Result includes a charge for litigation provisions in Institutional Securities in the amount of CHF 624 million after tax Private Banking: net income of CHF 581 million; net new assets of CHF 12.8 billion Corporate and Retail Banking: net income of CHF 277 million; record result; return on average allocated capital of 21.4% Institutional Securities: net loss of CHF 408 million, reflecting the charge for litigation provisions; trading impacted by slowdown in market activity in April and May; strong investment banking revenues Wealth and Asset Management: net income of CHF 245 million; good performance in Alternative Capital Winterthur: continuing improvements in operational performance; net income of CHF 116 million in Life and Pensions and CHF 137 million in Non-Life BIS tier 1 ratio of 10.9%
ZURICH, Switzerland, Aug. 3, 2005 (PRIMEZONE) -- Credit Suisse Group (NYSE:CSR) today reported net income of CHF 919 million for the second quarter of 2005, compared to CHF 1,910 million in the previous quarter and CHF 1,457 million in the second quarter of 2004. The result for the second quarter of 2005 includes a charge for litigation provisions in Institutional Securities in the amount of CHF 624 million after tax.
Credit Suisse Group's return on equity for the second quarter was 9.8%, with a return on equity of 9.1% for the banking business and 11.3% for Winterthur. Basic earnings per share were CHF 0.82.
The Group's net income for the first half of 2005 amounted to CHF 2,829 million, compared to CHF 3,318 million for the corresponding period of 2004.
Oswald J. Grubel, CEO of Credit Suisse Group, said, "Following a strong start to 2005, the second quarter was impacted by the anticipated slowdown in market activity and our banking businesses experienced low levels of client activity in April and May. Benefiting from significant improvements in June, the Group generated a respectable second-quarter result, driven by good net revenues and effective cost management."
He added, "Our half-year results demonstrate that we are making good progress in advancing our business but still have some way to go before we deliver the full potential of Credit Suisse Group. We therefore remain committed to further improving on this performance as part of our efforts to build a powerful integrated banking organization. With that, I am convinced we will create compelling new opportunities for revenue growth and improved efficiency."
Banking Segments
Private Banking reported net income of CHF 581 million in the second quarter of 2005, reflecting stable lending, deposit and commission income. Compared to the strong first quarter of 2005, net income declined 15%, due primarily to a reduction in overall trading revenues as a result of lower income from trading execution. The 13% decrease in net income versus the second quarter of last year was mainly attributable to small losses during the quarter in the fair value of interest rate derivatives used for risk management purposes which did not qualify for hedge accounting, compared to large gains in the second quarter of 2004. The gross margin was 125.6 basis points for the second quarter and 131.5 basis points for the first half of 2005, achieving the segment's mid-term target of 130 basis points. The cost/income ratio was 59.9% for the second quarter, up 4.5 percentage points versus the prior quarter and up 2.0 percentage points versus the second quarter of 2004. This reflects seasonally higher expenses compared to the first quarter of 2005, strategic investments in key growth markets and lower net revenues.
Corporate and Retail Banking generated net income of CHF 277 million for the second quarter of 2005, up slightly versus the previous quarter and up 8% compared to the second quarter of 2004. Strong revenue generation and a net release of provisions for credit losses were the main drivers of this result. The cost/income ratio of 63.9% in the second quarter of 2005 was up 2.4 percentage points from the prior quarter, which was characterized by seasonally lower expenses, and up 5.7 percentage points from the second quarter of 2004, which benefited from positive changes in the fair value of interest rate derivatives used for risk management purposes which did not qualify for hedge accounting. The segment achieved a strong return on average allocated capital of 21.4% in the second quarter.
Institutional Securities recorded a CHF 960 million charge before tax, CHF 624 million after tax, in the second quarter of 2005 to increase the reserve for private litigation involving Enron, certain IPO allocation practices, research analyst independence and other related litigation. The charge was in addition to the reserve for these private litigation matters of CHF 702 million (USD 450 million) before tax originally established in 2002 and brings the total reserve for these private litigation matters to CHF 1.4 billion (USD 1.1 billion) after deductions for settlements that have since taken place. We believe that with this measure, the litigation reserves of Credit Suisse Group adequately reflect our current assessment of the probable and reasonably estimable litigation exposure.
