Credit Suisse Group AG (CS) 2005 Q2 法說會逐字稿

Good morning this is the conference operator. Welcome and thank you for joining the Credit Suisse Group's second quarter and half year results 2005 conference call. [OPERATOR INSTRUCTIONS]

Good morning ladies and gentlemen and welcome to today's Earnings Conference. Ladies and gentlemen considering the market environment and we had from the market point of view, not an easy quarter. April and May were generally not very good months. So considering that I think we delivered a respectable second quarter result. Naturally, as always, I believe we can improve that in the future.

Our net income for the second quarter was around CHF919m and that is after a litigation charge of net CHF624m and excluding that charge the net income for the quarter would have been CHF1.5m. That means for the first half our net income is CHF2.829m including the increase in provisions. Excluding that charge the net income would have been CHF3.5m for the first half.

As we already stated Institutional Securities recorded a CHF960m before tax or CHF624m after tax in the second quarter of '05 to increase the reserves for private litigation involving Enron, certain IPO allocation practices research, analyst independent and other related dedications. The charge was in addition to the reserves for these private litigation matters of $450m as you know, which we made in 2002. Now with these additional reserves it brings our current reserves up to CHF1.1b and that is after deductions for certain events that have already taken place.

We believe that this measure with the litigation reserves of Credit Suisse Group adequately reflect our current assessment of some probable and reasonably estimable litigation exposure.

Let me have a quick look at our divisions.

In Private Banking, which also suffered a little bit under the weak months of April and May due to lower client volumes, but we had a strong net new asset generation of CHF12.8b which is very positive for the quarter and also total assets in by the banking moved above the CHF650b as you will see later. So in that new money we are at the moment year to date we are standing at 7%+ which is as you know, above our 5% annual target rate. So I would think overall it is a reasonably good result. Certainly we still have to work on the costs side due to the strong increase in assets, which we had in Private Banking, because the income ratio was affected and did move up.

The Corporate and Retail Banking which is still buffeting from the benign credit environment and which eases actually in credit provisions of CHF44m, was able to record another record quarter result of CHF277m and which is also a return on equity of 21.4%, which is a very pleasing performance but probably also in line with all the other corporate and retail banking industries due to the low credit provision environment.

Now in Institutional Securities we recorded a net loss of CHF408m after provision and excluding the charge, the profit would have been +CHF260m, which would have been slightly higher than the corresponding quarter last year. There we also suffered under the weak market conditions, which impacted both fixed income and equity trading, particularly as we said in April and May. In June the market rebounded and that then gave us exceptionally strong gains actually and may also show that we taken -- that we can take advantage if the market is reasonably active.

The decrease in trading activity compared with the first quarter of last year was partially offset by an improved performance in Investment Banking.

Even though the net revenues have fallen compared with the first quarter, I think overall our cost management proved effective. We're still not there where we should be. But we did hold our Cost Income Ratio -- not the Cost Income Ratio, the Cost Revenue Ratio at 51.9%, as you will see later, in that quarter as well, and on the Cost Income Ratio we have to become better and that I think we can only improve by having better operating performance. Generally in Institutional Securities Brady Dougan who is here, is making significant progress with his initiatives and -- which we announced in December last year.

We have been executing our strategy resulting in stronger and more consistent revenue performance even in difficult markets. Strong and improving franchise numbers in targeted areas like IPO's, leveraged finance and M&A and reasonable progress in growing in these areas.

We also have continued to clarify and streamline our organizational structure and to support our strategic goals. We have a good record in retaining people and you might not think so when you read the papers but actually it is like that. And I think we have to say even without giving any long term guarantees or giving any guarantees to internal people, that is quite an achievement on Wall Street. And you might have read that in the last few months we have -- I acquired a number of talented people in the market and it was especially satisfying I think that also very talented people approach us actually now, which is a change.

Investment and Asset Management net income for the quarter was CHF245m and especially based on the good performance in our Alternative Capital division. The results shows that on the revenue side as well as the cost side the creation of an integrated asset management division to help us to improve our performance going forward.

We also expanded geographically in Alternative Capital. In May we announced the creation of a strategic partnership with [China Wells] Capital Investment, which will focus on private equity investment opportunities in China.

We also announced in July that Credit Suisse Asset Management acquired a 25% interest in a joint venture with the Industrial and Commercial Bank of China and it's working on that in the coming years to give us also a better view of and better feeling of the asset management market in China.

Coming to Winterthur. Winterthur is trading as, like the proverbial Swiss Watch, as good quality income there and that income for Life and Pension was CHF160m and for non-life we have CHF137m in that quarter. So altogether you get around CHF250m for Winterthur.

Overall, I think that the Insurance business is continuing to improve its operating margins and operating performances and Winterthur is also benefiting from the efficiency measures we took in the last 2 years and they have resulted in improvements in insurance underwriting being an acquisition expense as you will and certainly in lower administration expenses for Life and Pension and in lower combined ratio for the Non-life business.

Now let me say a few words on the integration of the Banking business and give you an update on progress of how the integration is going and quickly come back on what is the purpose of the One Bank strategy. The strategy is focused on creating an integrated global bank in order to make the best use of the enormous pool of knowledge and experience we have within Investment Banking, within Private Banking and within Asset Management. The new organization is -- the new organizational structure will keep us -- help us to deploy our resources much more efficiently as we have been able to do that so far and therefore, will increase our competencies in our core business and also will increase our profitability. Again we have going forward from January 1st, we have 3 divisions. Investment Banking, Private Banking and Asset Management and that is how we will present us on a global basis to our clients.

Also obviously within the Bank we have the support of a range of shared services which include the Chief Operating Officer areas, the Finance areas, Risk Management, Legal and IT. We also have created regional structures and have put in place regional heads for 4 regions as we at the moment conduct our global business and the 4 regions are, Asia Pacific, The Americas, Europe, Middle East and Africa as one region and Switzerland because of our specific business interests here, is also a separate region.

Now recently we have merged our legal entities in May as we informed you and as you by now know in June we announced our new Executive Board for the Bank. And we will have Group Executive Board still going forward but effective January 1st, the Executive of the -- the Executive Board of the Bank will be running the Banking business on a global basis.

We also communicated to you our decision to create one global bank. That meant the Credit Suisse name and with that we also changed our logo. Our logo represents going forward much better the 3 businesses we are in. Investment Banking, Private Banking and Asset Management.

We are currently in the implementation phase and -- of the organizational structure and making relatively good progress I would say. We have the full involvement of our management. 150 managing directors are taking part in this stage of the integration.

