Credit Suisse Group AG (CS) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen, welcome to our results presentation. I'm joined here on the platform with our CFO, Renato Fassbind, and a number of other colleagues are in the room here from our executive team. Brady Duggan, CEO of Investment Banking; Walter Berchtold, CEO of Private Banking, and Urs Rohner, Chief Operating Officer and General Counsel. And we have in New York, David Blumer, CEO of Asset Management.

First let me give you a brief overview of the results and progress against our strategy. Renato Fassbind will take you through the financials and then we will take questions.

Turning to the results and our strategy progress. Credit Suisse has had its best first half ever with net income of CHF4.8b. For the quarter we delivered a strong result in a market that experienced higher volatility and increasing investor caution. These results show that our efforts to build a powerful, integrated bank are gaining momentum. Our business has proved resilient in the face of a demanding environment.

We had record second quarter results for both Investment Banking and Private Banking. The results for Asset Management were heavily influenced by the costs associated with realigning the business.

Moving to slide four, we are making excellent progress implementing our strategy. Integrating the Bank remains a major priority and we are already seeing results. For example, we are already starting to generate income and revenues through closer cooperation between our divisions. There's a good pipeline of deals and we are on track to meet our targets. These early signs of progress confirm that the new structure is working, and bode well for growth as an integrated bank.

The matrix organization, with a divisional and regional structure, is also proving to be a success. It facilitates cross-divisional working, both at the regional and country level. We are also seeing significant opportunities to leverage and streamline our operational capability. A good example is our plan to establish what we call Centers of Excellence. These centers will enable us to leverage talent around the world, and maximize the efficient use of the Bank’s resources.

We already have centers in North Carolina and Singapore. In Singapore we recently announced a new facility which will take our staff numbers to over 3,600, of which well over 2,000 will be in our Centers of Excellence. However, this is only the beginning. Our strategy is to be in the top quartile compared to our peers with regard to deployment.

Integration also enables Credit Suisse to address cost management across the whole Bank, helped by a firm-wide shared service organization. We have made great strides in our planning to enhance the procurement of goods and services, and in rationalizing the use of real estate. These and other initiatives will enable us to deliver and further improve on our already announced cost synergy targets.

Turning now to the strategic progress and operational performance of our divisions. Investment Banking has made enormous progress against the strategy, and the improved operational performance is coming through in the financial results. This has been driven in part by our investment in our core client businesses, leading to improvements in the price and diversity of revenues. We are continuing to build on our strengths.

For example, leverage finance, commercial mortgage securitization, emerging markets, are businesses where we continue to strength. And they are also highly profitable, despite the upturn of volatility over recent months. We believe that emerging markets are key to our future growth, and this will be helped by strong and improving economic fundamentals driven by expanding global trade. It was very pleasing for our progress to be recognized with the award for Best Emerging Market Investment Bank by Euromoney.

The areas we have targeted to close the revenue gaps with our peers are also showing continuous improvement. In particularly we are pleased that our commodities and prime brokerage businesses have made good progress. We had a reasonably good trading result for the first half as a whole, but the second quarter shows that we still have room for improvement. We are improving the profitability of businesses such as cash equities and investment grade debt. We are continually analyzing and reassessing our client base. The objectives are to ensure that we provide clients with a value added service, and to generate appropriate returns on the capital that has been deployed.

Costs are a particular area of focus for the Investment Banking division, as well as for the Bank as a whole. We are aiming to substantially reduce costs and deliver long-term, sustainable savings. I'm very pleased with the progress that has been made in Investment Banking. There's still room for further improvement, in particularly with regard to cost. Private Banking continues to deliver excellent financial results with good inflows of net new assets and sustained margin levels.

The path to grow is through building on our onshore business, and the integrated bank is a key enabler of this strategy. Existing businesses of other divisions will be leveraged for market entry, and we assure that we can deliver profitable growth. A particular area of focus is here as well as emerging markets.

