provisions 363 1 478 2 230 1 428 2

Underlying results 5,008 2,371 3,577 1,797 10.0 5.5

1 Includes CHF 136 million (CHF 96 million after tax) related to significant Investment Banking litigation provisions in the third quarter of 2012 and CHF 227 million (CHF 134 millionafter tax) NCFE-related litigation provisions in the fourth quarter of 2012. 2 Related to litigation provisions in connection with German and US tax matters.

We continued to see the benefits of the integrated bankmodel in 2012, with 18.6% of Group-wide net revenues gen-erated as a result of collaboration among our businesses.

Creating value for our stakeholders We want to be a company that is close to our clients and pro-vides them with the best service, generates superior returnsfor our shareholders, is considered a great employer by theover 47,000 people who work for us around the world and is acontributing member of the communities where we operate.We have adapted decisively to the structural changes in ouroperating environment and have addressed the needs of ourstakeholders. We are confident that the actions we have takenin 2012 and the steps we will implement going forward posi-tion us as a strong and reliable partner to our clients, share-holders and employees.

We would like to thank our shareholders and clients fortheir loyalty to Credit Suisse and for the trust they placed in usin 2012. We particularly wish to thank all our employees fortheir continued commitment and their valuable contribution tothe success of our business.

Yours sincerely,

Urs Rohner Brady W. DouganChairman of the Chief Executive OfficerBoard of Directors

March 2013

8

Credit Suisse

Private Banking & Wealth Management

Investment Banking

As one of the world’s leading financial services providers, we are committed to delivering ourcombined financial experience and expertise to corporate, institutional and governmentclients and to high-net-worth individuals worldwide, as well as to private clients in Switzer-land. Founded in 1856, today we have a global reach with operations in over 50 countriesand 47,400 employees from approximately 100 different nations. Our broad footprint helpsus to generate a geographically balanced stream of revenues and net new assets and allowsus to capture diverse growth opportunities around the world. We serve our diverse clientsthrough our two divisions, which cooperate closely to provide holistic financial solutions,including innovative products and specially tailored advice.

Private Banking & Wealth Management offers comprehensive advice and a wide range offinancial solutions to private, corporate and institutional clients. The Private Banking &Wealth Management division comprises the Wealth Management Clients, Corporate & Insti-tutional Clients and Asset Management businesses. In Wealth Management Clients weserve ultra-high-net-worth and high-net-worth individuals around the globe and privateclients in Switzerland. Our Corporate & Institutional Clients business serves the needs ofcorporations and institutional clients, mainly in Switzerland. Asset Management offers a widerange of investment products and solutions across diverse asset classes and investmentstyles, serving governments, institutions, corporations and individuals worldwide.

Investment Banking provides a broad range of financial products and services, includingglobal securities sales, trading and execution, prime brokerage and capital raising services,corporate advisory and comprehensive investment research, with a focus on businesses thatare client-driven, flow-based and capital-efficient. Clients include corporations, govern-ments, institutional investors, including hedge funds, and private individuals around theworld. Credit Suisse delivers its investment banking capabilities via regional and local teamsbased in major global financial centers. Strongly anchored in Credit Suisse’s integratedmodel, Investment Banking works closely with Private Banking & Wealth Management toprovide clients with customized financial solutions.

Credit Suisse at a glance

I 10 Strategy

13 Our businesses

22 Organizational and regionalstructure

24 Regulation and supervision

37 Risk factors

Information onthe company

9

10

StrategyAn integrated global bank

We offer our clients in Switzerland and around the world abroad range of traditional and customized banking servicesand products. We believe that our ability to serve clients glob-ally with solutions tailored to their needs gives us a strongadvantage in today’s rapidly changing and highly competitivemarketplace.

We operate as an integrated bank, combining ourstrengths and expertise in our two global divisions, PrivateBanking & Wealth Management and Investment Banking. Ourdivisions are supported by our Shared Services functions,which provide corporate services and business solutions whileensuring a strong compliance culture. Our global structurecomprises four regions: Switzerland; Europe, Middle East andAfrica; Americas and Asia Pacific. With our local presence andglobal approach, we are well positioned to respond to chang-ing client needs and our operating environment.

Progress across key strategic pillars

In 2012, we made significant progress in evolving our client-focused, capital-efficient strategy to meet emerging clientneeds and regulatory trends while delivering attractive returnsto shareholders. We undertook considerable efforts to adaptour business portfolio, to optimize and strengthen our capitalposition and to reduce our cost base. As a result of theseactions, we believe that Credit Suisse today is better posi-tioned to perform in a challenging market environment andcompete in our chosen businesses and markets around theworld.u Refer to “Cost savings and strategy implementation” in II –

Operating and financial review – Core Results – Information and

developments for further information on Group cost efficiencies.

u Refer to “Capital management” in III – Treasury, Risk, Balance

sheet and Off-balance sheet for further information on capital

trends.

Organizational alignmentIn November 2012, we announced an alignment of our organ-ization to further strengthen our focus and ensure a morecomprehensive execution of our strategy. We integrated ourformer Private Banking and Asset Management divisions intoa single, new Private Banking & Wealth Management division,

including the majority of our securities trading and sales busi-ness in Switzerland, which was transferred from the Invest-ment Banking division. We evolved certain responsibilities onour Executive Board so that the four heads of our two busi-ness divisions are each also responsible for one of our fourregions. The modified management structure allows for effi-cient cross-regional and cross-divisional collaboration to betterrealize revenue opportunities with more effective alignmentbetween legal entities and their management structure, whichalso meets regulatory expectations.

Private Banking & Wealth ManagementOur Private Banking & Wealth Management division is com-prised of our Wealth Management Clients, Corporate & Insti-tutional Clients and Asset Management businesses. In WealthManagement Clients, we continue to focus on our internationalgrowth strategy, most notably fast growing and large onshoremarkets, as well as our qultra-high-net-worth individual clientsegment (UHNWI), while building on our strong position in theSwiss market and enhancing our efficiency. Further, we haverealigned our organization in the Swiss market to balancegrowth in market share with operating efficiency. In our Cor-porate & Institutional Clients business, we further strength-ened our focus on the specific client needs in our differentbusinesses. In our Asset Management business, we strength-ened our focus on liquid, scalable alternative investment prod-ucts and multi-asset class solutions, while exiting subscale orless capital-efficient businesses and selectively optimizing ourfootprint.

