Economy & Finance

credit-suisse Quarterly Review Q2/2001

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1. Q2 2001 CREDIT SUISSE GROUP QUARTERLY REVIEW 2. 1 Editorial 2 Financial highlights Q2/2001 4 An overview of Credit Suisse Group 8 Review of business units 8 Credit…
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  • 1. Q2 2001 CREDIT SUISSE GROUP QUARTERLY REVIEW
  • 2. 1 Editorial 2 Financial highlights Q2/2001 4 An overview of Credit Suisse Group 8 Review of business units 8 Credit Suisse Financial Services 16 Credit Suisse Private Banking 18 Credit Suisse Asset Management 20 Credit Suisse First Boston 23 Consolidated results 23 Income statement 24 Balance sheet 25 Off-balance sheet business 25 Selected notes Information for investors As already stated in the Annual Review 2000 and the Annual Report 2000/2001, Credit Suisse Group changed its accounting policies in the year 2000, within the framework of the Swiss Accounting and Reporting Recommendations, in order to increase the transparency for its insurance business and to align its reporting with a more internationally recog- nised standard. The Group’s half-year financial statements as of 30 June 2000 have been restated to conform with the current year’s presentation. The Group’s consolidated financial statements show both the restated (new basis) and the “previously reported” comparative figures for 30 June 2000. For detailed information, please refer to the Annual Report 2000/2001, Note 2: Changes to accounting policies. This symbol is used to indicate topics on which further information is available on our website. Go to www.credit-suisse.com/q2review2001/bookmarks.html to find links to the relevant information. The additional information indicated is openly accessible and does not form part of the Quarterly Review. Some areas of Credit Suisse Group’s websites are only available in English.
  • 3. EDITORIAL Good performance in the challenging first half of 2001 Dear shareholders, clients and efforts will be continued throughout the fellow employees remainder of 2001 and into 2002. Going forward, we expect the Dear readers world’s economic climate and the situa- tion in the global financial markets With a net operating profit of CHF 1.6 to be difficult in the third and fourth billion and a net profit of CHF 1.3 bil- quarters, affecting our core activities lion in the second quarter of 2001, in the areas of asset gathering and in- Credit Suisse Group competed suc- vestment banking. At the same time, Lukas Mühlemann cessfully with its global peers in a the fundamental soundness of our Chairman and Chief Executive Officer demanding market environment. In the global business strategy has been first half of the year, we reported a net proved even under these conditions operating profit of CHF 3.3 billion and and the Group’s medium- and longer- a net profit of CHF 2.7 billion, with all term prospects are good. business units performing well. We will continue to focus on provid- Despite market conditions, the ing the best possible service for our Group posted a 1% increase in rev- clients, growing our business, increas- enues over the first quarter and record- ing our productivity, and thus further ed strong development in net new improving our position in the top tier of assets, which amounted to CHF 41.4 the world’s leading financial institutions. billion for the first half of 2001. Total assets under management stood at CHF 1,452.1 billion at end-June, up 4.3% compared with year-end 2000. Progress was also achieved in terms of cost reduction, demonstrated Lukas Mühlemann by lower personnel expenses as com- Chairman and Chief Executive Officer pared with the first quarter. These August 2001 www.credit-suisse.com 1