In the next few weeks we also will announce appointments to the top 3 levels of management internally.

Then our employees generally support our moves that we have made so far to support the organizational structure and even push us to do it quicker than we are planning at the moment. So the integrated bank will commence operations on January 1st and we will report according to the new structure in Q1 2006. We will quantify the synergies that we expect from the integrated Bank on the basis of the financials once we have restated them for the new organization, because we will report financials in future clearly on a division basis and that is Investment Banking, Private Banking and Asset Management.

So, now we hope that we can, with the new bank structure, potentially change our business, improve our business and also to deliver the numbers in the New Year when all our employees are involved in that new process.

Now I would like to hand over to our Chief Financial Officer, to Renato who will give you all the details of our results. Renato.

Yes. Thank you Ossy and warm welcome also from my side. We will give you more details, financial back up on what Ossy just commented before. Let's begin by looking at slide number 8. The net income reported for the Group as Ossy just said was CHF919m. Net income and operating expenses were materially impacted by the litigation charge. Given that this charge has such a significant impact on our results, and in order to allow you to compare our results to your estimates or expectations, we wanted to show you how our numbers are affected in detail.

On slide 9, you can therefore see that we booked the litigation charge in other expenses as part of total operating expenses. As you will also see later the charge was recorded in the Institutional Securities segment. Excluding the litigation charge the total operating expenses amounted to CHF6.2b. Net income was affected by this charge in the amount of CHF624m after tax. Excluding this charge Net Income would have stood at over CHF1.5b, down 19% with the previous quarter but up 6% compared to the same quarter last year.

Return on Equity this quarter for the Group would have stood at 16.5%. Reported Basic Earnings per Share excluding the litigation provision would have been CHF1.37.

At half year on slide 10, Net Income stood at CHF2.8b and the Return on Equity at 15.2%. And also here we want to show you the impact from the litigation charge on the following slide in more detail.

For the first 6 months of this year Net Income for the Group would have been almost CHF3.5b and this represents an increase of 4% compared to the first half of 2004. Return on equity for the Group would be at 18.5% compared to 19% for the same period last year. Basic earnings per share for the first 6 months would have been slightly above CHF3 excluding the charge.

Now turning to the segment results starting with Private Banking on page 12. Net Income at this segment of CHF581m was down 13% from the second quarter and down 15% from the previous quarter. Slightly lower revenues recorded in the current quarter largely drive the change in net income as we see on the next slide.

Net Revenues of CHF1.8b were 3% down the second quarter of 2004 and 5% quarter-on-quarter. To better illustrate this revenue development we have combined the Net Interest Income and Trading Revenues in the chart on the left hand side. The reason is that the dividend income we usually receive in the first half of the year generates net interest which also results in an equal and offsetting negative amount from external valuations recorded in our trading revenue. By combining these line items we eliminate this phasing effect. However revenues from our Lending and Deposit Taking businesses have been fairly stable compared to previous quarters. That was the commission and fee income.

The decrease we show in net revenues versus the second quarter of 2004 is mainly caused by the changes in the fair value of interest rate derivatives not qualifying for hedge accounting. Since 2005 as you know we no longer disclose this specific part of our business -- this item sorry, as we need to manage this as an integral part of our business.

As you will remember that we highlighted last year the gains we recorded on these structures as interest rates moved noticeably and we still had a larger portion of our business not qualifying for hedge accounting. In our disclosure at that time you could see that the gain from interest rate derivatives in the second quarter 2004 amounted to CHF57m, which compares to a small loss recorded this quarter.

The decrease in net revenues compared to the first quarter of 2005 is due to an expected reduction in our income from trading execution and resulted in a decrease of overall trading revenues by CHF84m.

Turning to the expenses on the right hand side of the slide you can see that total operating expenses amounted to CHF1.84m, virtually unchanged compared to the same period of last year, but up 2% compared to a seasonally low previous quarter. Slightly higher compensation and benefits compared to the second quarter of 2004 related to Private Bankings' ongoing strategic investments in international growth markets in Asia, the Middle East and Eastern Europe. A representative office in Guangzhou was opened providing access to Southern China and in St. Petersburg we opened a representative office serving clients in the rapidly developing Northern Russian and Baltic Regions.

Higher compensation expenses were partially offset by lower performance related compensation accruals. The Cost/Income Ratio stood at 59.9% in the second quarter of 2005, up against both the corresponding periods and the previous quarter. This reflects lower net revenues but also seasonally higher expenses when compared to the first quarter of 2005 and higher strategic investments as we build our presence in international growth markets and compared to the second quarter of 2004.

We are confident that the investments we will undertake over the next 18 months in developing these growth markets will benefit our performance and our ability to reach our mid-term cost income target of 55%.

As shown on the next slide, the gross margin in the second quarter of 126 basis points reflected the lower net revenues already mentioned, as well as the increase of the asset base towards the quarter end where revenues have not yet been fully recognized in the second quarter. The one-month delay in recognizing movements in the asset base negatively impacted the reported gross margin by approximately 3 basis points. For the first half year the gross margin amounted to 131.5 basis points, which is achieving the mid-term target of 130 basis points.

Slide 15 shows the development of net new assets and the assets under management. Private banking reported a strong net new asset intake of CHF12.8b in the second quarter of 2005. The growth rate in net new assets for the first half of 2005 was 7.3% which is well above our mid-term target of 5%. Strategic key markets in Asia and Europe continued to report strong growth rates.

Assets under management are shown on the right hand side exceeded CHF600b for the first time. Since the beginning of the year assets grew by CHF63b or 12%. Of that increase, net asset inflows amounted to approximately CHF20b, higher market valuations amounted to roughly CHF16b and the balance mainly coming from exchange rate movements and other impact.

In Corporate and Retailing Banking, as shown on slide 16, you can note that they again reported a record result with net income up 8% from the second quarter 2004 and slightly up from the previous quarter. Strong revenues and net releases of provisions for credit losses were the main contributors to these favorable results.

The segment made good progress in placing investment products in the high-end retail segments and gaining market share in private mortgages. In line with Group results, the segment reported a year to date return on allocated capital of 21.8%.

Provision for credit losses resulted in a net release of CHF44m, reflecting releases of provisions and the low level of new provisions as a result of the ongoing favorable credit environment.

Net revenues as shown on slide 17, amounted to CHF858m and are flat compared to the previous quarter and down 10% compared to the corresponding period of 2004. As was the case in Private Banking, the revenue decrease was caused by large gains of CHF136m in the second quarter of 2004 from changes in the fair value of interest rate derivatives compared to a small loss in the current quarter.