We are making excellent progress in the U.S. where we are introducing a full Private Banking model, and where we have increased the number of relationship managers substantially. And in Europe our efforts are paying off, with the onshore business already on target and growing upwardly.

Asset Management is implementing its global strategy. As I said before, this business is a key component of the integrated bank and is critical to the overall success of Credit Suisse. The various areas of Asset Management business brought together when we created an integrated bank, are now being placed on a common, efficient and sustainable platform for growth.

We are repositioning unprofitable businesses, reshaping our global product offering, improving processes, and reducing costs. But above all, we are focusing on our strengths to grow Asset Management as part of the integrated Bank.

Today we announced realignment of our U.S. business, where we are building a platform for profitable growth in this important market. We are focusing on our market leading alternative business, our growing business in cash and short-term duration products, and our enhanced index and qualitative capabilities. We have reviewed a number of traditional debt and equity products where we do not have the leadership position, and this will lead to staff levels in the U.S. being reduced by 300 by the end of the year.

Our global strategy will be built on our strengths. Alternative investment is a good example. We already have a market leading position with well over CHF100b of assets under management. We are diversifying our revenue stream and expanding into new strategies and businesses.

For example, we launched a $1b joint venture with General Electric which will invest in global infrastructure projects, with a particular focus on emerging markets. The joint venture was a direct result of our integrated bank strategy. The integrated bank has also helped generate enhanced asset inflows using a variety of distribution channels. In short, we are implementing our strategy in Asset Management to build position for the business for future growth and success, as part of the integrated bank.

Now to sum up, I think this had been a good first half for Credit Suisse. We are making excellent progress with our strategy, and the integrated bank model is already proving its worth. There are still areas for improvement but we are working to address these. Looking ahead, we see continued global economic growth, providing an excellent environment in which we can grow. Our business model will benefit from further global wealth creation and the increased corporate activity.

Now I hand over to Renato who will take you through the financials.

Thank you Ozzy. I will now take you through the second results, starting on slide 9 with an overview of the second quarter pre-tax contribution by segment.

As mentioned by Ozzy, Investment Banking and Private Banking had record second quarter results. Together with a very strong first quarter, this results in the best ever first half results for these two divisions. As already indicated some while ago, Asset Management is not yet in a position to fully benefit from the strong basis trends, or from being part of the integrated Group, as we continue to implement the strategic changes with this business. More on this later.

Let me turn to Investment Banking on slide number 10. Investment Banking achieved its best second quarter result ever, driven by record combined underwriting and advisory revenues. The trading operations produced good results, as the business showed resilience in more volatile trading conditions from mid-May through the end of the quarter.

Investment Banking is delivering on its growth plans, gaining momentum with clients, and expanding its range of products in its core areas of the business. Our strategy to implement a more focused franchise is paying off, as investments in core client businesses continue to result in improvements in the breadth and diversity of revenues. Let’s have a closer look at the results, starting with the underwriting and advisory business on the next slide.

Combined advisory and underwriting fees are up by 38% and 28%, compared with the second quarter last year and the previous quarter respectively. These results reflect continued improvements in the franchise and relative position in the industry, with increases in both underwriting and advisory fees.

Through the second quarter of 2006, Credit Suisse ranked third in revenues generated with financial sponsors, which continues to be an increasingly important client base for underwriting and advisory fees. Related to that, Credit Suisse continued to hold a strong third position in global high yield issues volumes.

Our energy banking franchise performed especially well, with a number of notable transactions in this highly active industry. But as important, the strength of our business also provides synergies with the commodities trading platform, that we are in the process of building out organically. I will continue now with the trading results on slide number 12.

Despite the more difficult market conditions in the second quarter, fixed income trading revenues in the first six months this year were a record CHF4.7b, up 36% compared to the first six months last year. The second quarter result of CHF1.9b reflects strong contribution from residential and commercial mortgage backed securities, interest rate products and leverage finance. Partly offset by weaker results in emerging markets trading and fixed income prop.