Investment BankingIn the Investment Banking division, we remain committed tooffering our clients a broad spectrum of equities, fixed income,and investment banking advisory products and services. Weare focused on businesses where we have a competitiveadvantage and where we are able to operate profitably andwith an attractive return on capital in the new regulatory envi-ronment. While the industry still faces substantial restructur-ing, we have substantially completed our transformation to abusiness model which is fully compliant with the qBasel IIIregulatory framework. We will continue to redeploy capital toour market-leading, high-returning businesses while continu-ing to reduce qrisk weighted assets and our cost base to fur-ther improve returns.

Information on the company

Strategy

11

Group cost efficienciesIn 2012, we continued to implement cost efficiency initiativesachieving our original cost savings target of CHF 2 billion oneyear early relative to the annualized first half 2011 expenserun rate measured at constant foreign exchange rates andadjusted to exclude business realignment and other significantnon-operating expenses and variable compensation expenses.We continue to adjust and optimize our footprint across busi-nesses and regions and adapt Shared Services to changingbusiness priorities.

As a result of the integration of our new Private Banking &Wealth Management division and other measures we are tak-ing, in February 2013 we updated our overall cost savings tar-gets relative to the annualized first half 2011 expense run rateto CHF 3.2 billion in 2013, CHF 3.8 billion by the end of2014 and CHF 4.4 billion by the end of 2015, adjusted onthe same basis as described above. We expect to incur CHF1.6 billion of business realignment costs associated with thesemeasures during the course of 2013 to 2015.u Refer to “Cost savings and strategy implementation” in II –

Operating and financial review – Core Results – Information and

developments for further information on group cost efficiencies.

Group priorities

We expect our client-focused, capital-efficient strategy to ben-efit from a more constructive market environment while limitingour risk exposure in down markets. We have increased clarityon our future regulatory environment, and we are welladvanced on implementation.

We target an annual after-tax return on equity (ROE) of15% across market cycles. Building on the momentum wehave established, we aim to further focus on our most prof-itable client businesses, gain market share and strengthen ourgeographic footprint, including our goal to achieve a 25% rev-enue contribution from emerging markets by 2014. To achieveour goals, we continue to focus on the following priorities:

Client focusWe put our clients’ needs first. We aspire to be a consistent,reliable, flexible and long-term partner focused on clients withcomplex and multi-product needs, such as qUNHWI, largeand mid-sized companies, entrepreneurs, institutional clientsand hedge funds. By listening attentively to their needs andoffering superior solutions, we empower our clients to makebetter financial decisions. Against the backdrop of significantchanges within our industry, we strive to consistently enableour clients to realize their goals and thrive. We continue tostrengthen the coverage of our key clients by dedicated teams

of senior executives who can deliver our integrated businessmodel. We have a strong capital position and high levels ofclient satisfaction and brand recognition, and our strong clientmomentum is well recognized. We were named “Best PrivateBank Globally”, “Best Investment Bank in Switzerland” and“Best Emerging Markets and Western Europe M&A House” inEuromoney’s Awards for Excellence in 2012.

EmployeesWe continue our efforts to attract, develop and retain top tal-ent in order to deliver an outstanding integrated value proposi-tion to our clients. Our candidates go through a rigorous inter-view process, where we not only look for technical proficiencyand intellect, but for people who can thrive in and contributeto our culture. We review our talent and identify the optimaldevelopment opportunities based on individual and organiza-tional needs. We strongly promote cross-divisional and cross-regional development, as well as lateral recruiting and mobility.Valuing different perspectives, creating an inclusive environ-ment and showing cross-cultural sensitivity are key to CreditSuisse’s workplace culture. Through our business school, wetrain our leaders, specialists and client advisors in a widerange of subjects. We take a prudent and constructiveapproach to compensation, designed to reflect the perform-ance of individuals and the firm and closely align the interestsof employees with those of shareholders.

CollaborationWe help our clients thrive by delivering the best products andservices across our organization and divisions. We have estab-lished a dedicated governance structure in order to drive,measure and manage collaboration among our businesses. Wetarget collaboration revenues of 18% to 20% of net revenues,and in 2012 we recorded collaboration revenues of CHF 4.4billion, representing 19% of net revenues. Since the inceptionof our collaboration program in 2006, we have built a strongtrack record of delivering customized value propositions. Webelieve this is a significant differentiator for Credit Suisse. Wehave observed increasing momentum in collaboration initia-tives, including tailored solutions for entrepreneurs and high-net-worth clients by Investment Banking and managed invest-ment products developed by Private Banking & WealthManagement. As we also benefit from our programs for cross-divisional management development and lateral recruiting, col-laboration revenues, including cross-selling and client refer-rals, have proven to be a resilient source of both revenues andassets.

12

Capital and risk managementAs prudent risk taking aligned with our strategic priorities isfundamental to our business, we maintain a conservativeframework to manage liquidity and capital. In July 2012, weannounced a number of comprehensive capital measuresdesigned to accelerate the strengthening of our capital posi-tion in light of the current regulatory and market environment,including the implementation of the qBasel III framework andthe Swiss q“Too Big to Fail” legislation. Our capital measuresinclude, among others, capital raising from key strategicinvestors and current shareholders, strategic divestments andreal estate sales. As of year-end 2012, our Look-throughSwiss Core Capital ratio was 9.0%, and our qBasel II.5 tier 1capital ratio improved to 19.4% from 15.2% in 2011. OurBasel II.5 leverage ratio improved to 5.8% from 4.6% in2011. We continued to optimize our balance sheet and planto further reduce it to achieve a 2013 target of below CHF900 billion on a foreign-exchange neutral basis compared tothe end of the third quarter 2012. We continue to deploy cap-ital in a disciplined manner based on our economic capitalmodel, assessing our aggregated risk taking in relation to ourclient needs and our financial resources.

As of January 1, 2013, the Basel Committee on BankingSupervision (BCBS) Basel III framework (Basel III) was imple-mented in Switzerland along with the Swiss “Too Big to Fail”legislation and regulations thereunder. Our related disclosuresare in accordance with our current interpretation of suchrequirements, including relevant assumptions. Changes in thefinal implementation of these requirements in Switzerland orin any of our assumptions or estimates could result in differentnumbers from those shown in this report. Our ratio calcula-tions use estimated qrisk-weighted assets (RWA) as ofDecember 31, 2012, as if the Basel III framework had beenimplemented in Switzerland as of such date.u Refer to “Capital management” in III – Treasury, Risk, Balance

sheet and Off-balance sheet for further information on capital

trends.

EfficiencyWe continue to strive for top-quartile efficiency levels, whilebeing careful not to compromise on growth or reputation. In2013 we are targeting a cost/income ratio of below 70%. Inline with the announced evolution of our strategy, implementedefficiency measures are generating significant cost savingswhile helping to build an efficiency culture. We have increaseddeployment under our Centers of Excellence (CoE) programto over 14,000 roles, increasing efficiency, and have estab-lished initiatives to further leverage the service capabilities andtalent at our CoE sites.