For the second quarter of 2005, Institutional Securities reported a net loss of CHF 408 million, including the above-mentioned charge for litigation provisions. Excluding this charge, Institutional Securities would have reported net income of CHF 216 million in the second quarter, an increase of 67% compared to the same period of last year, reflecting higher revenues and lower compensation and benefits. Compared to the first quarter of 2005, net income decreased from CHF 540 million, reflecting higher other expenses due to the litigation charge as well as a decline in net revenues resulting from the considerable slowdown in market activity in April and May. Trading revenues, particularly in fixed income, compared favorably to the second quarter of 2004 but were down from the first quarter of this year. Investment banking net revenues rose significantly versus the first quarter of 2005, with improved performances in advisory fees versus both prior periods and in debt and equity underwriting versus the first quarter of 2005. Total operating expenses increased compared to the previous quarter and the same period of 2004 due to the litigation charge. Compensation and benefits decreased slightly versus both prior periods.
Wealth and Asset Management reported net income of CHF 245 million for the second quarter of 2005, up 81% from the previous quarter and down 19% from the second quarter of 2004, which included particularly high levels of investment-related gains in Alternative Capital. Second-quarter 2005 net revenues benefited from investment gains from private equity realizations. Total operating expenses rose 4% compared to the previous quarter and were slightly lower compared to the same period of last year.
Insurance Segments
Life and Pensions' net income rose substantially to CHF 116 million in the second quarter of 2005, an increase of 73% compared to the same period of 2004. Year-to-date, net income totaled CHF 242 million, up CHF 36 million, or 17%, from the first half of 2004. The main drivers behind this result were the focus on productivity and selected areas of growth and, to a lesser extent, the slightly higher net investment income on investments backing traditional life policies. Total business volume grew by 2% compared to the second quarter of 2004 and was up 5% year-to-date. This encompasses deposits from investment-type products as well as gross premiums written from traditional insurance policies. The net investment return backing traditional life policies amounted to 4.7%, compared to 4.6% in the corresponding quarter of the previous year. Insurance underwriting and acquisition expenses decreased 5% and administration expenses were down 8% compared to the second quarter of 2004, reflecting further benefits from the ongoing implementation of cost control measures. The expense ratio consequently improved by 1.0 percentage points to 10.9%.
Non-Life reported second-quarter 2005 net income of CHF 137 million, up 67% compared to the second quarter of 2004. For the first half of 2005, net income amounted to CHF 262 million, representing an increase of CHF 77 million, or 42%, compared to the same period of 2004. This progress was achieved despite a challenging underwriting environment, the adverse impacts of foreign exchange rates and lower net investment income. Net premiums earned decreased slightly to CHF 2,643 million versus the same period of last year. Net investment return in the second quarter was 4.2%, compared to 4.5% in the second quarter of 2004. Net current investment return increased slightly to 3.7% from 3.6%, and net realized gains decreased by 0.4 percentage points to 0.5% versus the second quarter of 2004. The combined ratio decreased by a further 2.6 percentage points to 95.1% in the second quarter of 2005 compared to the same period of 2004, and it was down by 1.8 percentage points to 97.3% for the first half of 2005. The claims ratio improved by 0.9 percentage points to 70.4% from the second quarter of 2004 due to a low level of large-scale losses and improvements in claims management. The expense ratio decreased by 1.7 percentage points to 24.7%. Administration expenses decreased 15% to CHF 273 million and insurance underwriting and acquisition expenses remained relatively stable, decreasing 1% to CHF 379 million in line with net premiums earned.
Net New Assets
Private Banking generated CHF 12.8 billion of net new assets in the second quarter of 2005. The segment reported a net new asset growth rate of 7.3% for the first half of the year, with strong asset inflows from strategic key markets. Wealth and Asset Management recorded CHF 4.2 billion of net new assets, driven primarily by new fund commitments in Alternative Capital. Overall, Credit Suisse Group reported CHF 16.2 billion of net new assets in the second quarter. The Group's total assets under management stood at CHF 1,341.2 billion as of June 30, 2005, up 5.5% from March 31, 2005.
