Economy & Finance

credit-suisse Quarterly Review Q4/2001

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1. Q4 Q U A R T E R LY R E V I E W 2 0 01 2. Credit Suisse Group is a leading global financial services company headquartered in Zurich. Credit Suisse Financial Services…
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  • 1. Q4 Q U A R T E R LY R E V I E W 2 0 01
  • 2. Credit Suisse Group is a leading global financial services company headquartered in Zurich. Credit Suisse Financial Services provides private clients and small and medium-sized companies with private banking and financial advisory services, banking products, and pension and insurance solutions from Winterthur. Credit Suisse First Boston, the investment bank, serves global institutional, corporate, govern- ment and individual clients in its role as a financial intermediary. Credit Suisse Group’s registered shares (CSGN) are listed in Zurich and London on the SWX Swiss Exchange/virt-x, Frankfurt and Tokyo, and in the form of American Depositary Shares (CSR) in New York. The Group employs around 80,000 staff worldwide. As of December 31, 2001, it reported assets under management of CHF 1,425.5 billion. 1 Editorial 2 Financial highlights Q4/2001 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 24 Consolidated results Credit Suisse Group 24 Consolidated income statement 25 Consolidated balance sheet 26 Off-balance sheet and fiduciary business 26 Selected notes 29 Risk Management Information for investors The Financial Report comprising the Group’s consolidated financial statements and the parent company financial statements as of December 31, 2001, is available in English on the Internet. Credit Suisse Group’s Annual Report 2001 will be available from May 6, 2002, in English and German. This symbol is used to indicate topics on which further information is available on our website. Go to www.credit-suisse.com/q4results2001/bookmarks.html to find links to the relevant information. This 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. Cautionary Statement Regarding Forward-Looking Information This communication may contain projections or other forward-looking statements related to Credit Suisse Group that involve risks and uncertainties. Readers are cautioned that these statements are only projections and may differ materially from actual future results or events. Readers are referred to the documents filed by Credit Suisse Group with the SEC, specifically the most recent filing on Form 20-F, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including, among other things, risks relating to market fluctuations and volatility, significant interest rate changes, credit exposures, cross border transactions and foreign exchange fluctuations, impaired liquidity, competition and legal liability. All forward-looking statements are based on information available to Credit Suisse Group on the date of its posting and Credit Suisse Group assumes no obligation to update such statements unless otherwise required by applicable law.
  • 3. EDITORIAL Lukas Mühlemann Chairman and Chief Executive Officer Dear shareholders, clients and colleagues 2001 was a challenging year for the whole financial ser- Net profit for the year was CHF 1.6 billion. At year-end vices industry, including Credit Suisse Group. Revenues 2001, total assets under management stood at CHF were down in every quarter. The Group reacted to these 1,425.5 billion, up slightly from year-end 2000. developments early in the year and started to adjust its Our financial services, private banking and asset cost base in line with the significantly altered market management businesses proved remarkably resilient in environment. It was thus possible to reduce our operating 2001 and put in a good performance given market condi- expenses by 12% in the third quarter and – excluding tions. Credit Suisse First Boston was strongly impacted exceptional items at