To track our progress and benchmark our performance wehave defined a set of KPIs for growth, efficiency and perform-ance, and capital to be achieved across market cycles, andthese indicators were updated at year-end 2012.u Refer to “Key performance indicators” in II – Operating and

financial review – Core Results – Information and developments

for a more detailed description of our businesses and our per-

formance in 2012 against the defined targets.

Industry trends and competition

For the financial services industry, 2012 was a year of transi-tion, with banks seeking to adapt to new regulatory require-ments, changing macroeconomic conditions and evolvingclient needs. There was further debate about the process andtiming of implementing the qBasel III regulatory frameworkand the Swiss q“Too Big to Fail” legislation. In Switzerland,developments in the cross-border wealth management busi-ness were driven by the focus on finding a political basis foroperating this business in the future and ongoing efforts toresolve legacy tax matters, particularly with European coun-tries and the US.u Refer to “Our businesses – Private Banking & Wealth Manage-

ment” and “Our businesses – Investment Banking” for further

information.

Corporate responsibility and Code of Conduct

At Credit Suisse, we are convinced that our responsibleapproach to business is a decisive factor determining our long-term success. We therefore expect all our employees andmembers of the Board of Directors to observe the professionalstandards and ethical values set out in our Code of Conduct,including our commitment to complying with all applicablelaws, regulations and policies in order to safeguard our repu-tation for integrity, fair dealing and measured risk-taking. Atthe same time, we strive to assume our corporate responsibil-ities in every aspect of our work based on our broad under-standing of our role as a financial services provider, memberof society and employer. Our approach also reflects our com-mitment to protecting the environment and the importance weassign to our dialogue with our stakeholders. To ensure thatwe supply the full breadth of information required by ourstakeholders, we publish a Corporate Responsibility Reportand additional information, which can be found at www.credit-suisse.com/responsibility. Our Code of Conduct is available onour website at www.credit-suisse.com/code.


Our businesses

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Our businesses Private Banking & Wealth Management

Business profile Within the Private Banking & Wealth Management division, weoffer comprehensive advice and a broad range of financialsolutions to private, corporate and institutional clients. PrivateBanking & Wealth Management comprises the Wealth Man-agement Clients, Corporate & Institutional Clients and AssetManagement businesses, and had total assets under manage-ment of CHF 1,250.8 billion as of the end of 2012.

Our Wealth Management Clients business is one of thelargest in the international wealth management industry serv-ing over two million clients, including qUHNWI and qhigh-net-worth individual clients around the globe and privateclients in Switzerland. We offer our clients a distinct valueproposition, combining global reach with a structured advisoryprocess and access to a broad range of sophisticated productsand services. As of the end of 2012, our Wealth ManagementClients business had assets under management of CHF 798.5billion. Our global network comprises 3,910 relationship man-agers in 42 countries with more than 330 offices and 22qbooking centers.

Our Corporate & Institutional Clients business offersexpert advice and high-quality services to a wide range ofclients, serving the needs of over 100,000 corporations andinstitutions, mainly in Switzerland, including large corporateclients, small and medium size enterprises (SME), institutionalclients, financial institutions, shipping companies and com-modity traders. More than 1,500 employees serve our clientsout of 38 locations. While the Swiss home market remains ourcore focus, we are also building out our capabilities in interna-tional growth markets with dedicated teams in Luxembourg,Singapore and Hong Kong. As of the end of 2012, Corporate& Institutional Clients reported CHF 323.1 billion of clientassets and CHF 60.6 billion of net loans.

Our Asset Management business offers investment solu-tions and services globally to a wide range of clients, includingpension funds, governments, foundations and endowments,corporations and individuals. We invest across a broad rangeof asset classes with a focus on alternative investment strate-gies, emerging markets, asset allocation and traditional invest-ment strategies. Our investment professionals deliver accessto best-in-class products and holistic client solutions. AssetManagement had CHF 371.6 billion of assets under manage-ment as of the end of 2012.

Key data – Private Banking & Wealth Management

in / end of

2012 2011 2010

Key data

Net revenues (CHF million) 13,541 13,447 14,580

Income before taxes (CHF million) 3,775 2,961 4,142

Assets under management (CHF billion) 1,250.8 1,185.2 1,205.3

Number of employees 27,300 28,100 28,700

Industry trends and competition Notwithstanding the current economic uncertainty, the wealthmanagement industry continues to have positive growthprospects. Assets of ultra- and high-net-worth individualsglobally are projected to grow approximately 6% annually overthe next five years. Structurally, the industry is undergoing sig-nificant change. Wealth creation continues to shift towardsemerging markets, with higher growth rates fueled by entre-preneurial activity and comparatively strong economic devel-opment. Mature markets, with around two thirds of the world’swealth located in the US, Japan and Western Europe, areexperiencing a generational transfer of wealth. New and pro-posed laws and international treaties, including tax treatiesentered into by Switzerland, are leading to increased regula-tion of cross-border banking activities for certain clients.

Globally, regulatory requirements for investment advisoryservices are also increasing, including in the areas of suitabil-ity, appropriateness of advice, client information and documen-tation. We believe Credit Suisse will be well adapted for thisnew environment through application of our structured advi-sory process, which helps to ensure that our business conductis compliant with all applicable regulatory standards.

We believe the market for corporate and institutional bank-ing services continues to offer attractive business opportuni-ties. However, the competition between banks is intense andthe low-interest rate environment remains challenging, result-ing in continuous pressure on margins. This business is alsosignificantly affected by new capital requirements for banks.International financial institutions continue to review their mar-ket strategies in light of capital and leverage restrictions.

The asset management industry overall faced significantchallenges affecting growth in 2012, with assets under man-agement remaining flat compared to 2007 levels, even whileglobal investable assets have increased. Within the asset man-agement industry, allocations to alternative investments havecontinued to increase due to projected low returns from fixed-income products and increased volatility in equity markets.

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Within alternatives, the hedge fund industry continued to seemodest inflows in 2012, with the largest hedge fund managerscapturing the majority of asset inflows. Private equity fundrais-ing remained relatively flat in 2012 relative to 2011, remainingfar below pre-crisis peaks. The regulatory environment contin-ued to evolve in 2012 and is expected to continue to trendtoward simpler, more regulated fund structures in conjunctionwith investors seeking better transparency and risk manage-ment.