On the right hand side of the slide you can see that operating expenses increased by 4% compared to the previous quarter. The increase was primarily related to higher IT projects and marketing expenses compared to the seasonally low first quarter of 2005. This higher other expenses were partially offset by lower costs for compensation and benefits. The cost/income ratio stood at 63.9% for the second quarter of 2005. Compared to the previous quarter the cost/ income ratio increased by 2.4 percentage points, reflecting seasonally low expenses in the first quarter.

Now turning to CSFB. As shown on slide 18, Institutional Securities recorded a net loss of CHF408m. This loss is driven by the litigation charge as mentioned before. Adjusted for the charge the net income was CHF260m, up 67% from second quarter 2004 and down 60% from the previous quarter.

As shown on the next slide fixed income trading generated revenues of CHF1.2b, an increase of 18% from the second quarter of 2004. Here credit markets were challenging during the quarter with increased volatility as credit express first lightened and then contracted during the quarter. Interest rate markets were also challenging as the yield curve flattened during the quarter. The increase in revenues primarily reflected improved results in proprietary trading, leveraged finance, commercial structure products and emerging markets. Partially offset by weaker results in interest rate products, asset backed securities and residential structured products. The overall Residential Mortgage business performed well in the quarter but was down when compared to the strong second quarter of 2004.

Compared to a very strong first quarter of 2005, fixed income trading decreased by 38% due to an unfavorable market environment. This resulted in weaker performances across most fixed income products except Latin America trading and proprietary trading. In addition, and as reported at that time, the first quarter of 2005 included a CHF125m positive adjustment to the fair value of our OTC derivatives.

As shown on the right side, equity-trading revenues remain stable at CHF834m compared to the second quarter of 2004. Higher revenues in Prime Services and the Global Cash business were offset by weaker revenues in the Convertibles and Derivatives businesses. Convertible business was impacted by challenging market conditions, with weaker valuations, poor liquidity, wider credit spread and lower volatility.

Revenues in the Derivatives business were hindered by a dramatic reduction in implied volatility levels during the quarter. Compared to the first quarter of 2005, equity trading revenues decreased 10% primarily due to weaker revenues in proprietary savings, convertibles, equity derivatives and the Global Cash business. Partially offset by improvements in the Client Services business.

As you can see on slide 20, Investment Banking revenues of CHF948m increased by 5% compared to the second quarter of 2004, benefiting from an increase in advisory fees. And compared to the previous quarter Investment Banking revenues increased by 51% with significant increases in advisory and underwriting fees. Net underwriting revenues of CHF465m remain flat compared to the second quarter of 2004 due primarily to lower results in leveraged finance, offset by higher results in asset backed securities and residential structured products.

Net underwriting revenues increased 52% from the first quarter of 2005 driven by higher results in leveraged finance and investment grade capital markets. Strong leveraged finance results were achieved primarily due to higher revenues in the syndicated loan business, reflecting an industry wide increase in global syndicated loan volume in the second quarter of 2005 and an improvement in our global syndicated loan market share.

High yield underwriting fees were down significantly in the quarter reflecting lower levels of issuance in line with an industry-wide decline in global high yield new issuance.

Investment grade capital markets revenue increased from a year under and the prior quarter reflecting a greater focus on more profitable transactions.

Equity underwriting revenues of CHF185m remained flat compared to the second quarter of 2004, consistent with industry-wide issuance volumes and increased 34% compared to the first quarter of 2005, despite the 15% decline in the volume of industry-wide new equity issuances versus the first quarter of 2005.

Advisory and other fees of CHF298m increased 24% compared to the second quarter and 63% compared to the first quarter of 2005. The increase in revenues were primarily a result of CSFB's increase in global announced mergers and acquisitions market share in the prior quarter as well as increased industry-wide activity. The increase in advisory revenues is a result of our focus on leading companies in several consolidating industries.

Total operating expenses of CHF3.9b as shown on slide 21, were significantly impacted by the litigation charge. Adjusted for the charge, total-operating expenses amounted to CHF2.9b. Compared to the second quarter of 2004, other expenses also reflected higher commission expenses due to increased business activity and higher professional fees.

Compensation and benefits decreased by 1 percentage point reflecting lower severance and performance related compensation costs.

Now let me move to the Wealth and Asset Management segment on slide 22. This segment reported a net income of CHF245m, a decrease of 19% compared to the strong second quarter of 2004, which included a particularly high level of investment related gains in alternative capital. Compared with the second quarter of 2004, operating expenses reduced slightly to CHF623m, reflecting lower other expenses driven by a decrease in commission and distribution expenses. The net income increased CHF110m, or 81% compared to the first quarter of 2005.

Net revenues, as shown on slide 23, were down 9% primarily as a result of lower investment related gains. Investment related gains decreased 26% as you can see on the right hand column to CHF282m compared to the second quarter of 2004, due to an exceptionally high level of private equity gains in alternative capital recorded in the second quarter of 2004.

Investment related gains increased though 169% when compared to the first quarter of 2005 due to an increase in private equity realized gains.

Revenues before investment related gains are flat compared to the second quarter of 2004 as you can see in the lower part of the slide. Due to primarily higher placement fees in the Private Funds business of alternative capital offset by lower management fees of Credit Suisse Asset Management and compared with the first quarter of 2005, revenues before investment related gains were unchanged.

As shown on the next slide, net new assets stood at CHF2.8b in the quarter primarily due to inflows of alternative capital. Assets under management reached CHF529b, an increase by 5% during the quarter due to market performance, foreign currency exchange and net new asset inflows. Partially offset though by the spinout of the credit opportunities found in alternative capital.

Let me now turn to our Insurance business and first of all to our Life and Pensions segments on slide 25, which show an improvement of the technical results for the traditional products and the generation of additional business volume through a unit linked business.

Net income rose substantially to CHF116m. Year to date net income reached CHF242m, up 17% from the same period in 2004. The main drivers were the focus on productivity and selected areas of growth and the slightly higher net investment income for traditional life policies. Total business volume as shown on slide 26, grew by 2% compared to the second quarter of 2004, and by 5% year to date. Overall, business growth reflects the disciplined underwriting of traditional products in a challenging low interest rate environment and the proactive diversification with unit-linked businesses.