Credit Suisse First Boston – by 18% by the negative market environment, particularly in the in the fourth quarter. second half of the year. The strict implementation of cost At the same time, we successfully built our market saving measures led to exceptional items in the fourth franchise in all of the Group’s businesses. Our asset quarter, but also to a much more competitive cost base gathering and asset management businesses recorded which is expected to impact positively on the business net new assets of CHF 66.4 billion in 2001 compared unit’s performance going forward. with CHF 58.1 billion in 2000, corresponding to an We remain cautious in our outlook for 2002. However, increase of 14%. The Group’s insurance businesses the Group has considerable financial strength and a good achieved double-digit premium growth. Donaldson, Lufkin market position in all core businesses. We are confident & Jenrette (DLJ) was successfully integrated into Credit about our ability to capture new business opportunities and Suisse First Boston and their combined market position to create added value for our clients and shareholders. was maintained. The Group’s Board of Directors will propose a par value We attribute this performance to our dedication to reduction of CHF 2 per share in lieu of a dividend to providing our clients with the best possible services and the Annual General Meeting on May 31, 2002. This is products. Our strategic decision three years ago to offer unchanged versus the par value reduction for the financial mutual fund and life insurance products from external year 2000. providers – and not only our own products – has clearly paid off for our clients. Our decision two years ago to offer alternative investment products also enabled many of our clients to protect their capital despite the negative market conditions in 2001. Moreover, the combined Lukas Mühlemann product and market strength of the former DLJ, Credit March 2002 Suisse First Boston and Credit Suisse Asset Manage- ment enables us to provide a full and high-quality product line for our institutional clients. Credit Suisse Group reported a net operating profit of CHF 4.0 billion for 2001, excluding exceptional items at Credit Suisse First Boston and the amortization of acquired intangible assets and goodwill, net of tax. www.credit-suisse.com 1
  • 4. CREDIT SUISSE GROUP FINANCIAL HIGHLIGHTS Q4/2001 Change from Share data 1) 31.12.01 30.09.01 31.12.00 31.12.00 in % Shares issued 1,196,609,811 1,196,253,596 1,201,751,960 0 Shares repurchased 7,730,000 7,730,000 0 – Shares outstanding 1,188,879,811 1,188,523,596 1,201,751,960 (1) Share price in CHF (as of March 4, 2002: CHF 61.80 ) 70.80 56.50 77.00 (8) Market capitalization in CHF m 84,173 67,152 92,535 (9) Book value per share in CHF 29.92 29.90 34.08 (12) 12 months Change from Share price in CHF 1) 4Q2001 3Q2001 4Q2000 2001 2000 2000 in % High 71.30 75.88 87.38 87.00 97.13 (10) Low 51.60 44.80 73.25 44.80 73.25 (39) Repayment of capital (in lieu of a dividend) 5) 2.00 2.00 0 12 months Calculation of earnings Change from per share (EPS) 1) 4Q2001 3Q2001 4Q2000 2001 2000 2000 in % Net profit in CHF m (830) (299) 590 1,587 5,785 (73) Net operating profit in CHF m 2) 616 21 1,880 3,974 7,218 (45) Diluted net profit in CHF m (830) (299) 590 1,588 5,787 (73) Diluted net operating profit in CHF m 2) 616 22 1,880 3,975 7,220 (45) Weighted average shares outstanding 3) 1,188,677,445 1,189,924,996 1,162,136,520 1,194,090,788 1,111,100,088 7 Dilutive impact 4) 7,213,154 7,860,925 9,691,120 9,356,766 5,874,124 59 Weighted average shares, diluted 1,195,890,599 1,197,785,921 1,171,827,640 1,203,447,554 1,116,974,212 8 Basic earnings per share in CHF (0.70) (0.25) 0.51 1.33 5.21 (74) Basic earnings per share – operating, in CHF 2) 0.52 0.02 1.62 3.33 6.50 (49) Diluted earnings per share in CHF (0.69) (0.25) 0.50 1.32 5.18 (75) Diluted earnings per share – operating, in CHF 2) 0.52 0.02 