For the wealth and asset management industry in general,gross margins remain under pressure due to continued lowinterest rates as well as clients choosing a more conservativeasset mix and reducing their overall investment activity in theface of economic uncertainty and specific events such as theEuropean sovereign debt crisis and the US “fiscal cliff”. Weexpect these challenging conditions to last for some time tocome. Competition and cost pressure in the industry remainintense, with many competitors reevaluating their businessmodels. Attracting and retaining the best talent continues tobe a key factor for success. As a result of these structuralindustry trends, we expect industry consolidation and restruc-turing to continue. We believe Switzerland is well positionedas a financial center to continue its success in this changingmarketplace, offering clients a politically stable and economi-cally diversified investment environment combined with a long-standing heritage in wealth and asset management services.

For Swiss institutions, the Swiss franc remains strong his-torically, even given the actions by the Swiss National Bank(SNB) to maintain a minimum exchange rate against the euro.This strength can adversely affect operating performance forSwiss institutions as revenues are based on assets undermanagement that are often denominated in currencies thathave weakened against the Swiss franc but a substantial por-tion of the related expenses are incurred in Swiss francs.

StrategyAs of November 30, 2012 we integrated our former PrivateBanking and Asset Management divisions into a single, newPrivate Banking & Wealth Management division. In addition,the majority of our securities trading and sales business inSwitzerland was transferred from the Investment Banking divi-sion into the Private Banking & Wealth Management division.This integration created one of the foremost integrated wealthand asset management businesses globally. As a result of theintegration and other measures, the Group updated its overallcost savings target by an additional CHF 0.4 billion to beachieved by year-end 2015.

Wealth Management ClientsIn 2012 we made significant progress towards our goals. Weimproved our organizational structure to deliver more dedicatedand client centric services, especially in our Swiss home mar-ket. In parallel, we increased our profitability through strictcost management and revenue and pricing measures. We alsocontinued our focus on fast growing and large markets,UHNWI clients, and on attracting top talent to the business.With these efforts and even in the challenging economic envi-ronment, in 2012 we were able to achieve a pre-tax incomemargin of 22.6% and a gross margin of 114 basis points. Weexpect to make additional progress by continuing our long-term strategy along:p Advice at the corep Global growthp Productivity managementp Regulatory transformationp Integrated bankp Best people

Advice at the core: We have continued to deliver tailor-madeand best-in-class financial solutions to our clients based onour structured advisory process. In addition, particularly inSwitzerland, we created a more client centric organizationalstructure. Furthermore, we established new business unitsfocusing on specific client segments and continued to developour range of solutions based on client needs with the expertiseof our research and investment experts. To ensure the higheststandards in our product offerings, our selection of internaland third-party solutions is based on comprehensive due dili-gence with regard to client appropriateness.

Global growth: Our Swiss home market remains a keyarea of focus where we continued to expand our alreadystrong market position through new services and special cam-paigns. This resulted in CHF 2.3 billion of net new assets inSwitzerland in 2012. In addition, we successfully continuedour expansion in fast growing emerging markets, increasingour footprint in those markets in 2012 by 12% in terms ofassets under management. We also significantly invested inour dedicated offerings for UHNWI clients, resulting in strongnet new assets inflows of CHF 26.3 billion in 2012 from thisclient segment. Moreover, we concluded the integration ofHedging-Griffo in Brazil, the largest wealth market in LatinAmerica, as well as the integration of HSBC’s wealth manage-ment business in Japan. With these successful integrations,we are now among the top wealth managers in both countries.


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Productivity management: Key to achieving our produc-tivity enhancements were our efficiency management pro-grams we announced and began implementing in November2011, our CoE, now including more than 2,800 roles, and thecompletion of the integration of Clariden Leu. We are continu-ing our market review with a focus on locations with maximumscale and high cost efficiencies, and are planning to exit mar-kets which do not meet these standards. Through these vari-ous efficiency measures we achieved CHF 300 million of pre-tax income improvements in 2012.

Regulatory transformation: We are dedicated to strictcompliance with national and international regulations andproactive development and implementation of new businessstandards, including in the areas of client advice and anti-money laundering measures.

Integrated bank: The unique value proposition of ourintegrated bank remains a key strength in our client offerings.Close collaboration with the Investment Banking division andother businesses within Private Banking & Wealth Manage-ment enables us to offer customized and innovative solutionsto our clients, especially to UHNWI clients, our fastest grow-ing and most profitable segment.

Best people: Attracting, developing and retaining theindustry’s top talent continues to be a vital cornerstone of ourstrategy. Therefore, while reducing the overall headcount in2012 in accordance with our efficiency targets, we continuedto hire experienced senior relationship managers, whoaccounted for 64% of our relationship manager hires. We alsocontinued to build on our extensive training and certificationprograms through which we enhance our existing talent pool.

Corporate & Institutional ClientsIn 2012 we successfully took further steps towards the imple-mentation of our business strategy and achievement of theoverall Private Banking & Wealth Management strategydespite a difficult market environment. Our focus on risk andmargin management was not only the base for our solid finan-cial results, but was also a key factor in reinforcing our repu-tation as a proactive partner for our clients. A new client seg-mentation framework in the SME business, a redesigned salesmanagement process and the integration of key organizationalunits allowed us to further strengthen our focus on the needsof our different client segments. Through various efficiencymeasures completed in 2012, we maintained ourcost/income-ratio at a highly competitive level, supporting oursolid financial results. In 2012 we were recognized with sev-eral awards, including “Best Private Bank for Business JetFinance and Advisory” by Corporate Jet Investor, “Best Trade

Finance Bank” in Switzerland by Global Finance Magazine and“Best Swiss Global Custodian” by R&M Surveys.

Asset Management We continue to focus on alternative investment strategies,including emerging markets, and core investments, includingasset allocation and traditional products.

Strategic divestments: In line with our strategy toward amore liquid alternatives business and given the remaininguncertainty regarding the implementation of the “VolckerRule”, we accelerated the implementation of our strategy inmid-2012 and began the process of selling certain businesseswithin Asset Management. These comprise certain privateequity businesses and investments and our exchange-tradedfunds (ETF) business. We announced the sale of the ETFbusiness in January 2013 and expect to complete the sale bythe end of the second quarter of 2013. During 2012 we com-pleted the sale of our residual stake in Aberdeen Asset Man-agement and the sale of Wincasa AG.

Realignment of businesses: As part of our overall strat-egy, including the divestments mentioned above, we haverealigned our asset management businesses to optimize ourre-sized footprint. We will manage our business along the fol-lowing lines:p Alternative investment strategies, which includes hedge

fund strategies, alternative beta, commodities and creditinvestments;

p Core investments, which includes multi asset class solu-tions, equities, fixed income, real estate and index man-dates; and

p Legacy, which includes businesses identified for sale andother private equity interests that are not considered partof our scalable, capital-light alternative investment strate-gies.