  • 4. CREDIT SUISSE GROUP FINANCIAL HIGHLIGHTS Q2/2001 Change vs. 31 Dec. 2000 Share data 1) 30 June 2001 31 March 2001 31 Dec. 2000 in % Number of shares issued in millions 1,203.60 1,202.99 1,201.75 0 1,196.00 2) Shares ranking for dividend in millions 1,202.99 1,201.75 0 Market capitalisation in CHF m 88,295 91,529 92,535 (5) Book value per share in CHF 35.76 34.56 34.08 5 Change vs. Q2/2001 Q1/2001 2000 2000 in CHF in CHF in CHF in % Share price (as of 15 August 2001: CHF 71.25) at end of reporting period 73.88 76.38 77.00 (4) high 83.13 87.00 97.13 (14) low 72.25 69.75 73.25 (1) Change in % 6 months 6 months 6 months Q2/2001 Q1/2001 Q2/2000 2001 2000 2001/2000 1,196.05 3) 1,201.90 3) 1,198.96 3) Average number of shares in millions 1,095.38 1,093.11 10 Earnings per share in CHF 1.08 1.19 1.53 2.27 3.28 (31) Operating earnings per share in CHF 4) 1.35 1.44 1.57 2.78 3.37 (18) Earnings per share – diluted, in CHF 1.07 1.18 1.53 2.24 3.27 (31) Operating earnings per share – diluted, in CHF 4) 1.33 1.42 1.57 2.76 3.36 (18) 1) All share-related data have been adjusted for the 4-for-1 share split effective as of 15 August 2001. 2) 7.6 m of the shares repurchased were approved for cancellation by the Annual General Meeting on 1 June 2001 and are not ranking for dividend. 3) Adjusted for average number of shares repurchased. 4) Excl. amortisation of acquired intangible assets and goodwill. Share performance Market capitalisation Swiss Market Index Credit Suisse Group as of end of reporting period (in CHF bn) 100 100 90 90 80 70 80 60 70 50 60 40 50 30 40 20 30 20 10 0 1998 1996 1999 2000 2001 1997 91 92 93 94 95 96 97 98 99 00 Q2/01 Financial calendar Third quarter results 2001 Tuesday, 20 November 2001 Investor’s Day Friday, 7 December 2001 Fourth quarter/full-year results 2001 Tuesday, 12 March 2002 2
  • 5. 6 months 6 months Change in % Q2/2001 Q1/2001 Q2/2000 2001 2000 6 months Consolidated income statement in CHF m in CHF m in CHF m in CHF m in CHF m 2001/2000 Operating income 11,182 11,091 8,748 22,273 17,924 24 Gross operating profit 3,009 3,107 2,965 6,116 6,217 (2) Net operating profit 1) 1,611 1,726 1,723 3,337 3,684 (9) Net profit 1,288 1,428 1,675 2,716 3,590 (24) Cash flow 2,674 2,535 2,525 5,209 5,119 2 6 months 6 months Change in % Q2/2001 Q1/2001 Q2/2000 2001 2000 6 months Return on equity (ROE) in % in % in % in % in% 2001/2000 Credit Suisse Group: – Reported ROE 12.4 13.9 20.6 13.1 22.8 (43) Operating ROE 1) – 15.2 16.7 21.2 16.0 23.4 (32) Banking business: – Reported ROE 10.0 13.2 22.5 11.5 25.9 (56) Operating ROE 1) – 13.1 16.6 23.1 14.9 26.5 (44) Insurance business: – Reported ROE 26.0 16.7 15.3 21.0 14.2 48 Operating ROE 1) – 26.8 17.2 15.6 21.7 14.6 49 – Return on invested capital (ROIC) 29.3 21.6 26.9 25.2 25.4 (1) 30 June 2001 31 Dec. 2000 Change vs. Consolidated balance sheet in CHF m in CHF m 31 Dec. 2000 in % Total assets 1,118,206 987,433 13 Shareholders’ equity 45,582 43,522 5 Minority interests in shareholders’ equity 2,536 2,571 (1) 30 June 2001 31 Dec. 2000 Change vs. BIS data in CHF m in CHF m 31 Dec. 2000 in % BIS risk-weighted assets 261,550 239,465 9 BIS tier 1 capital 25,970 27,111 (4) – of which non-cumulative perpetual preferred securities 1,135 1,102 3 BIS total capital 42,108 43,565 (3) 30 June 2001 31 Dec. 2000 BIS ratios in % in % BIS tier 1 ratio – Credit Suisse 6.7 7.1 Credit Suisse First Boston 2) – 13.0 13.6 Credit Suisse Group 3) – 9.9 11.3 BIS total capital ratio – Credit Suisse Group 16.1 18.2 30 June 2001 31 March 2001 31 Dec. 2000 Change vs. Assets under management/client assets in CHF bn in CHF bn in CHF bn 31 Dec. 2000 in % Advisory assets under management 751.4 723.9 724.7 4 Discretionary assets under management 700.7 668.4 667.3 5 Total assets under management 1,452.1 1,392.3 1,392.0 4 Client assets 2,178.9 2,077.7 2,065.0 6 Change in % 6 months 6 months 6 months Q2/2001 Q1/2001 Q2/2000 2001 2000 2001/2000 in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn Net new assets 33 16.7 24.7 9.7 41.4 31.2 Change vs. Number of employees 31 Dec. 2000 31 Dec. 2000 in % 30 June 2001 31 March 2001 Switzerland – banking 4 22,357 21,915 21,454 – insurance (5) 6,439 6,503 6,781 Outside Switzerland – banking 0 30,636 30,894 30,666 – insurance 8 23,353 22,836 21,637 Total employees Credit Suisse Group 3 82,785 82,148 80,538 1) Excl. amortisation of acquired intangible assets and goodwill (Credit Suisse Group: Q2/2001: CHF 323 m; Q1/2001: CHF 298 m; Q2/2000: CHF 48 m), all net of tax. 2) Ratio is based on a tier 1 capital of CHF 18.9 bn (31 Dec. 2000: CHF 17.6 bn), of which non-cumulative perpetual preferred securities is CHF 1.1 bn (for both periods). 3) Ratio is based on a tier 1 capital of CHF 26.0 bn (31 Dec. 2000: CHF 27.1 bn), of which non-cumulative perpetual preferred securities is CHF 1.1 bn (for both periods). www.credit-suisse.com 3
