Credit Suisse Group AG (CS) 2005 Q3 法說會逐字稿

Good morning. This is the conference operator. Welcome and thank you for joining the Credit Suisse Group third quarter 2005 results conference call. As a reminder, all participants are in listen only mode and the conference is recorded. You will have the opportunity to ask questions directly after the presentation. [OPERATOR INSTRUCTIONS].

At this time I would like to turn the conference over to Mr Renato Fassbind, Chief Financial Officer of Credit Suisse Group. Please go ahead, sir.

Good morning also from my side, ladies and gentlemen. I would like to welcome you to our conference call for the presentation of our third quarter 2005 results this morning, and to thank you for your continued interest in Credit Suisse Group.

I will start by walking you through the slide presentation. This is available on our website; some of you will have seen it already. I will then be happy to answer any questions you may have. For the question and answer session I will be joined by the CFOs of our businesses; Ulrich Körner representing Private Banking and Corporate and Retail Banking, Neil Moskowitz representing Institutional Securities and Wealth and Asset Management and Hans Ulrich Lienau from Winterthur representing Life and Pensions and Non-Life segments.

Before I start the results presentation, I would like to refer you to the disclaimer on page 1 of the slides.

On page 2 you can see that our third quarter 2005 results represents a substantial improvement compared to the third quarter of last year. We are focusing on our core strengths in investment banking, private banking and asset management. We are building an integrated global bank to capture new opportunities in our markets and to achieve sustainable growth. Our work to implement our strategy and to position our company for future growth has only just begun.

Total net revenues increased 30% versus the third quarter of last year, or 10% compared to the last quarter. Overall, net income stood at just over 1.9 billion Swiss francs. The increase in profitability is also reflected by an improvement in the return on equity for the Group which stood at 20.1%. The return on equity for the banking business alone was 22.7%, while the return on equity for Winterthur, our insurance business, was 11.9%. Basic earnings per share in the third quarter stood at 1.67 Swiss francs, up 44% from the equivalent quarter of last year.

Let's now turn to the segment results, starting with Private Banking on page 3. Private Banking reported a strong result for the third quarter of 2005. Net income was 728 million Swiss francs, a 42% improvement compared to the third quarter of last year, and an increase of 25% from the previous quarter. This result reflects the increased levels of client activity and active market environment in the third quarter of this year. It also demonstrates the progress we are making in the expansion of our international business.

Let's look at slide no. 4 which outlines the development of revenues and expenses. The favorable market environment and healthy level of client activity resulted in strong revenue growth compared to the third quarter of 2004. Net revenues were up 23% or 377 million, to 2 billion francs versus the same quarter of last year. Commission and fees were up 17% for the same period, driven by higher asset based commissions, increased brokerage volumes and strong product issuance. Trading revenues more than tripled to 252 million Swiss francs compared to the third quarter of 2004, benefiting from strong trading execution, based on higher client flows from the securities transactions.

On the costs side, there was a 13% increase in operating expenses compared to last year, reflecting increased compensation and benefit expenses in line with improved results, and ongoing strategic recruitment efforts in our international growth markets in Asia, the Middle East and Eastern Europe. This resulted in an improvement of the cost/income ratio to 55.7%.

Now on to the asset inflows on slide 5. Private Banking generated net new asset inflows of 14.3 billion Swiss francs this quarter. For the first nine months, net new assets amounted to 34.1 billion Swiss francs which represents an annualized growth rate of 8.4%, and reflects our favorable position in launching new products, building on excellent service and advice capabilities. A significant part of this growth was from strategic key markets in Asia and the European onshore business where we continued to record double digit growth rates, double digit growth rates in net new assets for the first nine months of 2005.

Assets under management at Private Banking stood at a record 637 billion Swiss francs at the end of the third quarter of 2005. The growth in assets under management since the beginning of the year is 18%, or over 100 billion Swiss francs, driven by strong asset inflows, a positive market performance and foreign currency exchange movements.