Gross premiums written in the second quarter of 2005 decreased by 9% to CHF1.9b when compared to the same quarter last year. This resulted from the reduction of the premiums for vested benefits within the stable portfolio of Swiss Group Life contracts. Year to date, gross premiums written grew by 2% compared to last year. In the second quarter in 2005 the Deposit business increased by 17% to CHF1.7b for the same quarter last year due to a significant increase in unit-linked business primarily in the UK and Poland.

As shown on the right hand side of slide 27, the next 1, expenses decreased by 3% compared to the first half of 2004 reflecting further benefits from the ongoing implementation of expense and cost control measures. The expense ratio consequently improved by 0.6 percentage points to 7.9%.

Moving to Non-Life on the next slide. The second quarter saw a continued improvement in operational performance. The favorable claims environment, disciplined underwriting, continued strict cost management and reduced charges for discontinued operations contributed to a substantial increase in net income. Compared to the second quarter of 2004, net income increased by 67% to CHF137m. For the first half net income amounted to CHF262m representing an increase of 42%.

This progress was achieved despite the challenging underwriting environment, adverse impacts on foreign exchange rates and lower investment income.

Looking at net premiums earned on slide 29, you can see that growing price pressure in some markets confirmed the importance of a selective and controlled underwriting policy. Consequently net premiums earned in the second quarter decreased slightly to CHF2.6b compared to the same period of last year. Lower premiums were earned in the United States and Germany partially offset by premium growth in Switzerland and Spain due to tariff increases. Similar trends lead to a 2% reduction in net premiums for the half year period.

As shown on slide 30, administration expenses for the quarter decreased by 15% to CHF273m mainly in Switzerland and Germany and insurance underwriting and acquisition expenses remained relatively stable in line with net premiums earned. A similar trend is visible in the year-to-date results as shown on the right hand side.

The combined ratio on the next slide decreased to 95.1% for the second quarter and 97.3% in the first half of 2005. These improvements occurred in almost all market units and the claims ratio improved 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 to 24.7% due to the continued strict cost management as discussed earlier.

This concludes my segment results review. Now a couple of words from my side on the Group's performance before Ossy will finish the presentation with some closing remarks.

First let me go to the Capital Position on slide 32. Credit Suisse Group's consolidated BIS tier 1 ratio was 10.9% as of June 30, 2005, down from 12.1% as at the end of the last quarter. Following approval by the shareholders, the Group launched its share buy-back program and during the second quarter repurchased equity valued at CHF523m in the second quarter. During the quarter, the tier 1 capital remained stable while risk related assets increased by approximately 10% due to higher customer mortgage balances and off-balance sheet positions.

In total, approximately a quarter of the risk related assets increase was related to the strengthening of the US Dollar. Winterthur continued to improve its capital position reporting shareholder's equity of CHF9.4b which represents an increase of CHF0.9b during the quarter.

Now let me go over to the last slide in my part of the presentation that compares our performance against our medium-term targets on slide 33.

Our respectable performance in the second quarter, together with a strong start to 2005 in the first quarter is also reflected in the progress we made against the full year Group performance goals that we presented last December. For Private Banking the gross margin and net new assets compare favorable and I also mentioned that the ongoing investments in the international growth markets will address the operational efficiency improvements we are looking to realize in our Swiss platform. There are now growth prospects in these businesses and we are confident that we can also achieve the medium term cost income target.

With 2 record quarters in a row there isn't really much to complain about the results of Corporate and Retail Banking I think.

For CSFB a disciplined approach to compensation expenses was maintained. Compensation to revenue ratio stood at 51.9% in both the second quarter and also for the first half of this year. Excluding the litigation charge the pre-tax margin and the return on allocated capital stood at 18% for the first 6 months of this year. These rates are still below our medium-term goals but respectable given the weak client activities this quarter.

CSFB has also made significant progress relative to its major competitors and increased global market share in high margin products including global announced M&A and US IPO's versus the end of 2004 and in the increasingly competitive high yield business versus the first quarter.

Winterthur is making steady steps in improving results both in the underwriting results as well as on the costs side, is reflected on this slide.

With that I have concluded the financial review of our second quarter results and now Ossy will conclude the presentation with the Outlook and some closing remarks. Thank you for your attention.

Thank you Renato. Now the outlook for the second half. We expect the market recovery or the client activity, which we saw in June to continue. Then we believe that equity markets will continue to improve. There might be some consolidation and some corrections after these moves but for the remainder of the year we think equity markets look very interesting and will continue to improve. And we think that interest rates will move in a relatively narrow range. So that is -- if that happens and if we are as wide in that outlook as we have been for the second quarter, then we actually should have a relatively good business for our segments with a good environment where they could operate in.

Now we are ready to take your questions.

We will now start taking questions from the analysts. [OPERATOR INSTRUCTIONS].

Questions and after a short break if there are any questions left we will meet them then. So, we will take as usual the questions from the auditorium here first and then we will ask or take any questions through the telephone conference. Please be so kind to state your name and company before you ask the questions. So we can start. Yes please.

Philippe Peson from UBS. A couple of questions if I may please. First on Institutional Securities division. For the quarter standalone comp revenue was 59, pretax margin probably around 12 -- adjusted 12%. When do you expect the initiatives of the improvements you are initiating to be more visible on a sustainable basis? And could you just comment also how you view the business in that kind of quarter? Is it in general structurally -- do you see some problems on the cost side as well or is it just increasing the revenue base?

Second, very quickly on credit. Could you just share with us your expectations in terms of second half and also going into '06 in terms of the overall loans provision charge for the Group? Obviously you had a write-back in the first half.

Quickly on the -- on Asset and Wealth Management, what is your expectation and your run rate in terms of investment related revenues?

And last but not least a quick update on XL Capital Issue in terms of when do you expect a decision to be made? Has any thing changed with this? Thanks.

So this is 4 questions. Let's start with XL. No news on XL, we've told you everything we expect during the course of this year that we have a result and most likely in the fourth quarter and there's nothing else we conveyed this with the independent arbitrators.

On credit provisions I think certainly that environment we have at the moment where we have constantly releases cannot go on forever so -- but I think it could and probably will go on for quite some time because I do not see a substantial rise in interest rates. It could go on for quite some time and that you have a benign environment where I would think for the rest of the year, I cannot see with our market outlook and what we think will happen that credit provisions would substantially increase and on a general basis, you always could have one or the other case but on a general basis I don't think for this year that much will happen there. And next the -- I come back in December or so and then for next year.

Then on Institutional Securities Brady would you like to give an answer to that?