  • 6. AN OVERVIEW OF CREDIT SUISSE GROUP Credit Suisse Group posted a net operating profit of CHF 1.6 billion in the second quarter of 2001, representing a 7% decrease compared to the second quarter of 2000 and to the first quarter of 2001. Net operating profit for the first half of 2001 totalled CHF 3.3 billion, down 9% year-on-year. Assets under management grew by 4.3% to CHF 1,452.1 billion since year-end 2000, with a very strong net inflow of new assets of CHF 41.4 billion (3.0%). Overview of business unit results Credit Credit Credit Credit Adjustments Suisse Suisse Suisse Suisse including Credit 6 months 2001 Financial Private Asset First Corporate Suisse in CHF m Services Banking Management Boston Center Group Operating income 5,221 3,081 794 13,358 (181) 22,273 11 091 Operating expenses 3,345 1,379 607 11,147 (321) 16,157) 7 984 Gross operating profit 1,876 1,702 187 2,211 140 6,116 3 107 Depreciation and write-offs on non-current assets 1) 301 26 15 439 204 985 483 Valuation adjustments, provisions and losses 2) 166 85 0 390 9 650 238 Profit before extraordinary items, taxes 1) 1,409 1,591 172 1,382 (73) 4,481) 2 386 Extraordinary income/(expenses), net 8 3 (1) (1) 13 22 (22 Taxes (408) (362) (15) (279) 29 (1,035) Net operating profit before minority interests 1) 1,009 1,232 156 1,102 (31) 3,468) 1 773 Amortisation of acquired intangible assets, ) 298 and goodwill, net of tax 33 8 52 537 (9) 621 Net profit before minority interests 976 1,224 104 565 (22) 2,847) 1 475 Minority interests (77) (11) 0 0 (43) (131) Net profit 899 1,213 104 565 (65) 2,716) 1 428 3,337) 1 726 Net operating profit 1) 932 1,221 156 1,102 (74) Value added 3) 558 1,095 92 250 (408) 1,587 10,887 4) Average allocated capital 3,373 1,265 17,217 17.9% 4) Return on average allocated capital n/a n/a 6.6% Return on average allocated capital (operating) 1) 18.5% 4) n/a n/a 12.8% Increased/(decreased) credit-related valuation adjustments 2) (5) 1 – 0 1) Excl. amortisation of acquired intangible assets and goodwill. 2) Increased/decreased valuation adjustments taken at Group level resulting from the difference between the statistical and actual credit provisions. 3) Value Added is a measure of value creation in the period under review. It is derived from Credit Suisse Group’s Value Based Analysis (VBA) and complements the per- formance metrics which are currently used, but does not replace them. The measure is aimed at enhancing the management’s awareness of value creation. For this purpose, accounting figures are adjusted by adding back accounting distortions such as selected non-cash charges (e.g. amortisation of goodwill), and cost of equity is charged to the business unit as well as the consolidated accounts. 4) For the Winterthur business units within Credit Suisse Financial Services, average invested capital is used for the calculation of return on invested capital (ROIC). 4
  • 7. Assets under management/client assets 30 June 2001 31 March 2001 31 Dec. 2000 Change vs. in CHF bn in CHF bn in CHF bn 31 Dec. 2000 in % Credit Suisse Financial Services 278.4 276.4 273.8 1.7 0.9 Assets under management 147.5 145.3 142.6 3.4 1.9 – of which discretionary 293.8 291.7 289.6 1.5 0.7 Client assets Credit Suisse Private Banking 489.1 463.6 456.4 7.2 1.5– Assets under management 122.5 110.7 108.7 12.7 1.1 – of which discretionary 526.7 502.2 495.6 6.3 1.0 Client assets Credit Suisse Asset Management 503.4 485.4 487.2 3.3 (0. Assets under management 372.4 356.7 360.1 3.4 (0.9 – of which discretionary 503.4 485.4 487.2 3.3 (0.4 Client assets