Let's now move on to the development of our asset margins starting on slide 6. Private Banking’s gross margin improved to 131 basis points in the third quarter. This compares well to our over-the-cycle target level of 130 basis points. Compared to the previous quarter, the gross margin improved by 5 basis points reflecting higher transaction driven revenues in line with the strong revenue growth of this quarter. The asset driven margin has fallen slightly over the last six month period as the growth we are experiencing is having a minor dilutive effect on the margin until the newly acquired assets generate revenues to the level of their full potential. More importantly however, we are seeing a continued good net margin contribution that rose to 48 basis points, reflecting the strong revenue performance and improved efficiency.

Let's move on to Corporate and Retail Banking on slide 7. This segment reported net income of 264 million Swiss francs in the third quarter. This was an increase of 65 million Swiss francs or 33% compared to the corresponding period last year. The return on average allocated capital stands at over 21% for the first nine months of 2005. This result reflects strong net revenue growth, tightly managed costs, as well as net releases of provisions for credit losses.

To support the strategic aim of achieving further growth within the Swiss residential mortgages businesses, we have intensified our marketing activities. In the third quarter of 2005, our private mortgage volumes grew by approximately 10% on an annualized basis.

Provisions for credit losses this quarter resulted in the net release of 10 million Swiss francs, reflecting an ongoing favorable credit environment requiring a low level of new provisions.

Please move to slide no. 8. Net revenues were up 9% compared to the corresponding period of 2004. Higher brokerage income, product sales and higher trading revenues mainly drove the growth in net revenues. Operating expenses increased 5% compared to the same period of last year. This was mainly driven by higher performance related compensation accruals reflecting the better result. The segment's cost income ratio improved to 62.7% for the quarter.

Now let's look at the Institutional Securities segment starting on slide 9. In the third quarter of 2005, Institutional Securities increased its net income to 612 million Swiss francs, benefiting from increased client flows and the active market environment. These results were encouraging and show that we are making progress against our strategic plan as we focus on higher margin products. Delivering a more focused franchise should help continue this process to realize our full potential.

Let's now look at the development in the income statement in more detail, starting on slide 10 with Investment Banking revenues.

We reported further improvements in Investment Banking revenues in the third quarter of 2005. They were up 30% compared to the third quarter of 2004, and rose 19% versus last quarter. On the M&A side, advisory fees increased by 28% to 381 million Swiss francs as we benefited from higher industry-wide activity, and the significant progress made in market share and rankings from last year. Through the third quarter, we are up to sixth in global completed M&A rankings compared to ninth last year.

Equity underwriting revenues more than doubled from the third quarter of 2004, and also showed an improvement of 42% compared to last quarter. This was in line with the increase in the volume of industry-wide new equity issuance. In line with our strategy of focusing increasingly on high margin products, we increased our market share to rank first in global IPOs through the third quarter. Moreover, we ranked first in both the Americas and the European IPO markets in this period.

Debt underwriting revenues were up 8% compared to the same period of last year and rose 4% from last quarter. These results reflected higher results in investment grade debt and leveraged finance, partly offset by lower results in structured products. Leveraged finance remains strong, although we saw a pronounced shift in issue activity away from high yield securities towards syndicated loans. We also benefited from the expansion of the leveraged finance franchise in Europe and Asia, as year-to-date revenues more than doubled from the same period in 2004.

The next slide shows our fixed income and equity trading performance. Fixed income trading generated revenues of nearly 1.8 billion Swiss francs. We experienced a satisfactory quarter with growth in leveraged finance and residential mortgage revenues. Despite the challenges of a yield curve that continued to flatten in the quarter, revenues from interest rate products increased due to a renewed focus on the business. This quarter's revenues also include a change in estimate of the fair values of its retained interest in residential mortgage-backed securities, resulting in a positive adjustment of revenues in the amount of 216 million Swiss francs. This contributed 68 million Swiss francs to net income; about 50% of this revenue and net income adjustment would have related to 2005 year-to-date on a retrospective basis.