Yes I guess I would just say to the question about the quarter and our view of the quarter and its impact on the overall numbers, I mean our trading performance was in line with most of the industry in the quarter and I think that is actually a positive thing. I think in the past there's been a view that CSFB has been kind of volatile and particularly in more difficult markets has under performed and I think in this case, we feel we performed at least in line with market if not, towards the better end. And then clearly the very positive news about the second quarter was the investment banking results where as you could see, we were really at the top end of performance both in terms of actual revenue performance where you had advisory up 65%, debt underwriting up 50% over the previous quarter, equity underwriting up 35% and also market share numbers that go along with that where we were really number 3 in IPO's at the end of the first -- at the end of the second quarter. Actually number 1 in IPO's globally as well as in the US and Europe now, very strong in leveraged finance at number 2 and really strong momentum on the advisory side. We were number 7 in announced deals, up 11 from the year before and number 5 in closed deals, up from number 9 the year before.

So, our view is that that's all positive but obviously the second quarter for the industry was a difficult environment. Having said that, the costs side, when you look at our cost of revenue and our overall margin issues, clearly the margin issues are impacted by the performance in the second quarter in the more difficult markets. But we have continued to take a very disciplined approach to our cost side of things, particularly the cost of revenue that we maintained at 51.9 in the second quarter, the same as the first quarter. Down from 53.1 which was the number last year we are continuing to take a very disciplined approach there. But overall, we continue to be very focused on the costs side I think as Ossy mentioned at the outset, we can do better and we think we will do better. So I think actually that in terms of a trend, that the business performance is improving but obviously you're going to have ups and downs in the markets for the industry as we saw in the second quarter which are going to -- which obviously have to be taken out of the overall trend.

Okay, thank you Brady. On Asset Management and Private Equity gains it is impossible to give you any guidance there on when the gains are coming in and when they are released. It is depending very much whether the market is -- depending on when certain investments are resold and so very slow over the year. There is constantly some releases but you cannot target a certain number there. It is pretty uneven.

Next question please? It seems you have asked all the questions that everybody wanted to know. Yes please over there?

Thomas Brown [Klisig] France. Legal provisions. You have I think 1.4b now for all of the legal stuff. How much of that is for Enron?

And second question, given what others have paid for the Enron case -- CIBC for example yesterday announced $2.4b for Enron only. Do you really think you have provided sufficiently here?

I think the best man to answer that is our General Counsel Urs Rohner.

Let me maybe make 2 comments to your question. First the CHF1.4b reserve that we currently have in place relates as indicated by Ossy today to the Enron IPO and research allocation cases -- independent research cases. We do this reserve analysis obviously every quarter as we go along. And on the basis of the applicable accounting standards as is our duty and on the basis of our analysis we have come to the conclusion and we believe that the reserve we currently have in placed adequately reflects let's say the probable and reasonably estimable contingencies related to these matters. But I would like to stress that this is for let's say the areas that I've just mentioned, the private litigation matters involving Enron IPO and research allocation cases independent from other reserves that we have disclosed in the past and in particular XL.

Now your question concerning CIBC, I mean obviously we do not comment on pending litigation matters in detail so we won't disclose also our specific reserves for individual matters. And quite frankly I'm not -- certainly not in a position to comment on what CIBC has done. But what I can assure you is that we go through this process every quarter and we analysis it on the basis of the facts known to us and that’s what we have done this quarter as well.

Thank you Urs.

Claudia Meyer from Bank Vontonbel. Net new money has really been tremendously good so probably you can specify a little bit more on your -- where this money has come from and on the initiatives you said that are going on and also impacting negatively with the cost income ratio. Thank you.

When it comes to the cost income ratio I think I try to explain it. So we had a strong asset growth and all the net new assets has relatively strong growth and it takes some time until they -- until you get back to the top profitability's there in the growth margin and if that strong asset growth continues for the rest of the year, the growth margin probably would stay relatively lower than otherwise because if you have a business which is rather not growing and stagnating then you can improve the margins much quicker. But we are happy that we are growing so strongly and whilst we would see that to continue. I think Walter do you want to give any indications where the net new money is coming from and?

Yes, well actually what we can say is that this year the net new -- or last quarter net new assets really came from all over the world but still mainly 1 of the major drivers Asia, but in Switzerland contributed very well to the net new asset intake.

Thank you.

Heinrich Weimer, Bank Oppenheim. Perhaps a more long-term question. When you switch to a one bank model then obviously your reputation, brand value management becomes even more important. And when we have -- I mean right now it's just bookings or reserves but when we have a scandal like Enron or when you have First Boston relationships or Institutional Securities Investment Banking relationships which show in the area of the Sakhalin project, how do you then measure the potential negative impact such events may have on Private Banking, on net new assets? Do you have in your management information system the possibility to have a rough idea where the cost -- how high the cost is? Thank you.

Let me put it that way Mr. Weimer. Through past experience we are very sensitive to reputational changes and probably more sensitive than anybody else. So we are all aware of when our reputation is getting challenged be it through the things you mentioned or going forwards the things which we don't know at present and we very clearly have within the creation of the integrated bank -- 1 of our principals is -- 1 of our immutable principals is that our reputation is everything and we have to protect it and so we put much more awareness on that as well as the Company globally because we are aware that you can lose your reputation within seconds and it takes you years to get it back. We are fully aware of that and the measure -- I don't think you can clearly measure it in dollars and cents because it has to do with different opinions probably about a certain value. But our Executive Board and our management throughout the Bank is fully aware and we have made sure that they are aware that you have to keep our reputation. You cannot make any compromise on the reputation and we rather that some business go and don't do it, than compromise on our reputation going forward.

If there are no other questions from here then let us go over to the participants on the telephone conference. Are there any questions there please?

The first question is from Mr. Matt Spick, Deutsche Bank

Good morning. I have 3 questions. The first 1 of which was just on the charts that you've put very helpfully on page 15 of your report, on CSFB's back testing and there's clearly a lot of volatility in the first 2 months. Just changing the bars it looks to me like you only have 8 or 9 positive trading days in the first 6 weeks of the quarter. Have you got any comments on whether you feel that you still need to diversify your business to prevent something like that recurring again?

And the second question I wanted to ask about the capital position and the buy-back and there specifically your tier 1 ratios obviously move down from 12.1 to 10.9 and it seems to be a combination of currencies and investment opportunities growing the balance sheet. You seem to be quite positive about the outlook for H2 and therefore presumably about more investment opportunities and of course the currency could continue to move against you in terms of the dollar strengthening. So have you got any comments about whether you are still convinced you can keep the level of buy-back that you were executing in Q2 over the second half, or whether it may be that the buy-back gets a bit back-end loaded if you see better opportunities for use of your capital and expanding your risk related assets in H2?