Credit Suisse First Boston 1) 181.2 166.9 174.6 3.8 (1.3 Assets under management 58.3 55.7 55.9 4.3 – of which discretionary 32.4 32.0 31.9 1.6 – of which Private Equity on behalf of clients 855.0 798.4 792.6 7.9 Client assets Credit Suisse Group 1,452.1 1,392.3 1,392.0 4.3 Assets under management 700.7 668.4 667.3 5.0 – of which discretionary 2,178.9 2,077.7 2,065.0 5.5 Client assets 6 months 6 months Change in % Q2/2001 Q1/2001 Q2/2000 2001 2000 6 months Net new assets in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn 2001/2000 (1.1) 4.6 0.5 3.5 5.7 (39) Credit Suisse Financial Services 12.1 8.4 5.3 20.5 10.9 88 Credit Suisse Private Banking Credit Suisse Asset Management 2) 1.2 6.8 4.3 8.0 14.6 (45) Credit Suisse First Boston 3) 4.5 4.9 (0.4) 9.4 0.0 – 16.7 24.7 9.7 41.4 31.2 33 Credit Suisse Group 1) Certain restatements have been made to prior period amounts to conform to the current presentation. 2) Net new discretionary assets. 3) Measured as the balance from accounts opened minus accounts closed. Credit Suisse Group performed well in Taking into account the 4-for-1 4.3% since year-end 2000 (4.3% the second quarter of 2001, despite share split effective 15 August 2001, since the end of the first quarter of a demanding market environment operating earnings per share for the 2001). In the first half of 2001, Credit which contrasted sharply with the posi- second quarter of 2001 were CHF Suisse Private Banking contributed tive market developments in 2000. 1.35, compared to CHF 1.57 for the CHF 20.5 billion (CHF 12.1 billion in Net operating profit – which excludes second quarter of 2000 and CHF 1.44 the second quarter of 2001), Credit the amortisation of acquired intangible for the first quarter of 2001. Operating Suisse Asset Management CHF 8.0 assets and goodwill – was CHF 1.6 earnings per share for the first half of billion (CHF 1.2 billion), Credit Suisse billion, representing a decrease of 7% 2001 decreased to CHF 2.78 from Financial Services CHF 3.5 billion over the second quarter of 2000 and CHF 3.37 in the first half of 2000. (CHF –1.1 billion) and Credit Suisse over the first quarter of 2001. Credit Net new assets developed very First Boston CHF 9.4 billion (CHF 4.5 Suisse Group’s consolidated second strongly in the first half of 2001, con- billion) to the Group’s net new assets. quarter results include a CHF 100 mil- tributing CHF 41.4 billion or 3.0% of Operating income amounted to lion reserve for potential writedowns in assets under management (CHF 16.7 CHF 11.2 billion for the second the private equity portfolio. billion or 1.2% in the second quarter). quarter of 2001, representing a 1% Net operating profit for the first half The Group’s total assets under man- increase quarter-on-quarter. Operating of 2001 amounted to CHF 3.3 billion, agement stood at CHF 1,452.1 billion expenses were up 2% over the first down 9% over the first half of 2000. as of 30 June 2001, an increase of quarter of 2001, to CHF 8.2 billion, www.credit-suisse.com 5
  • 8. AN OVERVIEW OF CREDIT SUISSE GROUP whereas personnel expenses were miums earned at Winterthur Operating income composition down 1%. Operating income for Insurance grew 15% and net op- Q2/2001 the first half of 2001 totalled CHF erating profit was up 7% year-on- 14% 17% 22.3 billion, up 24% compared to the year; the sale of its business for same period of last year, while operat- large multinational companies was ing expenses amounted to CHF 16.2 completed in July 2001. billion, up 38% year-on-year. When Winterthur Life & Pensions 28% comparing the first-half results of 2001 recorded 10% premium growth in 41% with those of the same period of the the first half of 2001 and an in- previous year, it should be noted that crease in net operating profit of Donaldson, Lufkin & Jenrette (DLJ) is 43%, to CHF 413 million. Net op- Balance sheet business included in Credit Suisse Group’s re- erating profit at Credit Suisse Commission and service fees sults as of November 2000. Banking, at CHF 365 million for Trading Reported net profit for the