Equity trading revenues had a strong quarter with improved trading results and higher customer flows. All major product areas contributed to an improvement in revenues, which were up almost 50% compared to last quarter, and increased almost by 80% versus the same period of last year.

Revenues in the cash business, the convertibles and derivatives market and proprietary trading, rebounded due to higher levels of client activity and improved trading conditions.

The private services businesses achieved a strong quarter due to increases in client balances and higher short term interest rates. We ranked second in the inaugural hedge fund service provider survey carried out by institutional investors.

For institutional securities, average daily value at risk was 63 million Swiss francs during the quarter, and flat from the previous quarter. As we slowly build out the product portfolio in areas such as commodities, the increased daily VaR levels were offset by a larger diversification effect. We still aim to increase risk over time, but as we are demonstrating, and as we have mentioned many times before, we will only increase risk when and if suitable opportunities arise.

Moving on to the pre-tax margin performance on slide 12. Over the last few quarters we have seen an improvement in the pre-tax margin to 20.4% in the third quarter. We are aware that a single quarter does not yet represent a trend, and that the short-term industry outlook will affect margin development. We also acknowledge that fact that the margin we achieved is not yet at the level that compares favorably to most of our peers, but as we start to implement the strategic and operational changes in our business, we are seeing a visible improvement in our pre-tax margin, and over time expect to continue closing this gap versus our peers.

Compensation expenses increased 37% compared to the third quarter of 2004, reflecting higher performance related compensation costs and increased salaries relating to higher head count.

Other expenses were held at third quarter 2004 levels.

Let's go on to the Wealth and Asset Management segment on slide no. 13. Wealth and Asset Management reported net income of 101 million Swiss francs which was up compared to the third quarter of last year but down on the strong last quarter.

Please move over to slide 14. Net revenues excluding minority interest were up 28% to 812 million Swiss francs compared to the same period last year, although were down 14% versus last quarter.

Revenues before investment related gains increased 17% compared to the same period last year due to primarily higher placement fees in the private equity funds business of alternative capital, and higher management fees in CSAM reflecting an increase in assets under management.

Investment related gains shown on the top of the chart decreased to 139 million Swiss francs reflecting a good level of gains from the sale of private equity investments, although they were not as strong as in the excellent second quarter of this year. While we report fluctuating levels of private equity gains each quarter, as explained many times before, our track record of gains in this business is impressive. Our private equity business is continuously making new investments to lay the foundation for future gains.

During the third quarter the private equity business managed by Alternative Capital, invested or committed over US$650 million in a variety of industries, bringing year-to-date investment to some US$2.2 billion.

As shown on slide 15, the next one, net asset inflows of 4.1 billion Swiss francs were achieved during the quarter. Inflows of 2.5 billion at PCS were driven by large new client accounts, and inflows of 1.8 billion at CSAM were due primarily to solid business growth in Europe. Assets under management increased by 5% to 553 billion Swiss francs in the quarter.

Now let me go over to the results for our Winterthur segments, starting with Life and Pensions on slide 16. Net income of 96 million Swiss francs reported at Life and Pensions represents a solid performance in the third quarter of 2005, although on this chart reports that net income fell 41% compared to the same quarter of 2004, the result is masked by two main factors. Firstly, we took a decision to change the actuarial assumptions and models, reflecting a reduction in the long term earned rate as a result of sustained low interest rate environment, and the adjusted mortality tables to reflect increased life expectancy in some countries. The negative impact on net income was 61 million Swiss francs after tax and policy holders' participations. Secondly, net income was positively impacted by an increase in the valuation of deferred tax assets by 31 million Swiss francs this year, compared to a similar increase of 72 million the same quarter of 2004.

This reflects a continued improvement in the expected future taxable earnings. For the first nine months, pre-tax income was maintained at 481 million Swiss francs, despite the adverse impact of the change in actuarial assumptions. So adjusted for these items, net income improved in both the third quarter and the first nine months of the year against the equivalent periods of last year.