In line with our strategy to build our commodities trading platform, the business has experienced solid revenue growth in its first year of operation. Our commodities business is still relatively small compared to where we want to bring it. But we are very pleased that the business is gaining traction, even as the industry overall experienced a rough couple of weeks during the quarter.

Let me go over to equity trading with slide number 13. Equity trading markets were very volatile during the quarter. Our equity trading revenues in the quarter of CHF1.1b increased 26% from last year, reflecting better results in the convertibles, derivatives and most cash businesses as client activity remains strong. This was partially offset by weaker results in equity prop trading, as risk taking conditions became more difficult from mid-May.

Following record revenues in the first quarter, equity prop trading continued to make a positive contribution in the second quarter, although at the significantly low level. However, for the first six months of 2006 prop revenues were up significantly compared to last year. The Group’s average VAR and value at risk in the second quarter of 2006 was CHF95m, up CHF20m since the first quarter.

While this increase reflects an increase in equity exposure during the early part of the quarter, roughly 40% of the increase is explained by inclusion of higher market volatility in the dataset underlying the VAR calculation.

Let me give you some comments on the businesses that we continue to grow. Advanced execution services, a recognized leader in the rapidly growing electronic trade execution business, experienced strong growth and record revenues in the second quarter. Prime brokerage also had an excellent quarter, with higher revenues due to new client mandates and continued business growth.

Growth in the industry was especially strong in Europe where, according to third party market research, a record number of 170 funds where launched in the first half of this year. More importantly, the market share of current leaders in the industry is declining. But our market share is on a clear upward trend to above 10%, both in terms of new mandates and in terms of fund volumes.

Let me go on to the expenses in Investment Banking as shown on the next slide, number 14. We kept the compensation to revenues ratio stable at 53.5%, 2 percentage points down from full year 2005. It continues to be our intention to keep this ratio at or below this level during 2006. We also see an improvement in the ratio of non-compensation costs to revenues. This year’s run rate is currently 5 percentage points below the full year 2005 ratio. Analyzing the trend in other expenses is somewhat distorted, given the litigation related charges and insurance recoveries booked this quarter, as well as the same quarter last year.

Slide 15, the next slide, shows the expense trend adjusted for these items. Here we want to give you some insight on how our expenses developed quarter-over-quarter. Adjusted for the litigation items, other expenses increased 19%. After analyzing the detail, we identified certain items that are related to increased business activity, like commission expenses, professional fees and T&E.

These together accounted for about half of the expense increase of roughly CHF100m. About a third of the increase of roughly CHF60m related to increased investments in support functions, to accommodate business growth and structural changes to drive economic -- economies of scale, sorry. They include investments in systems and infrastructure but also branding and advertising expenses.

The remainder of the increase relates to miscellaneous items, with the primary one being a provision increase in the reserves for future litigation expenses. To attack the increase in expenses, we have established internally a 2006 run rate targets for each business, category of expense, and region in Investment Banking. And are finalizing detailed plans and initiatives.

We continue to pursue sustainable, long-term cost income ratio reductions, and we are confident about the positive future results of our initiatives. Let me now go on to Private Banking, starting with slide number 16.

Private Banking’s pre-tax income of CHF1.1b is the best quarter after the record first quarter, and our best second quarter ever. For the first six months, pre-tax income increased 28% compared to the same period last year. In order to further leverage our strong position, we continue to expand our global footprint with new offices in Australia and in Qatar.

Our strategy to grow our U.S. operations and European onshore business is making progress, as these regions generated strong asset inflows during the quarter. All countries of our European onshore business are currently on track to deliver positive results contributions for 2006, indicating that we are on the right track with our European onshore strategy.

Net revenues as shown on the next slide, number 17, are up 20% from the same quarter last year due to higher levels of assets under management, as well as strong brokerage and product sales. Resulting in strong asset and transaction based fees. The 9% reduction from the previous quarter reflects the market slowdown, resulting in increased investor caution.