Growth in targeted areas: We have made significantprogress in new initiatives in our targeted growth areas in2012. We announced the formation of an asset managementjoint venture with one of our strategic investors focused oninvestment strategies in the Middle East, Turkey and otherfrontier markets. We launched a number of new products dur-ing the year, including the largest listed closed-end structuredcredit trust of its kind in Mexico, two fixed income bond fundsin Singapore, a structured products fund, an alternatives fundthat offers US investors a mutual fund vehicle providing a fundof hedge funds return profile with daily liquidity, and two fixedincome bond funds in Singapore. Further, we successfullyclosed fundraisings for two significant collateralized loan obli-gation transactions.

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Brazilian operations: We successfully integrated theexisting Asset Management businesses in Brazil into one plat-form within our subsidiary Hedging-Griffo, and expanded ourasset management capabilities through our investment inPeninsula Investimentos SA, which sponsors and manageshedge funds with a focus on Brazil macroeconomic funds andprivate equity funds.

Efficiency measures: We continued to streamline andsimplify our business which resulted in reduced total operatingexpenses and headcount.

Products and servicesWealth Management ClientsIn Wealth Management Clients, our service offering is basedon our structured advisory process, client segment specificvalue propositions, comprehensive investment services andour multi-shore platform.p Structured advisory process: We apply a structured

approach based on a thorough understanding of ourclients’ needs, personal circumstances, product knowl-edge, investment objectives and a comprehensive analysisof their financial situation to define individual client riskprofiles. On this basis we define together with our clientsan individual investment strategy. This strategy is imple-mented ensuring that portfolio quality standards areadhered to and that all investment instruments are compli-ant with suitability and appropriateness standards.Responsible for the implementation are either the portfoliomanagers, in the case of discretionary mandates, or ourrelationship managers working together with their clients,in the case of advisory mandates.

p Client segment specific value propositions: We offera wide range of wealth management solutions tailored tospecific client segments. Our global market segments areprimarily made up of UHNWI and high-net-worth individualclients, and, in Switzerland, private clients. UHNWI andhigh-net-worth individual clients contributed 41% and45% of assets under management in Wealth ManagementClients at the end of 2012, respectively. For entrepre-neurs, we offer solutions for a range of private and corpo-rate wealth management needs, including successionplanning, tax advisory, financial planning and investmentbanking services. Our entrepreneur clients benefit fromthe advice of Credit Suisse’s experienced corporatefinance advisors, immediate access to a network of inter-national investors and the professional support in financial

transactions. A specialized team, Solutions Partners,offers holistic and tailor-made business and private finan-cial solutions to our UHNWI clients.

p Comprehensive investment services: We offer a com-prehensive range of investment advice and discretionaryasset management services based on the outcome of ourstructured advisory process and the guidelines of theCredit Suisse Investment Committee. In addition, we baseour advice and services on the analysis and recommenda-tions of our global research team, which provides a widerange of global research including macroeconomic, equity,bond and foreign-exchange analysis, as well as researchon the Swiss economy. Our investment advice covers arange of services from portfolio consulting to advising onindividual investments. We offer our clients effective port-folio and risk management solutions, including managedinvestment products. These are products actively managedand structured by our specialists or third parties, providingprivate investors with access to investment opportunitiesthat otherwise would not be available to them. For clientswith more complex requirements, we offer investmentportfolio structuring and the implementation of individualstrategies, including a wide range of structured productsand alternative investments. Discretionary asset manage-ment services are available to clients who wish to delegatethe responsibility for investment decisions to CreditSuisse. We are an industry leader in alternative invest-ments and, in close collaboration with our Asset Manage-ment business and Investment Banking, Wealth Manage-ment Clients offers innovative products with limitedcorrelation to equities and bonds, such as hedge funds,private equity, commodities and real estate investments.

p Multi-shore platform: With global operations comprising21 international booking centers in addition to our opera-tions in Switzerland, we are able to offer our clients book-ing capabilities locally as well as through our internationalhubs. Our multi-shore offering is designed to serve clientswho are focused on geographical risk diversification, havemultiple domiciles, seek access to global execution serv-ices or are interested in a wider range of products than areavailable to them locally. In 2012, CHF 26.5 billion of netnew assets in Wealth Management Clients were bookedoutside Switzerland, and we expect that internationalclients will continue to drive our growth in assets undermanagement.


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Corporate & Institutional Clients In Corporate & Institutional Clients, we supply a comprehen-sive spectrum of financial solutions to companies and institu-tional clients. Our offering is derived from our clients’ needsand delivered through our integrated franchise and growinginternational presence. With this foundation, we are able toassist our clients in virtually every stage of their business cycleand cover their banking needs in Switzerland and abroad. Forcorporate clients we provide a wide range of basic bankingproducts such as traditional and structured lending, paymentservices, foreign-exchange, capital goods and real estate leas-ing as well as investment solutions. Furthermore, together withthe Investment Banking division we offer tailor-made servicesin the areas of mergers and acquisitions, syndications andstructured finance. For corporations with specific needs forglobal finance and transaction banking we provide services incommodity trade finance, commodity project and exportfinance as well as trade finance and factoring. For our institu-tional clients, including pension funds and public sectorclients, we offer a wide range of fund solutions and fund-linked services, including fund management and administra-tion, fund design and comprehensive global custody solutions.Our offerings also include ship and aviation finance and acompetitive range of services and products for financial insti-tutions such as securities, cash and treasury services.

Asset Management In Asset Management, we offer institutional and individualclients a range of products, including alternative and traditionalproducts. We reach our clients through our own distributionteams in Private Banking & Wealth Management, the Invest-ment Banking division and through third-party distributionchannels.

Our alternative investment offerings include hedge fundstrategies, alternative beta, commodities and credit invest-ments. We offer access to various asset classes and marketsthrough strategic alliances and key joint ventures with externalmanagers and have a strong footprint in emerging markets.

In our core investments business, in the area of multi-assetclass solutions we provide clients around the world with inno-vative solutions and comprehensive management across assetclasses to optimize client portfolios, with services that rangefrom funds to fully customized solutions. Stressing investmentprinciples such as risk management and asset allocation, wetake an active, disciplined approach to investing. Other coreinvestment strategies include a suite of fixed income andequity funds, our real estate business which aims to provideinvestors with stable and attractive cash flows by applyingactive portfolio management to reduce volatility, and ourindexed solutions business which provides institutions andindividual clients access to a wide variety of asset classes in acost-effective manner.

Products that we now include in our legacy businessinclude our ETF business, the private equity businesses andinvestments that we have targeted for sale, and other privateequity interests that are not considered part of our scalable,capital-light alternative investment strategies.