Now to slide 17. Gross premiums written increased by 10% compared to the third quarter of 2004. More meaningful is the year-to-date growth which was 4%. This growth was predominantly driven by a positive sales performance in the Netherlands, Spain, Japan, as well as the Swiss Group Life business. Deposit business which includes unit linked business grew by 16% with significant growth in the UK and Central and Eastern Europe. The expense ratio increased to 10% from 9.2% for the nine month period, but this was fully attributable to the 205 million accelerated amortization in respect of the change in actuarial assumptions and models, otherwise it would have fallen to 8.5%.

Let me go over to Non-Life on slide 18. Non-Life reported net income of 190 million, a decrease of 4% compared to the third quarter of 2004, but up 39% versus last quarter. This result was also affected by two main factors; the result for the current period was adversely affected by the unusually heavy rainfall and flooding in Switzerland which had a negative impact of 72 million Swiss francs, net of reinsurance and tax. However the hurricanes in the US had a minimal impact on our results, due to the decision to exit certain risk exposures over recent years, which included coastal areas of the US.

Secondly, the valuation of deferred tax assets was increased, similarly to the other segment, by 132 million Swiss francs this year, compared to a similar increase of 59 million in the same quarter last year. Again, these changes reflect a continual improvement in the expected future taxable earnings.

A short remark on the pending Excel arbitration case. As we informed you some time ago, the proceedings involving the independent actuary are still ongoing, although we hope to reach a conclusion by the end of the year.

Let's now look at the premium growth on slide 19. Net premiums earned grew by 6% in the third quarter and 1% year-to-date. The benefits of tariff increases in Switzerland and Spain were partly offset by market pressure in Germany where the business is introducing measures to respond to the increased competition.

Let me go over to slide no. 20, talking about the combined ratio. Combined ratio improved by 1% to 98.8% for the first nine months of the year, despite the Swiss floods in August of this year, which according to the meteorologists was an event likely to occur only every 300 years. Adjusting for this event, the combined ratio would have been down 2.1% to 97.7%. Expense was further decreased to 25% year-to-date as a result of the ongoing strict cost management.

Let me now move on to slide 21, and talk about the Group's capital position.

The consolidated BIS Tier One ratio increased to 11.1%. This was due to an improvement of net income levels achieved in the quarter, and holding risk-weighted assets level flat at 240 billion Swiss francs over the quarter. The retained net income level was partially offset by the share buyback program, totaling 0.7 billion Swiss francs during this quarter. The buybacks to date total 1.4 billion francs or 26 million shares which means we are on track to achieve our target to buy back our own shares with a purchase value of up to 6 billion francs over a two year period.

You should note that our 1.25 billion Swiss franc mandatory convertible bond will mature and convert into 33.7 million shares during the fourth quarter. Our target Tier One ratio is 10%, which is conservative versus our peers. We are confident that our strong capital generation will support the share re-purchase program while keeping the Group appropriately capitalized.

In addition, Winterthur increased its shareholders' equity by another 300 million Swiss francs to 9.7 billion Swiss francs at the end of September 2005.

On the next slide I would like to give some comments on our performance goals. Our performance improvement is reflected in the progress we made against the full year Group performance goals we presented last December. As you will note, we have met or exceeded our goals in some areas, but see a number of areas in which we have room for improvement. We still have a lot of work to do and we expect to experience certain challenges as we continue to implement our strategy.

That brings me to the summary and outlook as detailed on page 23. Following the increased client activity and more active markets in the third quarter, we expect to see higher interest rates and increased market volatility in the fourth quarter. Oil and other commodities will continue to experience a correction within the longer term upward trend.

The global economy should remain robust as growth in Asia and Europe helps offset the pressure from high energy costs and interest rates facing US customers. While the results we reported were satisfactory, we know we have the potential to do even better over time. We are convinced that our integration strategy will create an organization that should enable us to capture opportunities for sustainable growth.

Finally, I would like to inform you that we will be holding a Credit Suisse Group Investor Day in London on December 7th for investors and our analysts. Further details will be sent shortly.