1.60 3.30 6.46 (49) 1) All share-related data have been adjusted for the 4-for-1 share split effective as of August 15, 2001. / 2) Excluding amortization of acquired intangible assets and good- will, exceptional items of CHF 1,092 m in 4Q2001, as well as restructuring provisions of CHF 1,074 m in 4Q2000, all net of tax. / 3) Adjusted for weighted average shares repurchased. / 4) From convertible bonds and outstanding options. / 5) Proposal of the Board of Directors to the Annual General Meeting on May 31, 2002. Share performance Market capitalization Swiss Market Index (rebased) Credit Suisse Group As of end of reporting period (in CHF bn) 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 10 20 0 1998 1996 1999 2000 2001 2002 1997 91 92 93 94 95 96 97 98 99 00 01 Financial calendar Annual Report 2001 Monday, May 6, 2002 First quarter results 2002 Wednesday, May 15, 2002 Annual General Meeting 2002 Friday, May 31, 2002 Second quarter results 2002/distribution of par value reduction Wednesday, August 14, 2002 Third quarter results 2002 Thursday, November 14, 2002 2
  • 5. 12 months Change from Consolidated income statement in CHF m 4Q2001 3Q2001 4Q2000 2001 2000 2000 in % Operating income 8,161 8,720 10,632 39,154 37,231 5 Gross operating profit 1,264 1,490 3,170 8,870 12,083 (27 ) Net operating profit 1) 616 21 1,880 3,974 7,218 (45 ) Net profit (830) (299) 590 1,587 5,785 (73 ) Cash flow 1,802 1,373 3,309 8,384 10,734 (22 ) 12 months Change from Return on equity (ROE) in % 4Q2001 3Q2001 4Q2000 2001 2000 2000 in % Credit Suisse Group: Reported ROE (9.3) (3.0) 6.1 4.1 17.7 (77 ) Operating ROE 1) 6.6 0.2 19.0 10.0 21.5 (53 ) Banking business: Reported ROE (12.5) (5.3) 2.5 1.7 18.2 (91 ) Operating ROE 1) 5.2 (1.6) 18.7 8.4 23.1 (64 ) Insurance business: Reported ROE 14.5 11.0 19.9 17.6 16.2 9 Operating ROE 1) 16.5 12.0 20.4 18.7 16.6 13 Return on invested capital (ROIC) 7.8 9.0 30.2 16.7 26.5 (37 ) Change from Consolidated balance sheet in CHF m 31.12.01 30.09.01 31.12.00 31.12.00 in % Total assets 1,022,513 1,006,062 987,433 4 Shareholders’ equity 38,921 37,937 43,522 (11 ) Minority interests in shareholders’ equity 3,121 2,167 2,571 21 Change from BIS data in CHF m 31.12.01 30.09.01 31.12.00 31.12.00 in % BIS risk-weighted assets 222,874 237,347 239,465 (7 ) BIS tier 1 capital 21,155 21,325 27,111 (22 ) of which non-cumulative perpetual preferred securities 2,076 1,078 1,102 88 BIS total capital 34,888 35,216 43,565 (20 ) BIS capital ratios in % 31.12.01 30.09.01 31.12.00 BIS tier 1 ratio Credit Suisse 6.9 7.1 7.1 Credit Suisse First Boston 2) 12.9 12.5 13.6 Credit Suisse Group 3) 9.5 9.0 11.3 BIS total capital ratio Credit Suisse Group 15.7 14.8 18.2 Change from Assets under management/client assets in CHF bn 31.12.01 30.09.01 31.12. 00 31.12.00 in % Advisory assets under management 725.4 660.1 724.7 0 Discretionary assets under management 700.1 630.3 667.3 5 Total assets under management 1,425.5 1,290.4 1,392.0 2 Client assets 2,131.3 1,928.3 2,065.0 3 12 months Change from Net new assets in CHF bn 4Q2001 3Q2001 4Q2000 2001 2000 2000 in % Net new assets 17.9 7.1 21.9 66.4 58.1 14 Change from Number of employees 31.12.01 30.09.01 31.12. 00 31.12.00 in % Switzerland banking 22,346 22,694 21,454 4 insurance 6,297 6,289 6,781 (7 ) Outside Switzerland banking 28,415 30,660 30,666 (7 ) insurance 22,641 22,315 21,637 5 Total employees Credit Suisse Group 79,699 81,958 80,538 (1 ) 1) Excl. amortization of acquired intangible assets and goodwill, exceptional items of CHF 1,092 m in 4Q2001, as well as restructuring provisions of CHF 1,074 m in 4Q2000, all net of tax. / 2) Ratio is based on a tier 1 capital of CHF 15.2 bn (September 30, 2001: CHF 16.8 bn; December 31, 2000: CHF 17.6 bn), of which non- cumulative perpetual preferred securities is CHF 1.1 bn (for all periods). / 3) Ratio is based on a tier 1 capital of CHF 21.2 bn (September 30, 2001: CHF 21.3 bn; December 31, 2000: CHF 27.1 bn), of which non-cumulative perpetual preferred securities is CHF 2.1 bn (for September 30, 2001 and December 31, 2000: CHF 1.1 bn). www.credit-suisse.com 3