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Investment Banking

Business profileInvestment Banking provides a broad range of financial prod-ucts and services, focusing on businesses that are client-dri-ven, qflow-based and capital-efficient. Our suite of productsand services includes global securities sales, trading and exe-cution, prime brokerage and capital raising and advisory serv-ices as well as comprehensive investment research. Ourclients include corporations, governments, pension funds andinstitutions around the world. We deliver our global investmentbanking capabilities via regional and local teams based inmajor developed and emerging market centers. Our integratedbusiness model enables us to gain a deeper understanding ofour clients and deliver creative, high-value, customized solu-tions based on expertise from across Credit Suisse.

Key data – Investment Banking

in / end of

2012 2011 2010

Key data

Net revenues (CHF million) 12,558 10,460 15,873

Income/(loss) before taxes (CHF million) 2,002 (593) 3,594

Number of employees 19,800 20,700 20,500

Industry trends and competition 2012 was a challenging year marked by market uncertaintyamid continued concerns from the European sovereign debtcrisis, global economic slowdown and the late 2012 threat ofthe US “fiscal cliff”. Investment Banking, in particular, wasimpacted by a high degree of macroeconomic uncertainties,political tensions and continuing regulatory developments.Similar to many of our global competitors, Credit Suisse’sInvestment Banking business was affected by subdued corpo-rate and institutional risk appetite, continued low client activitylevels across businesses and high market volatility during theyear. In addition, financial institutions across the globe wereunder significant pressure to adapt their business models aslegal requirements became increasingly stringent. The evolvingregulatory framework and significant regulatory developmentsin 2011 and 2012 have fundamentally changed the businessand competitive landscape of the industry. One example ofsignificant change affecting the industry is the phasing-in ofhigher minimum capital requirements under qBasel III begin-ning in 2013 in some countries, including Switzerland. Banksdeemed systemically important will be required to hold addi-tional capital by the beginning of 2019 as part of efforts toprevent another financial crisis. Although some of the newregulatory measures require further rule-making and will be

implemented over time, we expect increased capital and liq-uidity requirements and derivatives regulation to result inreduced risk-taking and increased transparency.

StrategySince 2008, Credit Suisse has proactively pursued a client-focused, capital-efficient business model. This strategy, cou-pled with our conservative funding and liquidity position andstrong capitalization, has served us well during a period ofmarket volatility and industry change. In light of persistentheadwinds, we announced a refinement to our strategy inNovember 2011 aimed at adapting our businesses to the newmarket and regulatory environment. This includes significantlyreducing Basel III qRWA in fixed income, achieving greaterfinancial flexibility by reducing our cost base, optimizing ourportfolio towards synergies with the Private Banking & WealthManagement division and delivering sustainable, attractivereturns in areas where we have competitive advantages.

Since this announcement, we have made substantialprogress in executing the initiatives of our evolved strategy.We have significantly adapted our business model and havebecome one of the first global banks to be Basel III compliant.Without these proactive measures, the onset of regulatorychanges arising from Basel III would result in a materialincrease in RWA for Investment Banking, with the vast major-ity impacting the fixed income business. In 2012, we acceler-ated our RWA reduction plan and reduced Basel III RWA byUSD 55 billion to USD 187 billion. The bulk of these reduc-tions were in our fixed income wind-down businesses, as evi-denced by a decrease of USD 35 billion, or 73%, in Basel IIIRWA during the year. Specifically, we reduced positions andrisks across long-dated trades in global rates, credit correla-tion book, legacy wind-down portfolio and legacy emergingmarkets portfolio. We also transferred a portion of risk in thewind-down portfolio to the 2011 Partner Asset Facility(PAF2). Looking ahead, we have a Basel III RWA target forInvestment Banking of USD 175 billion to be achieved byyear-end 2013.

Another component of our evolved strategy is our focus oncost initiatives, which have been ongoing since the secondquarter of 2011. We achieved CHF 1.3 billion of direct costsavings in 2012 compared to the annualized 6M11 run-rate,measured at constant foreign exchange rates and adjusted toexclude significant non-operating expenses and variable com-pensation expenses. Having made substantial progress in2012, the Group recently announced revised cost savings tar-gets to be achieved by year-end 2015, of which an additionalCHF 0.5 billion is expected to come from Investment Banking.Through these initiatives, we are creating significant flexibilityin our Investment Banking cost structure, which will permit us


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to adapt to the challenging market environment while takingadvantage of favorable market opportunities when they arise.

As a result of our proactive efforts to improve operatingand capital efficiency, in 2012 we generated higher revenuesand returns on significantly less RWA and on a substantiallyreduced expense base. We have a targeted, client-focusedand capital-efficient fixed income business that has deliveredmore balanced and consistent results, with lower risk and lessrevenue volatility. We have an industry-leading equities fran-chise. Our underwriting & advisory businesses have globalreach with opportunities to increase returns driven by ourplanned cost savings. We remain focused on our market-lead-ing, high-return businesses where we have competitive advan-tages or synergies with Private Banking & Wealth Manage-ment, including cash equities, prime services, emergingmarkets, securitized products and global credit products. Weare allocating a majority of our Investment Banking capitalbase to these businesses.

We believe we have benefitted from an early mover advan-tage by adapting to the regulatory and operating changesahead of our peers, and we have seen announcements of sim-ilar strategies from our peers throughout 2012. In light of thesubstantial restructuring we completed in 2012, we haverevised our key performance indicator, the cost/income ratiotarget to 70%, which is an enhancement over the previouspre-tax income margin target of 25% and implied cost/incomeratio target of 75%. We believe our transformed portfolio willallow us to generate attractive returns under Basel III and sup-port the overall Group ROE target of 15% or greater acrossmarket cycles. u Refer to “Regulation and supervision” for further information on

regulatory developments.