With that, I would like to thank you for your attention and would like to open the Q&A session by taking the first question from the telephone conference. Thank you.

[OPERATOR INSTRUCTIONS]. The first question is from Mr. [Dusanc] Philippe from UBS. Please go ahead sir.

Hello, three questions please. The first one is with respect to the private banking revenue mix. If I take the year-to-date numbers '05 versus over '04, your assets under management on average are up some 11%, fees are up only 3% but trading is up 94%, and if I adjust for a positive mark to market one off in 2004 trading it's actually up 150%. Could you just comment in terms of the revenue mix and why trading is that strong and why commission and fees are actually a bit weaker compared to the overall increase in the asset base?

Second question, also with respect to private banking, could you please give an indication what your profit contribution is from the higher growth areas, be it onshore Europe, be it Asia, and what you actually expect in terms of break even point or is it already reached?

And last but not least, with respect to institutional securities, you've mentioned that you believe over time that you can close the gap versus peers. If I adjust for the valuation methodology change, basically your pre-tax margin for the quarter was more around 18% and your comp revenue ratio more around 56%, and I just was interested what -- also with respect to, what I've heard a bit in between the lines, that you've given a rather cautious or more cautious outlook for Q4 in investment banking. What makes you confident that this quarter is basically the start of a higher structure profitability level versus just basically exploiting very good external conditions? Thanks.

Let me first answer a couple of points on my side before I give to my colleagues for more details. The second question regarding the breakdown of the profitability of our assets in various regions, we are not giving in the quarter at least. What we can say though is that, as we said before, we expect to be break even in most of the markets in Europe by 2007, but we may see some of them being break even, even earlier than that but we are not commenting in detail on that.

Regarding the institutional securities strategy and its implementation, I mean we are -- we have just started to implement all the actions we have communicated in December last year, and I think the running year has shown that we have made good progress towards achieving these targets. And you know we have still a lot to do there, but we are confident that we are on the right track and the businesses have shown also that they can live up to the requirements that have been set out for them in the plans.

Regarding the private banking revenue mix, I hand to Ulrich Körner.

Thank you Renato. A couple of points here. The significant increase which we have seen in terms of assets under management during the course of this year is, except from the case of the strong net new assets generation obviously, also driven by a substantial increase of the US dollar and the equity markets overall, and that was -- took place especially in the last four months. So if you look at the increase of the average asset base for the whole nine months in 2005, it increased at around 9% basically compared to the nine months of 2004. And if you look then at the increase of non-interest revenues, they also increased by around 8% this year, so being basically in line with the increase of the average asset base. That is one important thing for me.

The second one is that obviously you mentioned that also last time with this very strong increase in the asset base overall we have a certain time gap to come up with the full revenue potential of these assets acquired. And this time gap is somewhat between, I would say, 18 and 24 months, and that is also another factor here.

When it comes to trading, that was I think also part of that question, this very strong increase in trading has different kind of reasons. The first one is very strong training execution which we saw, especially in Q3 here. The second one was strong results from ForEx trading as well. And I think a third factor here is what we called last time was this ex-dividend effect, which was significantly lower in Q3 compared to Q2, and that is also very significant, the reason why this trading income came up basically.

So is there -- in terms of trading income would you regard these results as sustainable?

As I said, we had strong markets in Q3, but except from that I think so, yes.

Thanks.

With regards to closing the gap in institutional securities, I would probably emphasize that the gap we look at most is -- and the financial metric we look at most is the pre-tax margin number. As you know we have a goal on that of 20%. We did exceed that this quarter. Obviously that's something we would like to sustain over a cycle or a year where there's a series of quarters that may not be as good as this quarter. Yes, we do think certainly the market's helped us this quarter, but I would say overall that as we look to see whether we're implementing our strategy and how well that it's doing, we tend to look at those focus products that we pointed out in our strategy.

So we tend to look at things like in banking we look at IPOs and we look at M&A and we look at leveraged finance, and I think we're very happy this quarter that we're top of the league tables in IPOs. In leveraged finance we think we've kind of caught the wave going to syndicated lending at the right time, and that's reflected in our results. And on the M&A side we're seeing continuous improvement there.