  • 6. AN OVERVIEW OF CREDIT SUISSE GROUP Credit Suisse Group reported a net operating profit of CHF 616 million for the fourth quarter, compared with CHF 21 million in the previous quarter, and of CHF 4.0 billion for full year 2001, down 45% versus 2000, excluding exceptional items at Credit Suisse First Boston and the amortization of acquired intangible assets and goodwill, after taxes. A net loss of CHF 830 million was recorded in the fourth quarter and net profit stood at CHF 1.6 billion for the full year, down 73% versus 2000. The Group’s asset gathering businesses continued to achieve a high level of profitability and healthy growth. Net new assets for the full year amounted to CHF 66.4 billion, representing growth of 4.8% for 2001. Total assets under management stood at CHF 1,425.5 billion as of end-2001. The Group has made progress in reducing costs in all its business units. The Group’s Board of Directors will propose a par value reduction of CHF 2 per share in lieu of a dividend to the Annual General Meeting on May 31, 2002. Overview of business unit results 1) Credit Credit Credit Credit Suisse Suisse Suisse Suisse Adjust. incl. Credit 12 months 2001 Financial Private Asset First Corporate Suisse in CHF m Services Banking Management Boston Center Group Operating income 9,601 5,781 1,575 22,825 (628) 39,154 Operating expenses 6,618 2,707 1,138 20,902 (1,081) 30,284 Gross operating profit 2,983 3,074 437 1,923 453 8,870 Depreciation of non-current assets 850 84 126 2,292 397 3,749 Valuation adjustments, provisions and losses 2) 347 36 0 1,938 271 2,592 Profit before extraordinary items, taxes 1,786 2,954 311 (2,307) (215) 2,529 Extraordinary income/(expenses), net 10 15 (14) (1) (239) (229) Taxes (480) (631) (61) 685 1 (486) Net profit before minority interests 1,316 2,338 236 (1,623) (453) 1,814 Minority interests (49) (20) 0 (1) (157) (227) Net profit 1,267 2,318 236 (1,624) (610) 1,587 Reconciliation to net operating profit Amortization of acquired intangible assets and goodwill 98 18 94 1,361 (8) 1,563 Exceptional items – – – 1,428 – 1,428 Tax impact (2) – (8) (594) – (604) Net operating profit 3) 1,363 2,336 322 571 (618) 3,974 Value added 4) 517 2,071 206 (883) (747) 1,164 5) Average allocated capital 10,906 3,471 1,291 16,913 Return on average allocated capital 5) 12.1% – – (9.6%) Return on average allocated capital (operating) 3) 5) 12.9% – – 3.4% Increased/(decreased) credit-related valuation adjustments 2) 27 (5) – 194 1) The Group’s consolidated results are prepared in accordance with Swiss GAAP, while the Group’s segment reporting principles are applied for the presentation of the business unit results. For a detailed description of the Group’s segment reporting principles, please refer to our Financial Report 2001 which is available on our website www.credit-suisse.com, and to the footnotes to the business unit results. This presentation of the business unit results is provided to assist in evaluating the operating performance of the business units, which should be considered in the context of the Group’s consolidated financial statements. / 2) Increased/decreased valuation adjust- ments taken at Group level resulting from the difference between the statistical and actual credit provisions. / 3) Excl. amortization of acquired intangible assets and good- will, as well as exceptional items, all after tax. / 4) 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 performance metrics which are currently used, but does not replace them. The measure is aimed at enhancing 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. amortization of goodwill), and cost of equity is charged to the business unit as well as the consolidated accounts. / 5) For Winterthur business units within Credit Suisse Financial Services, average invested capital is used for the calculation of return on invested capital (ROIC). 4