Outlook
We expect the recovery in client activity in the banking business, which started in June, to continue. We believe that equity markets will improve in the second half of the year after a short-term correction of the recent uptrend. Interest rates will most likely move in a narrow range. Credit Suisse Group is well positioned to benefit from this economic environment.
For additional information on Credit Suisse Group's results for the second quarter of 2005, please refer to the Group's Quarterly Report Q2 2005, as well as the Group's slide presentation for analysts and the press, which are available on the Internet at: www.credit-suisse.com/results
Credit Suisse Group Credit Suisse Group is a leading global financial services company headquartered in Zurich. It provides private clients and small and medium-sized companies with private banking and financial advisory services, and pension and insurance solutions from Winterthur. In the area of investment banking, it serves global institutional, corporate, government and individual clients in its role as a financial intermediary. Credit Suisse Group's registered shares (CSGN) are listed in Switzerland and in the form of American Depositary Shares (CSR) in New York. The Group employs around 60,000 staff worldwide. As of June 30, 2005, it reported assets under management of CHF 1,341.2 billion.
Cautionary Statement Regarding Forward-Looking Information
This press release contains statements that constitute forward-looking statements. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements. Such forward-looking statements may include, without limitation, statements relating to our plans, objectives or goals; our future economic performance or prospects; the potential effect on our future performance of certain contingencies; and assumptions underlying any such statements. Words such as "believes," "anticipates," "expects," "intends" and "plans" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We do not intend to update these forward-looking statements except as may be required by applicable laws. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include (i) market and interest rate fluctuations; (ii) the strength of the global economy in general and the strength of the economies of the countries in which we conduct our operations in particular; (iii) the ability of counterparties to meet their obligations to us; (iv) the effects of, and changes in, fiscal, monetary, trade and tax policies, and currency fluctuations; (v) political and social developments, including war, civil unrest or terrorist activity; (vi) the possibility of foreign exchange controls, expropriation, nationalization or confiscation of assets in countries in which we conduct our operations; (vii) the ability to maintain sufficient liquidity and access capital markets; (viii) operational factors such as systems failure, human error, or the failure to properly implement procedures; (ix) actions taken by regulators with respect to our business and practices in one or more of the countries in which we conduct our operations; (x) the effects of changes in laws, regulations or accounting policies or practices; (xi) competition in geographic and business areas in which we conduct our operations; (xii) the ability to retain and recruit qualified personnel; (xiii) the ability to maintain our reputation and promote our brands; (xiv) the ability to increase market share and control expenses; (xv) technological changes; (xvi) the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users; (xvii) acquisitions, including the ability to integrate successfully acquired businesses; (xviii) the adverse resolution of litigation and other contingencies; and (xix) our success at managing the risks involved in the foregoing. We caution you that the foregoing list of important factors is not exclusive; when evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, as well as the risks identified in our most recently filed Form 20-F and reports on Form 6-K furnished to the US Securities and Exchange Commission.
Presentation of Credit Suisse Group's Second-Quarter 2005 Results via Webcast and Telephone Conference
Date Wednesday, August 3, 2005
Time 10.00 CEST / 09.00 BST / 04.00 EST
Speakers Oswald J. Grubel, Chief Executive Officer of Credit Suisse
Group
Renato Fassbind, Chief Financial Officer of Credit Suisse
Group
The presentation will be held in English
(with simultaneous interpreting into German)
Webcast www.credit-suisse.com/results
Telephone Europe: +41 91 610 5600
U.K.: +44 207 107 0611
U.S.: +1 866 291 4166
Reference: 'Credit Suisse Group quarterly results'
Q&A You will have the opportunity to ask questions during the
conference following the presentation.
Playback Video playback -- available approximately three hours after
the event at: www.credit-suisse.com/results
Telephone replay -- available approximately one hour after
the event; please dial:
Europe: +41 91 612 4330
U.K.: +44 207 108 6233
U.S.: +1 866 416 2558
Analyst & media conference ID:
Q&A Analysts English 661#
Q&A Analysts German 309#
Q&A Media English 728#
Q&A Media German 699#
Note We recommend that you dial in approximately ten minutes
before the start of the presentation for the webcast and
telephone conference. Further instructions and technical
test functions are now available on our website.
The full press release including tables can be downloaded from the following link: http://hugin.info/100174/R/1004697/154573.pdf