I would say that there are areas that in our strategy will take us a little longer time to build, such as commodities and prop trading, and as those build we could even take advantage of good conditions even more so in the future.

Thank you very much.

Thanks Neil. Next question please?

The next question is from Mr. Jeremy Sigee from Citigroup. Please go ahead, sir.

Thanks very much. Two questions if I may. Just following on on the Investment Bank actually. Firstly, headcount was up 5% in institutional securities in the third quarter. I just wondered if you could talk about which particular areas the extra headcount was going into. Second question, similarly, capital allocated to the Investment Bank was up 14% in the quarter, despite what seemed to be fairly flat VaR and RWA figures, so I just wondered if you could talk similarly about which areas the extra capital went into, within the Investment Bank?

Do you want to answer that please?

Sure. I guess the first would be headcount, you see the increase of 5% there. I'd say there are a couple of areas; one is the support areas, particularly those around the more complex products that we're building as part of our strategy, things like derivatives and mortgages where we have extensive programs to build out our infrastructure so we can build our business capacity.

The other areas that we're adding people are the focus products that we've talked about a bit, the build out of leveraged finance in Europe, commercial mortgage backed, and equities and prime services as well as derivatives generally, in both fixed income and equity.

In terms of the capital allocation going up, it is around the businesses that had the good quarters. It's around syndicated lending; it's around residential mortgages; it's mostly around the fixed income side of the business. You will also note that we have an increase in risk in commodities as well, because that business has started to build and you'll see both the VaR is up there, and some of that is reflected in ERC as well.

Can I just ask a follow on question on this revaluation of the RMBS portfolio. Do you accrue comp on that? So is there a matching comp accrual on that revenue item?

The answer to that is yes, that goes into the top line. And as Renato cited, I believe the net income effect on that was about 67 million Swiss francs as a result of comp and taxes.

Thanks very much.

Thank you. Next question please?

The next question is from Mr. Solveig Babinet at Morgan Stanley. Please go ahead sir.

Yes, good morning. I have three questions please. One on the Private Bank again; I understand you are not willing to give much profitability figure for onshore Europe and Asia, but could you give us a flavor of the size of assets under management there as well as margins and trends in margins?

Second, on litigation. Could you tell us when you expect a conclusion to Enron, Parmalat and Excel? And lastly, can you just generally tell us to what extent you attribute today's results to the One Bank synergy? Thank you.

Can you repeat the second one again? What was your question exactly on the litigations?

On litigation it's just about timing. When do you expect a conclusion to the Enron, Parmalat and Excel?

Let me start from the back. There is in the third quarter definitely no net positive impact of One Bank yet. As you know we are implementing right now the One Bank structure which will be effective as of January 1st, 2006 and has then finally to be lived, and I was very clear on my earlier statement that the benefits will only come once we have really implemented the One Bank structure for the whole Group. So the answer is clearly there is no benefit yet in the third quarter as to that.

Regarding the timing of the litigations, as I mentioned in my presentation, the decision on the Excel case should reach us within this quarter, within the fourth quarter, and the independent actuary will have hopefully completed his analysis and made a decision on that. When it comes to the other litigations, that is something which we cannot predict and to also not comment on that. The only thing I can say is that we believe that we are properly provisioned for these cases in our books.

Regarding the Private Banking, and again net new assets figures, we are not giving any details on that. We have chosen to give some details as you may remember last December when we had our analysts and investors conference, and we may do so next time, but we are not giving any details on that.

Thank you.

Thank you. Next question please.

The next question is from Mr. Vasco Moreno, KBW. Please go ahead sir.

Yes, good morning. Just three questions. The first one is on the back testing chart that you have on page 15 of the quarterly report which shows a pretty strong evolution between trading revenues and VaR, certainly better than in previous quarters. Are you now done with the hiring process as far as the prop business is concerned? And basically is this the kind of trend that we are going to see in future quarters if that build out process is now pretty much done? That's question number one.