And then the third question was on Private Banking, cost accounting. My understanding was that there were a number of commissions that you received gross in the revenue line and you pay to third parties through the expense line and that was 1 of the reasons why your Private Banking margin was inflated when you moved to US GAAP. So given that and given that in the second quarter your gross revenue margin declined quite a bit, I was expecting a bigger fall in the expense line as the accounting grossing up came away a little bit with lower transaction activity. So I don't know if you've got any comments on that as well?

Thank you. First I would say on the business mix, I am happy with the business mix. Certainly we have to improve and we said again we can improve and will improve and especially with the new banking structure. But I am happy with our business mix there, Investment Banking, Private Banking and Asset Management. And we still have clearly some influence from the past in investment banking and that probably also explains the bigger than usual fluctuation in the results there. But Brady if you would like to say words to that? But generally I think the underlying improvement which Brady talked about before are seen and seen to us in the numbers and I'm actually pleased with the development so far.

Yes I would just say that with regard to the back testing chart, it was a difficult quarter. Trading conditions were difficult for all participants in the industry so naturally that's going to feed through. I would say if you look at our average risk, our average VAR in the second quarter was actually down from the first quarter. I think as everyone knows our strategy is to increase our risk taking over time. We think that we have lots of businesses where we have an edge, where we can increase risk taking profitably. We still are in the process of putting place the resources to do that but actually I think that the fact that our VAR was down in the second quarter when conditions were much choppier is a good indicator that we're being very disciplined about taking up those opportunities in markets which are appropriate to do so.

In addition I think it's important to note that we actually are diversifying our risk taking and -- into different areas. We've got higher commodity VAR than we did in the first quarter. Our commodities business is developing, it's coming along. The equity business had higher VAR. The interest rate in the foreign exchange business had longer VAR in the second quarter. So I think that shows that we actually are diversifying our risk taking as well and we will continue to do that. So in my view I think the results in the second quarter were in line to the better end of industry overall results, but we clearly want to do better and believe we will do better over time in terms of our risk taking activities.

On the capital situation and on buy-backs I think it is very clear obviously to do the buy-backs is depending on our earnings capacity over the next couple of years, on our capital requirements. If we would see that we can invest the capital into a business which we think we have to be in and which gives us good returns, so we clearly, as we said at the time, would rather do that than buy-back shares. But under current view and from the current numbers and as we see our business developing during the second half, we do not foresee any change from our plan as you know it.

Private Banking cost accounting Renato do you want to?

Maybe the gentleman can repeat the question once more? We didn't get what exactly the details were.

Sure it was just a question that related to when you transitioned to US GAAP and it inflated your gross revenue margin in the Private Bank, because there were a number of commission items that were being taken through which were effectively commissions that were going to be paid to third parties for services provided to you, which previously under Swiss GAAP you netted off as a single item, but now you're paying them gross in the revenue line and accounting for them out as an expense in the cost line. Given that the transaction margin came down in the quarter, in theory the offsetting cost charge for those third party services should have come down. But I'm just noticing that your cost base really didn't fall versus Q1 in spite of the lower activity levels and I wondered if you had any comments?

Spontaneously I don't. That's a very detailed question. You can always call our Investor Relations to go more into detail. But you are right the changes to the US GAAP has resulted in a 10 basis points improvement on the gross margin and that was reflected of course also in the financials as they were restated. Now to what extent your element you were mentioning has an impact on this 10% I can't really take out of my head right now. Thank you. I hope you appreciate that.

Thank you.

We will come back on that to you. Next question please.

We have a question from Mr. Vasco Moreno, KBW.

Yes good morning. Vasco Moreno from KBW. Just a few questions. On the Private Banking, I know this was asked before but I was just wondering can you give us some more color on the inflows? Is it a specific product that may be introduced this quarter in some of the Asian markets as well as European markets that really has led to this very, very strong inflow number in Private Banking? If you could give us some more color on that that would be great.

Also I have a question in terms of the advisory and underwriting quarter-on-quarter evolution. Obviously very strong there. Are you confident in the performance for the second half given your view obviously of the pipeline at the moment? Within Institutional Securities as well, if you can also give us some idea in terms of the other revenues which are becoming an increasing part of the revenue structure of Institutional Securities? How much of that for this quarter was gains and then can you give us some guidance or at least can you talk about the sustainability of that line item going forward?

And then lastly, in terms of the risk weighted asset increase for the overall Group, you talk about three-fourths of the increase being due to increased activity and I know you mentioned mortgage market share taking but I mean obviously there must be something else? Can you give us some more color on that particular increase in risk weighted assets? Thanks.

Okay, thank you very much. Walter do you want to say a little bit more on Private Banking influence if there was any special.

Well obviously what is paying off now is our organic growth initiatives. We have hired about 150 relationship managers over the course of the year and that really starts to pay off now. These relationship managers are starting to bring in assets and as I said, the most aggressive strategies in terms of organic growth we have in Asia, therefore Asia is at the forefront of growth but secondly, I think the one bank concept already starts to work out here in Europe. We are able to raise net new assets together with investment banking. So you see all these different aspects now slowly but surely start working together.

So it's not 1 product it's generally throughout. Renato you want to quickly say something on risk weighted assets?

Sure. Let me just say first that risk weighted assets have grown according to plan. So that is not something that has surprised us and of course you can -- has a tendency always see that in the first half of the year the risk related assets are growing. That's happened you can see for quite some years now and therefore your question what exactly it is, we do not go into all details but it came about excluding the currency effect -- it came about half-half both from the Investment Banking side and mainly from the Corporate Retail Banking side and however from a product point of view most of that was absorbed by the expansion of our Mortgage business particularly in Switzerland where we gained, as I said before, by some market share. But it was also involving some off balance sheet items that had to be covered by risk weighted assets. That is in line with our expectations and is the usual build up in the first half.

Okay Brady would you please respond to the Group Advisory result and how we go on from here and then on other revenues? What is in there?

Yes, I would also just add on the risk weighted assets side, within CSFB it's entirely a factor of presuming our strategy that we laid out in terms of the business areas that we're focused on. That's where we're growing our assets as Renato said.

I think with regard to Advisory business, I think our view is that we have a very strong franchise with very good momentum. Certainly the activity in the market is -- continues to be good at this point and obviously, given our overall perspective on the second half, we would assume that that would continue to be a good environment. And our view is that given our market -- is given our very strong position in the areas that we targeted as part of our strategy, namely IPO's, the M&A advisory business, the leveraged finance business. We will continue to have very good share in these businesses going forward.