second the first half, was slightly weaker Insurance quarter of 2001 was CHF 1.3 billion, than in 2000; lower asset gather- down 23% compared to the second ing income was partially offset by quarter of 2000 and down 10% com- lower credit provisions. The pared to the previous quarter. For the Personal Finance initiative in first half of 2001, reported net profit Europe is well on track: operations was CHF 2.7 billion, down 24% year- in Germany and Spain were started Operating income contribution by on-year. Reported net profit includes in the second quarter of 2001, business unit Q2/2001 the amortisation of acquired intangible with the actual launch of its offer- assets and goodwill, which amounted to ings scheduled for the third quar- 24% CHF 323 million net of tax (CHF 0.27 ter. Continued investments resulted per share) for the second quarter of in an operating loss of CHF 196 59% 2001, compared to CHF 48 million million in the first half. 13% (CHF 0.04 per share) for the same pe- riod of the previous year and CHF 298 • Credit Suisse Private Banking con- 4% million (CHF 0.25 per share) for the tinued to perform very well, with previous quarter. For the first half of first-half net operating profit down CSFS 2001, these items stood at CHF 621 12% over a very strong first half of CSPB million net of tax (CHF 0.52 per share), 2000, to CHF 1.2 billion. These CSAM versus CHF 94 million (CHF 0.09 per results reflect continued strong CSFB share) in the same period of last year. sales of new products, partially Credit Suisse Group’s annualised offsetting the weak transaction operating return on equity was 15.2% volume. The inflow of net new for the second quarter of 2001, com- assets in the second quarter 2001 pared to 21.2% for the same period exceeded the already strong result of the previous year and 16.7% for of the previous quarter, totalling Net operating profit contribution by the previous quarter. Annualised CHF 20.5 billion, or 4.5% growth business unit Q2/2001 operating return on equity for the first for the first half of 2001. half of 2001 was 16.0%, compared 31% 28% to 23.4% in the same period of last • Credit Suisse Asset Management’s year. first-half revenues were up 10% Credit Suisse Group expects the over 2000 to CHF 827 million. 5% third and fourth quarters to be difficult, Net new asset growth slowed in with the capital markets environment the second quarter as a result of affecting both the asset gathering and the unfavourable market condi- 36% the investment banking businesses. tions. Assets under management rose 3.3% in the first six months of CSFS 2001, to CHF 503.4 billion. Business unit highlights CSPB CSAM • Credit Suisse Financial Services • Credit Suisse First Boston posted CSFB achieved a strong result, particularly good results in difficult market con- in the insurance business. Net pre- ditions for the first half of 2001, 6
  • 9. holding or gaining market share in the following members: Lukas ing line on the stock exchange from most of its segments. Net operat- Mühlemann (Chairman and Chief 14 March to 14 August 2001. The ing profit for the first six months Executive Officer), Hans-Ulrich Doerig total purchase price for these shares was down 14% over a very strong (Vice-Chairman of the Group was CHF 1.1 billion and the average first half of 2000, to CHF 1.1 bil- Executive Board and Chief Risk price per share – prior to the share lion. Quarter-on-quarter results Officer), John J. Mack (Vice-Chairman split on 15 August – was CHF 295.70 were in line with the industry, with of the Group Executive Board and (CHF 73.92 after the split). Out of the revenues down 7% in US dollar Chief Executive Officer of Credit total shares repurchased, 1,900,000 terms and operating expenses Suisse First Boston), Thomas Wellauer were cancelled on 10 August, as down 6% in US dollar terms. The (Chief Executive Officer of Credit previously approved by the Annual private equity business recorded Suisse Financial Services) and Philip General M
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