Question number two is related to the buyback. You've already done 23% of the buyback, the buyback goes on until 2007. I suppose the first issue on that is, could it accelerate, could you actually basically finish the buyback early here? And then related to that, what is the specific mechanism of the conversion of the MCS coming up? In other words are you just basically take the stock that you've bought back and issue it as far as the conversion process?

My third question is related to the outflows that you saw in Alternative Capital in the third quarter. Can you give us some color on why that was? Thank you.

Thank you. I will quickly answer question number two, regarding the capital. As I said, we are on track in buying back our shares; there is right now no intention to speed that up or buy it earlier as we have a consistent process in place, as you can also follow by the way on the Internet where we publish every Monday the outcome of the buyback of the previous week.

The mandatory convertible, we can not so to say keep that in-house and not issue it. We have to issue these shares into the market. And as I mentioned before, we are compensating for that, over-compensating even, through the share buyback on the second line.

Neil, can you say something about the prop trading?

On the prop trading question, I would say we are not done with our hiring there. We think in equities we're pretty mature and down the curve, closer to where we want to be than say fixed income, and on the fixed income side we do anticipate more hiring and more growth in that business over time. Maybe a slightly slower build because we did start from a higher base in equities. I can't promise you the kind of trend we'll see over time on the chart, on the back testing chart. I wish I could promise they'd all look like the third quarter, but I can't do that.

The other question was regard to the ACD outflow of 200 million Swiss francs. It was really just a couple of minor events and nothing really significant there. I think the real issue with ACD is more around the new money that we're raising in the funds where I think you can see in the quarterly that we've raised about 2.2 billion year-to-date for monies that we are going to commit to new funds across a variety of areas. As you know, that was part of our strategy to reduce the focus on just the LBO type of funds. And then I think that just this quarter alone we raised over 670 million, so that's our real focus there with ACD.

Okay, thank you.

You're welcome. Next question please?

The next question is from Michael Schutz, Bank & Bellevue. Please go ahead sir.

Good morning. I have two questions, one follow up to the Private Banking trading revenues. Could you please give us an indication what the driver of that revenue is? Is it structured products or is it any kind of proprietary revenues?

And the second question would be the change in actuarial assumptions. Was this a one time event or does this have any kind of consequences going forward in terms of lower profitability of the business?

On the change in actuarial assumptions, as a quick feedback, we look at the situation every year and adjust it according to the expectations we can see going forward. So in that sense, yes, it's a one time effect, but of course it's reviewed every year and it's adjusted every year based on the future expectations.

Ulrich, can you give feedback on the trading revenues in Private Banking?

Yes, sure I can. As I said ForEx trading was very strong in Q3, but also as you mentioned, structured product sales was obviously strong as well. I think overall we saw trading execution – a very strong result here. Except from that, nothing special to mention from my side here.

Thank you. Next question please?

The next question is from Mr. [Gideon Meyer], NZB, please go ahead sir.

Good morning. I would have two questions. The first one would be, could you please give --?

We can hardly hear you.

Could you please give us an update or an assessment of Credit Suisse's position in the Revco case? And the second one is, Credit Suisse is pretty strong at selling structured products. Maybe you could give us an indication about the investment performance of these products in a positive market environment like we had it during the past month?

Okay, on the Revco case I have not a lot to comment; again we believe that whatever we need to have as a provision we have properly provided for in the quarter. I can tell you though that the credit exposures are minor and that's where we are with the case right now. So we give further information as we go.

I didn't quite get your second question on the profitability of structured? This is in Private Banking or what was that?

The question was about the performance of your -- investment performance of your structured products, in your clients' portfolios. How are they doing in the current market environment?

A general word here, because that's a difficult question given the numbers of structured products we are selling basically. But let's put it that way, as you said rightly, we are relatively successful in that field and what you can see from that is obviously that demand for these products coming from our clients is relatively high, and that probably wouldn't be the case if the investment performance is not there where it should be.