Significant transactions We executed a number of noteworthy transactions in 2012,reflecting the breadth and diversity of our Investment Bankingfranchise: p Debt capital markets: We arranged key financings for a

diverse set of clients, including RedPrairie (privately heldsupply chain, workforce and all-channel commerce soft-ware provider), Rank Group (privately owned investmentcompany), Fortescue Metal Group (world’s fourth largestiron ore producer based in Australia), Wideopenwest (pri-vately owned cable, Internet and phone company) andKinetic Concepts Inc. (global medical technology com-pany).

p Equity capital markets: We executed a follow-on offer-ing for Cobalt International Energy, Inc. (independent oil-focused exploration and production company), a rightsissue and offering for UniCredit Group (European banking

services organization), a rights offering for Fondiaria SAI(Italian financial services company focusing on insurance)and were an active bookrunner on the initial public offering(IPO) of The Carlyle Group (global alternative asset man-ager).

p Mergers and acquisitions: We advised on a number ofkey transactions throughout the year, including the Well-Point (managed healthcare company) acquisition of Ameri-group (manager of publicly funded health programs), theacquisition of Southern Union Company (US natural gascompany) by Energy Transfer Equity (US diversified energyoperator), the sale of Synthes (global manufacturer oforthopedic devices) to Johnson & Johnson (leading manu-facturer of health care products), the sale of Goodrich(global supplier of systems and services to aerospace anddefense industries) to United Technologies Corporation(provider of high-technology products to aerospace anddefense industries), the sale of Amylin (biopharmaceuticalcompany) to Bristol-Myers Squibb (global biopharmaceuti-cal company), the sale of Inhibitex (biopharmaceuticalcompany) to Bristol-Myers Squibb and the first step in amulti-stage plan for Alibaba Group (privately-owned Inter-net business in China) under which Alibaba’s major share-holder Yahoo! will exit its investment.

Market share momentump We have advanced to become the second-largest prime

broker worldwide, as reported in the 2012 global survey ofprime brokerage assets conducted by Hedge Fund Intelli-gence.

p We were recognized for our leading equities program trad-ing and electronic trading capabilities by US and Europeaninstitutions in recent surveys conducted by GreenwichAssociates.

p In the 2012 fixed income trading survey for North Americaby Greenwich Associates, we increased our overall rank totop five in 2012 from number seven in 2011, increased ormaintained market share in a majority of key businessesand significantly improved our market share in investmentgrade credit trading.

p We advanced to number four globally and increased ourmarket share to 14.4% in global completed M&As for2012, compared to 13.8% market share in 2011, accord-ing to Dealogic. We also finished 2012 at number one inUS IPOs according to Dealogic.

p We maintained our share of wallet according to Dealogicin Asia Pacific (excluding Japan) at first place in 2012 witha 7.4% market share. In the Americas, we maintained ournumber five ranking and increased our share of wallet to6.4% in 2012 from 5.9% in 2011, according to Dealogic.

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Products and servicesOur comprehensive portfolio of products and services is aimedat the needs of the most sophisticated clients, and we increas-ingly use integrated platforms to ensure efficiency and trans-parency. Our activities are organized around two broad func-tional areas: investment banking and global securities. Ininvestment banking, we work in industry, product and countrygroups. The industry groups include energy, financial institu-tions, financial sponsors, industrial and services, healthcare,media and telecom, real estate, and technology. The productgroups include M&A and financing products. In global securi-ties, we engage in a broad range of activities across fixedincome, currencies, commodities, derivatives and cash equi-ties markets, including sales, structuring, trading, financing,prime brokerage, syndication and origination, with a focus onclient-based and flow-based businesses, in line with growingclient demand for less complex and more liquid products andstructures.

Investment bankingEquity and debt underwriting Equity capital markets originates, syndicates and underwritesequity in IPOs, common and convertible stock issues, acquisi-tion financing and other equity issues. Debt capital marketsoriginates, syndicates and underwrites corporate and sover-eign debt.

Advisory servicesAdvisory services advises clients on all aspects of M&A, cor-porate sales and restructurings, divestitures and takeoverdefense strategies. The fund-linked products group is respon-sible for the structuring, risk management and distribution ofstructured mutual fund and alternative investment productsand develops innovative products to meet the needs of itsclients through specially tailored solutions.

Global securities Global securities provides access to a wide range of debt andequity securities, derivative products and financing opportuni-ties across the capital spectrum to corporate, sovereign andinstitutional clients. Global securities is structured into the fol-lowing areas

Fixed incomep Rates: Global rates products is a global market maker in

cash and derivatives markets and a primary dealer in mul-tiple jurisdictions including the US, Europe and Japan.This business covers a full spectrum of government bonds,interest rate swaps and options, as well as providing liabil-ity and liquidity management solutions.

p Foreign exchange: Foreign exchange provides marketmaking in products such as spot and options for curren-cies in developed markets. The foreign exchange productsuite also includes proprietary market leading technologyto provide clients with electronic trading solutions.

p Credit: Credit products offers a full range of fixed incomeproducts and instruments to clients across investmentgrade and high yield credits, ranging from standard debtissues and credit research to fund-linked products, deriv-atives instruments and structured solutions that addressspecific client needs. We are a leading dealer in flow trad-ing of single-name qcredit default swap (CDS) on individ-ual credits, credit-linked notes and index swaps. Invest-ment grade trades domestic corporate and sovereign debt,non-convertible preferred stock and short-term securitiessuch as floating rate notes and commercial paper. Lever-aged finance provides capital raising and advisory servicesand core leveraged credit products such as bank loans,bridge loans and high yield debt for non-investment gradecorporate and financial sponsor-backed companies.

p Securitized products: Securitized products trades, securi-tizes, syndicates, underwrites and provides research forvarious forms of securities, primarily qresidential mort-gage-backed securities and asset-backed securities. Boththe mortgage- and asset-backed securities are based onunderlying pools of assets, and include both government-and agency-backed, as well as private label loans.

p Emerging markets: Emerging markets offers a full rangeof fixed income products and instruments, including sover-eign and corporate securities, local currency derivativeinstruments and tailored emerging market investmentproducts.

p Commodities: Commodities trades oil, gas and otherenergy products as well as base, precious and minor met-als. The Commodities product suite also includes bench-mark indices developed by Credit Suisse Commodities.

Equityp Cash equities provides a comprehensive suite of offerings

as described below:p Equity sales uses research, offerings and other products

and services to meet the needs of clients including mutualfunds, investment advisors, banks, pension funds, hedgefunds, insurance companies and other global financialinstitutions.

p Sales trading links sales and position trading teams. Salestraders are responsible for managing the order flowbetween our client and the marketplace and provide clientswith research, trading ideas and capital commitments and


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identify trends in the marketplace in order to obtain thebest and most effective execution.

p Trading executes client and proprietary orders and makesmarkets in listed and qover-the-counter (OTC) cash secu-rities, exchange-traded funds and programs, providing liq-uidity to the market through both capital commitments andrisk management.

p qAdvanced execution services (AES®) is a sophisticatedsuite of algorithmic trading strategies, tools and analyticsoperated by Credit Suisse to facilitate global equity trad-ing. By employing algorithms to execute client orders andlimit volatility, AES® helps institutions and hedge fundsreduce market impact. AES® is a recognized leader in itsfield and provides access to exchanges in more than 35countries worldwide via more than 45 leading trading plat-forms.

p Equity derivatives: Equity derivatives provides a full rangeof equity-related products, investment options and financ-ing solutions, as well as sophisticated hedging and riskmanagement expertise and comprehensive executioncapabilities to financial institutions, hedge funds, assetmanagers and corporations.

p Convertibles: Convertibles trading involves both secondarytrading and market making and the trading of creditdefault and asset swaps and distributing market informa-tion and research. The global convertibles business is aleading originator of new issues throughout the world.

p Prime services: Prime services provides a wide range ofservices to hedge funds and institutional clients, includingprime brokerage, start-up services, capital introductions,securities clearing, hedge fund administration, syntheticsand innovative financing solutions.