With regard to the other line within IS about 70% or 80% of that is really the gains from some of the legacy assets that we have on primarily private equity and some of the other legacy assets that we have on there. We think we will continue to show revenue on that line item but obviously over time it will be reduced over time as we realize the gains of that investment.

Thank you very much. Thank you. Next question please?

We have a question from Mr. Jacques-Henri Gaulard, Merrill Lynch.

Yes, good morning gentlemen. 3 questions. The first 1 is the tax rate of inventory in the Non-life business at 44%. Just some explanations there and whether you see that recurring or more generally if we can have a guidance for the tax rate of these 2 would be very helpful.

The second question is on the provision for litigation basically. We've seen a lot of banks settling. Is settlement something that you would obviously consider at this point?

And the third question is -- I would say we heard rumor of Mr. Fisher leaving to become CEO of Deutsche Borsche, so I wanted to have your side of the coin here? Thank you very much.

Okay, why don't we start with Mr. Fischer.

Good morning Leonard. Sorry I didn't know you were here.

No, no problem. On your last question I have a long and a short answer. My short answer is no and my long answer is no Sir.

Okay.

And on the first question related to the tax, I can only -- I can tell you that unfortunately a lot of our productivity increases have also happened in countries which still have higher tax rates. And so part of this tax increase is due to a higher net income in countries with higher marginal tax rates and secondly, because of the P&L development of the last years we have been eating up most of the tax carry forward.

How would I -- how would you guide the rest of the year?

In terms of the tax?

In terms of the tax thee yes.

Please don't ask me a question on tax or debt.

I did have the question of your resignation, so you've got to move well on taxes.

I'm sorry.

Okay.

Okay. Walter you want to say anything in addition to what we already said and?

Walter Berchtold Well as I said before it is our policy not to comment on pending litigation matters. That is true for all litigation matters that we are having. So obviously I'm not going to comment on anything in this regard.

Okay.

Okay. Next question please.

We have a question from Mr. Jeremy Sigee, Citigroup.

Thank you very much. I want to talk to you about the costs in Institutional Securities because even if I strip out the litigation expense it looks like non-comp is up about CHF100m and I just wondered if you could comment on the drivers for that and whether they remain in there going forward?

Secondly maybe related to that, I wondered at what stage we start seeing cost savings kicking in from the one bank program?

And then secondly, separate question. I just wanted to come back. Someone was asking earlier about the pace of buy-backs and I missed the answer. So I just wanted to ask will you be buying back at that sort of 750m per quarter run rate implied by your target and are there any periods in the year when you would be buying back more or less aggressively for whatever reason?

Let me start. Thank you very much for the questions first. Let me start with the buy-back and we certainly would like to buy back when we believe that our shares are under valued in relation to the rest of the market of our industry. And so we cannot and I cannot tell you if we will buy back the same way as we did. I think we promised you that we will try to buy as quickly as possible back the shares -- the 34m shares to off leverage our coming out of the mandatory convertibles. And so it should at least, if you ever want to have no dilution on that but otherwise I can't tell you at what rate we will be buying back no. You could assume when we are making good earnings and we have a weak equity market and our shares are cheap then we'd probably buy more back than in other circumstances.

Then one bank cost savings, as we said, we are changing our reporting starting next year in -- to Investment Banking Private Banking and Asset Management. That will imply that certain areas of business will move from the -- today's business unit where we are reporting and that means we have to give them certain restatements. We have very clearly identified certain savings be it in IT or be it in Operations across the Bank, but we would really like to give you some good indications only after we did -- went through the restatement because it doesn't help very much if we tell you some numbers now and then we have to revise them going forward and so that's why we do not want to give any actual numbers now. But they are very clearly substantial cost savings as well. Brady on cost and Institutional Securities and non-comp costs up CHF100m.

Yes, I mean the non-comp costs were up in the second quarter. I think that's partly due to the fact that the first quarter is seasonally lower so we would normally see that kind of comparison and I think most of the increase was in professional fees and also commissions and execution fees. So we are still -- continue to be very focused on the non-comp side and looking to bring that down. I think as Ossy mentioned, over time we certainly think that the One Bank initiative will allow us to do that.

Thanks very much.

Thank you. Next question please.

We have question from Miss Fiona Swaffield, Execution.

Good morning. Can I ask a question in a couple of areas? Firstly, on the Private Bank. I think on your slide you said if the assets hadn't grown the margin would have been 82 basis points. So could you confirm that the net new money that you're putting on isn't diluting the overall margin and that it's all -- the margin decline is all down to timing? So there's no issue in terms of growing in lower margin areas?

The second issue, just coming back to the One Bank, are there are costs within your first half numbers related to the one bank already. And I understand why you're not giving details at the moment about the one bank, but should we assume that you gave an CHF8b net profit target for 2007, so the synergies would be on top of that? Because all you're doing is changing the divisional split of the CHF8b. Thanks very much.

In Private Banking clearly if your revenues are unchanged and the assets are higher, then your gross margin will be lower and as we have demonstrated with the revenues, we are unchanged compared to the first quarter and with higher assets and higher net new money so the gross margin was lower and it takes for net new money -- net new money is not coming in at 130 basis points. So some people take it in -- not with us, but we hear some other banks do it at 10 basis points or 20 basis points and then hope and pray that they can get it up to 100 basis points. We normally start with something higher though and -- but it needs at least a year for net new money to get to the full potential of basis points and actually experience tells us that it needs probably more than 18 months or so instead of a year to get into the profitability we expect.

Then, the question on costs in the first half. There are some costs in the first half on the one bank issue because obviously merging the legal entities and all these little things so they do cost some money. Do we have a figure on that?

Yes it is I would say around CHF30m and we clearly said also in the outset I think in December last year that we would have roughly CHF50m this year. That's the number if I remember correctly that we mentioned.

Yes and on our CHF8b you said it correctly, you have to watch out for what we've done with the new divisions. But the number which comes out at the end should be the same, so, as we said before. Next question please?

We now have a question from Kinner Lakhani, ABN Amro.

Good morning. I've got a couple of questions. Firstly on the private banking margins. On one hand clearly you're indicating recovering customer activity. On the other hand we have typical seasonality, which works against you typically in the second half of the year. So I guess my question is do you feel that second quarter is going to be the low point in terms of the revenue margin? And looking at it a slightly different way, do you still feel quite comfortable with beating your 130 basis point target for the full year?