  • 7. Change from Assets under management/client assets in CHF bn 31.12.00 1) 31.12.01 30.9.01 31.12.00 in % Credit Suisse Financial Services 274.2 263.9 273.8 0.1 Assets under management 144.0 140.4 142.6 1.0 of which discretionary 0.2) 290.3 278.5 289.6 Client assets ) Credit Suisse Private Banking ) 469.1 438.6 456.4 2.8 Assets under management 128.0 113.5 108.7 17.8 of which discretionary 505.1 470.9 495.6 1.9 Client assets ) Credit Suisse Asset Management 508.8 434.4 487.2 4.4 Assets under management 364.2 317.8 360.1 1.1 of which discretionary 508.8 434.4 487.2 4.4 Client assets Credit Suisse First Boston 173.4 153.5 174.6 (0.7) Assets under management 63.9 58.6 55.9 14.3 of which discretionary 29.3 27.1 31.9 (8.2) of which Private Equity on behalf of clients 827.1 744.5 792.6 4.4) Client assets Credit Suisse Group 1,425.5 1,290.4 1,392.0 2.4) Assets under management 700.1 630.3 667.3 4.9 of which discretionary 2,131.3 1,928.3 2,065.0 3.2 Client assets ) ) 12 months Change from Net new assets in CHF bn 4Q2001 2000 1) 3Q2001 4Q2000 2001 2000 in % Credit Suisse Financial Services 3.3 1.1 3.4 7.9 10.4 (24.0) Credit Suisse Private Banking 7.5 5.0 4.7 33.0 18.8 75.5 Credit Suisse Asset Management 2) 1.9 (0.7) 9.3 9.2 24.4 (62.3) Credit Suisse First Boston 3) 5.2 1.7 4.5 16.3 4.5 262.2 Credit Suisse Group 17.9 7.1 21.9 66.4 58.1 14.3 1) Certain restatements have been made to conform to the current presentation. / 2) Net new discretionary assets. / 3) Measured as the balance from accounts opened minus accounts closed. 2001 was a challenging year for Credit Suisse Group net loss of CHF 299 million in the third quarter and a in view of the difficult capital markets environment, net profit of CHF 590 million in the corresponding period particularly in the second half. Despite the adverse of 2000. Net profit for the full year declined 73% to market conditions, Credit Suisse Financial Services, CHF 1.6 billion. Credit Suisse Private Banking and Credit Suisse Asset Operating earnings per share for 2001 decreased Management achieved good results in terms of both 49% to CHF 3.33 versus CHF 6.50 in the previous year, profitability and growth. Credit Suisse First Boston was and earnings per share amounted to CHF 1.33 for 2001, particularly impacted by market conditions. In addition, down 74% on 2000. Operating return on equity was exceptional items led to an unsatisfactory result. Credit 10.0% compared with 21.5% in the previous year, while Suisse Group reported a net operating profit of CHF 616 return on equity stood at 4.1%, versus 17.7% in 2000. million in the fourth quarter, excluding exceptional items at Credit Suisse First Boston of CHF 1.1 billion (USD Strong net new asset growth 646 million) and the amortization of acquired intangible Net new assets developed strongly in the fourth quarter, assets and goodwill, after taxes. This compares with a contributing CHF 17.9 billion or 1.4% of assets under net operating profit of CHF 21 million in the previous management. The Group’s asset gathering businesses quarter and CHF 1.9 billion in the fourth quarter 2000. maintained their healthy growth momentum over the full Full year net operating profit amounted to CHF 4.0 year, with net new assets totaling CHF 66.4 billion, repre- billion, down 45% on the previous year, excluding the senting growth of 4.8%. To the total of net new assets after-tax exceptional items at Credit Suisse First Boston in 2001, Credit Suisse Financial Services contributed CHF and the after-tax amortization of acquired intangible 7.9 billion (CHF 3.3 billion in the fourth quarter 2001), assets and goodwill. The Group reported a net loss of Credit Suisse Private Banking CHF 33.0 billion (CHF 7.5 CHF 830 million for the fourth quarter 2001, versus a billion), Credit Suisse
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