Arbitrage tradingOur arbitrage trading business focuses on liquidity-providingstrategies in the major global equity and fixed income markets.

OtherOther products and activities include lending, certain realestate investments and the distressed asset portfolios. Lend-ing includes senior bank debt in the form of syndicated loansand commitments to extend credit to investment grade andnon-investment grade borrowers.

Research and HOLTCredit Suisse’s equity and fixed income businesses are sup-ported by the research and HOLT functions.

Equity research uses in-depth analytical frameworks, pro-prietary methodologies and data sources to analyze approxi-mately 3,000 companies worldwide and provides macroeco-nomic insights into this constantly changing environment.

HOLT offers one of the fastest and most advanced corpo-rate performance, valuation and strategic analysis frameworks,tracking more than 20,000 companies in over 60 countries.

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Organizational and regional structureOrganizational structure

We operate in two global business divisions and reporting seg-ments – Private Banking & Wealth Management and Invest-ment Banking. Consistent with our client-focused, capital-effi-cient business strategy, we coordinate activities in four marketregions: Switzerland, Europe, Middle East and Africa (EMEA),Americas and Asia Pacific. In addition, Shared Services pro-vides centralized corporate services and business support, aswell as effective and independent controls procedures in thefollowing areas:p The Chief Financial Officer (CFO) area covers many

diverse functions, including Corporate Development, Infor-mation Technology, Corporate Real Estate & Services,Efficiency Management, Financial Accounting, GroupInsurance, Group Finance, Investor Relations, New Busi-ness, Global Operations, Product Control, Tax and Treas-ury.

p The General Counsel area provides legal and compliancesupport to help protect the reputation of Credit Suisse. Itdoes so by giving legal and regulatory advice and providingemployees with the tools and expertise to comply withapplicable internal policies and external laws, rules andregulations.

p The Chief Risk Officer (CRO) area comprises strategic riskmanagement, credit risk management, risk analytics andreporting, and operational risk oversight activities, whichcooperate closely to maintain a strict risk control environ-ment and to help ensure that our risk capital is deployedwisely.

p The Talent, Branding and Communications area compriseshuman resources, corporate communications, corporatebranding and advertising. Human Resources strives toattract, retain and develop staff, while also creating a stim-ulating working environment for all employees. CorporateCommunications provides support in media relations, crisismanagement, executive and employee communications,branding and corporate sponsorship.

Other functions providing corporate services include One BankCollaboration and Public Policy. One Bank Collaboration facil-itates cross-divisional collaboration initiatives throughout theGroup and measures and controls collaboration revenues.Public Policy promotes and protects the interests of CreditSuisse and its reputation.

The Chief Executive Officers (CEOs) of the divisions andregions report directly to the Group CEO, and, together with

the CFO, CRO, General Counsel and Chief Talent, Brandingand Communications Officer, they formed the Executive Boardof Credit Suisse in 2012.

Our structure is designed to promote cross-divisional col-laboration while leveraging resources and synergies within ourfour regions. The regions perform a number of essential func-tions to coordinate and support the global operations of thetwo divisions. On a strategic level, regions are responsible forcorporate development and the establishment of regional busi-ness plans, projects and initiatives. They also have an over-sight role in monitoring financial performance. Each region isresponsible for the regulatory relationships within its bound-aries, as well as for regulatory risk management and the reso-lution of significant issues in the region as a whole or its con-stituent countries. Other responsibilities include client andpeople leadership and the coordination of the delivery ofShared Services and business support in the region.

Market regions

SwitzerlandSwitzerland, our home market, represents a broad businessportfolio. We employ 19,400 people in Switzerland. The Pri-vate Banking & Wealth Management division comprises ourWealth Management Clients, Corporate & Institutional Clientsand Asset Management businesses. In Wealth ManagementClients, we offer our clients a distinct value proposition com-bining a global reach with a structured advisory process andaccess to a broad range of sophisticated products and serv-ices tailored to different client groups, from private clients toqUHNWI. In Corporate & Institutional Clients, we provide pre-mium advice and solutions within a broad range of bankingservices, including lending, cash and liquidity management,trade finance, corporate finance, foreign exchange, invest-ment solutions, ship and aviation finance, global custody andasset and liability management. Clients include SME, globalcorporations and commodity traders, banks and Swiss pensionfunds. Our Asset Management business has a market-leadingposition in the Swiss traditional business, and also offers abroad range of alternative investment products and multi-assetclass solutions. The Investment Banking division offers a fullrange of financial services to its Swiss client base, holdingmarket-leading positions in the Swiss debt and capital marketsas well as in mergers and acquisition advisory.


Organizational and regional structure

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EMEA We are active in 30 countries across the EMEA region with9,300 employees working in 75 offices. Our regional head-quarters is in the UK, but we have an onshore presence inevery major EMEA country. The EMEA region encompassesboth developed markets, such as France, Germany, Italy,Spain and the UK, and emerging markets, including Russia,Poland, Turkey and the Middle East. We implemented ourclient-focused integrated strategy at the country level, servingcorporate, government, institutional and private clients. Bothdivisions are strongly represented in the EMEA region, withthe Investment Banking division providing a full spectrum offinancial advisory services with strong market shares acrossmany key products and markets.

AmericasWe have operations in the US, Canada, the Caribbean andLatin America with 11,300 employees working in 42 citiesspanning 14 countries. In the US, our emphasis is on our coreclient-focused and qflow-based businesses in InvestmentBanking, and on building on the market share gains we have

achieved in a capital-efficient manner. In Private Banking &Wealth Management, we see considerable potential to lever-age our cross-divisional capabilities, as we further develop ouronshore wealth management platform in the US, Brazil andMexico. In Latin America, particularly in our key markets ofBrazil and Mexico, we continue to focus on providing clientswith a full range of cross-divisional services.

Asia PacificCredit Suisse is present in 12 Asia Pacific markets with

Annual Report 2012 - Credit Suisse · 2017-07-07 · Annual Report 2012 - Credit Suisse Group AG &...

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