My second question is for Brady Dougan. Just to ask you at what stage you feel that you are in terms of upgrading your various franchises in terms of improving the revenue productivity and bringing those ratios down to the levels of the -- or up to the levels of the industry average?

Okay, thank you very much. In Private Banking certainly we did mention the seasonality and Private Banking clients like to go on holidays and normally they can also afford to go on holidays during July and August. And there is some seasonality in it but we also have seen that that effect is not as strong if markets are active during that period and since we have telephones these days. So, it is very much depending on the activity of the market during August. Normally September is in our business generally a good month and we can't tell you what July was. We could find out but we think that as long as the markets are as active as they are now, that the seasonal effect will be less than it was for example last year. Now can we hold on to the 30 basis points for the full year? I would think and would tell very clearly if that net new asset inflows which we have at the moment is continuing all during the second half and if the assets under management increase at the same pace in the second half as it did in the first half, then it is pretty unlikely that we reach 130 basis points. It is more likely that we stay around the levels we have now. Brady.

Well I think with regard to where we stand on implementing a number of the strategic actions and the revenue growth, I think we have been for the last 6 months, very hard at work implementing the strategy. We have been very actively and aggressively doing that. I think we are in good shape versus our plans but obviously this is something that's going to take multiple years to realize the full benefit but I think we are actually in very good shape against where we'd like to be and we are realizing some of those benefits already. Obviously you have to take out the market cyclicality as well and the conditions in the markets. But I think we're actually well along and in good shape but obviously it's a multi-year process.

Which businesses would you highlight where you have the most work left to do?

Well there are businesses -- I mean a good example would be the Commodity business where we are taking an organic growth approach to it. We've actually got -- we've assembled a very good group of people. I think we've got about 20 professionals in the business now. A number of market leading professionals that we've brought on board. We are increasing our activities there. Our VAR has gone up. In Commodities we're increasing our customer business. But obviously to get to close the gap to where the leaders in the industry are, in that area, will take a number of years. So there's a lot of work to do there. We do think that that's the -- the best way to approach it is the organic approach but that will take time.

Thanks very much.

Okay. Thank you very much. We're getting short on time. So next question please.

We have a question from Mr. Hugh Van [Seenis], Morgan Stanley.

Yes. Morning. I think most of my questions have been asked, so can I just ask on Institutional Securities? As you go into the second half how confident do you feel about the pipeline and Advisory and underwriting and particularly as you trimmed your VAR back, how do you feel about the current trading environment and opportunities to maybe extend risk capital as you go through the year? Thanks.

Brady?

Well as I said before, I think actually on the Advisory side we do feel that the business -- there is a good pipeline of business out there on the underwriting side and on the advisory side we feel like we are very well represented in the flow of deals and will continue to be so. We're pretty confident on that side. I think with regard to risk taking opportunities as we go into the second half, it's obviously dependant -- you know different for different markets around the world, but we do see some good opportunities out there to take advantage of and we are -- in some areas we have increased our risk in connection with that. But the markets are still -- there are still a lot of markets that are trading fairly tight and where there isn't huge value there, so we're obviously going to continue to be disciplined in how we look at that.

Thank you.

Okay, thank you. Next question please.

We have a question from Mr. [Kime Abu Halson], JP Morgan.

Yes, I have 3 quick questions. 1 is related to fixed income volatility. Looking at your numbers compared to some of your peers on a quarterly basis, we do see significant volatility on the sales and trading line as well as on the Group trading line in interest rate products, and I'm just wondering what your explanation is -- so what your analysis is? If it is business mix what is driving it, what is the explanation basically for the higher volatility?

The second question is on page 13. You give the value at risk but you used to give it for CSFB separately as well. I was wondering if you could give it for interest rates and equities?

And the third question is on page 23 of your slides you talk about CHF282m of revenues and I'm just wondering what these revenues really are? You talk I think about capital gains and other revenues and I'm just trying to understand where they're coming from?

Brady?

Well I think with regard to fixed income volatility I think your question was about fixed income trading results in general or interest rates specifically.

For sales in trading.

For sales in trading in general I mean first of all the first quarter versus the second quarter comparison is exaggerated because we did have, I think as we reported before $125m item in the first quarter which was a restatement against some of the calculations on the credit provisions I think and on some of the derivatives so it actually -- that actually overstates some of the volatility in the results but I think in general as we said we believe that our fixed income business really performed in line in terms of volatility against the industry average. The other thing to remember though is that the business mix is different to some of our competitors so again, as an example, not having a large commodities component -- commodity business component is something that probably increases the volatility of those -- of the trading results generally.

With regard to the VAR of CSFB I think the answer is we're not actually going to disclose CSFB's VAR separately now. We have disclosed the Group VAR and I think that's what we are planning to do going forward. The last question was with regard to what? You mentioned an item of CHF282m?

This was in the Asset Management business actually. On slide 23 you talk about CHF282m of other revenues.

I think that's investment gains yes. I mean that's just the investment gains on the portfolio and I think as Renato went through, investment gains in the second quarter were quite good particularly compared to the first quarter, actually down on a year ago. And I think what we want to continue to emphasize to people is that those investment gains are a regular recurring part of the business but they are a little bit lumpy so they may be higher in 1 quarter than another. But they are clearly an important part of the business going forward and obviously in the second quarter that was a good result on the investment gains side.

Okay, thank you very much. We have the last question?

We have a question from Kiri Vijayarajah, Citigroup.

Hi thank you. Yes. I just have a quick question on Corporate and Retail Banking. You mentioned that the credit environment generally remains pretty benign and new provisions should stay low going forward but could you comment on the extent of actual provision releases in the second quarter and how that's likely to play out in the second half and in 2006? I guess how sustainable is the current pace of provision releases helping your bad debt numbers? Thanks.

Yes we said we had the second quarter releases of 44m and I don't think we can give you any indication on what releases could be or will be going forward in the second half. But what I wanted to get across is I do not see an abrupt change in the credit environment in the second half. I see interest rates to stay in a relatively narrow range and so without any external thing happening, so I think really there is -- there wouldn't be any big need for credit provision. But on releases that I cannot give any indication there, they come and they come and there's nothing you can plan. So thank you very much. Thank you for asking all these questions and that now ends the analyst's session. We make a 5-minute break to allow the media to reassemble itself and we thank the analysts for their patience, for their appearance and wish you a pleasant day.

The Q&A session for the analysts is now over. We'll now have a short break and continue by taking questions from media representatives. Journalists who wish to register for a question should press *1 at this time.

This now concludes our conference call. Thank you all very much for attending.