Okay.

Thank you. Next question please?

The next question is from Mr Kiri Vijayarajah, Citigroup. Please go ahead sir.

Yes good morning. It's Kiri Vijayarajah from Citigroup. I've got a follow on question on your One Bank strategy. I know in the past you haven't quantified the cost and revenue synergies, but can you clarify whether they are included within the 8 billion profit target for '07 or is it incremental to that 8 billion? And are you planning to quantify those benefits at your investor day? Thank you.

I cannot comment yet on the agenda of the investor day, but very clearly as I said before, the target for 2007 with the 8 billion Swiss francs net income does not include any synergies out of the One Bank exercise. And the reason for that is mainly that in implementing the One Bank structure and making sure that we have the revenue benefits and the cost savings, this may bring some early synergies into the books, but at the same time we will also have -- and have actually also have costs in doing so. So what we have assumed conservatively, we said we will not have any net benefits until the end of '07 when you have the 8 billion target. So that is factored in then in the year '08 and ongoing.

Okay, thank you.

Thank you. Next question please?

The next question is from Mr. Derek Chambers, Standard & Poor's. Please go ahead, sir.

Derek Chambers from Standard & Poor's Equity Research. I've got a question about Private Banking transaction driven revenues. Traditionally the summer has been quite quiet for activity and I wonder if some of the changing geographical mix of your clients has led to a change in behavior, because from US brokers I think the traditional pattern is still going on? And related to that, how do you classify product issuance related revenues? Are they transaction or are they asset driven?

They are basically transaction driven. Most of the product issuing, all that execution revenues coming from execution of these products is in the transaction driven margin included.

And are you noting any difference in customer behavior as the geographical mix changes?

No not really.

Right, thank you.

Thank you. Next question please?

The next question is from Mr Kian Abouhossein from JP Morgan. Please go ahead, sir.

I have a question in respect to a recent presentation at the Merrill Lynch conference, slide 7, where you broke down CSFB's net income for 2004 by 46 products, and you highlighted that a certain amount of product groups make the 1.2 billion loss in 2004. And I'm just trying to understand what you're doing actually on the structuring side of these product groups, and maybe you could give us an update how you tackle these areas and in particular where we stand at this point after nine months of restructuring?

Sure. Neil, can you take this?

I would ask you which areas you're referring to though. We are tackling all the areas; I wasn't sure if you were referring to the --.

You don't actually say on this slide what areas; you just say they're 46 product lines within CSFB, and of those you have a negative impact of 1.2 billion. I don't know how many product lines, if you could tell us that would be great, but it would be also interesting just to understand what you're doing in these areas.

Okay, there's a few things. Basically what we're doing is we're trying to first of all reallocate our capital as well as our people more towards those products that we think over time will end up on the right side of that chart, i.e., the ones that have above 20% pre-tax margin. And again, this was one of the slides that we had used as a focus of our strategy when we developed it. There's an accompanying slide that we use internally which we use to measure our progress in terms of looking at our capital allocation and seeing what percentage of our capital is allocated to those businesses in each of those three quadrants, obviously wanting to allocate less capital to the businesses that are negative pre-tax margin and more to those that are very positive.

Secondly, within those that have the strong margins, we isolated some products that we felt we could grow out because we thought we had strong franchises in, and we've talked about some of those today already, such as structured products and leveraged finance and prime services and IPOs and so forth. On those products that are struggling, we've put together some get well plans for some. We've decided to maybe focus on certain customers within there that may be more profitable or focus on certain geographies that may be more profitable, and reallocate resources to those to improve the overall profitability of those products.

Okay. Can you also give us maybe an idea of how much of the capital is actually invested in the products that generates this loss and the product line that generates this loss?

I would say less in '05 than in '04.

Okay, I expected that. Thank you.

Renato Fassbind. Thank you for the question. Next question please?

Mr Fassbind, there are no further questions at this time.

If that's not the case, thank you very much for attending and have a good day. Thanks for your interest in our Group.