Looking at the half year comparison, the current year gross margin is more than 5 basis points above the same period last year, reflecting the good momentum in our business. Gross margin in the quarter of 113 basis points decreased from the strong first quarter, as revenues declined due to a reduction in transaction based margin, in line with lower client activity.

As can be seen on the next slide, number 18, the second quarter has been a near record for asset inflows, with net new assets of CHF16.5b. Net new assets for the first six months this year totaled CHF31b, with strong contributions from our European onshore business, the U.S. and Switzerland. Net inflows of CHF16.5b result in the rolling 12 months growth rate of 8.6%, which is well ahead of our 6% mid-term target. Assets under management reduced slightly by 2.7% to CHF714b, as net inflows were more than offset by adverse market movements.

Let me go to the expenses on slide 19. For the first six months we have been seeing a 4.4 percentage points improvement in the pre-tax margin to 40.9%, as revenues grew at the higher rate than expenses. The pre-tax margin for the second quarter stood at 38.3%. Looking at the components of our expenses compared to the same quarter last year, compensation is up 22%. Primarily as we continue to make investments in our strategic growth initiatives, and by higher performance related compensation accruals in line with better results.

Since the beginning of 2005 we have added 270 new relationship managers, predominantly outside Switzerland. This represents a net 10% increase. We have added nine new service locations, predominantly in Middle East and Asia. Other expenses are up 10%. Currently over 50% of the total expense increase in the first half 2006 compared to the same period last year, stems from investments in respect of our international expansion as mentioned before.

Let me go to slide number 20, giving you feedback on the performance of Corporate and Retail Banking which delivered another excellent result, arising from good income growth and cost control. Net revenue growth of 5% for the first six months of 2006, compared with the same period last year, shows the strengthening of our position in the Swiss market. The pre-tax margin remains steady quarter-on-quarter but was down from the same quarter last year, as the level of net releases from credit provisions fell from CHF45m down to CHF5m.

I will now continue with Asset Management on the next slide, number 21. Ozzy spoke earlier about our strategy for Asset Management. Repositioning unprofitable franchises and realigning the business will have a negative impact on the current results. But in the longer-term serve the purpose of the integrated bank, and put Asset Management in a better position for future profitable growth.

Revenues from Asset Management and fund administration fees increased, while investment related gains declined with the cyclical nature of the private equity business. Operating expenses included realignment costs of CHF152m, whereas other asset gathering trends remain strong with inflows of CHF15.5b in the second quarter.

As you can see on the next slide, Asset Management recorded revenues before investment related gains of CHF560m, up 9% from the second quarter last year. Reflecting the growth in asset under management and an increase in private equity related fund management fees. Investment related gains of CHF115m were down from both comparable quarters, which included significant levels of private equity gains.

And we go to the next slide number 23, which talks about expenses. Expenses in this quarter were affected by the costs of CHF152m as mentioned before, associated with the realignment of Asset Management, primarily impacting the U.S. business. And included CHF127m write down of intangible assets from prior acquisitions.

Allow me to put these realignment costs into context with our global strategy for Asset Management. These actions will enable us to put in the U.S. a business on a solid, sustainable platform for future growth and profitability. The operations affected by these changes were previously loss-making, and as a result of taking these actions we will see a return to profitability, enhancing our pre-tax results by around CHF100m in 2007. The U.S. business will focus on areas such as enhanced index, core strategies and unstructured products, including current strengths in alternative investments and core competencies in certain equity and fixed income strategies.

Net new assets as shown on the next slide, number 24, amounted to CHF15.5b, primarily reflecting inflows in the U.S. in alternative assets and money market funds. Assets under management decreased slightly to CHF615b, as a result of adverse market and foreign exchange related movements, offset in part by net new assets.

Now let me say a couple of words on Winterthur, on slide 25. Due to the sale of Winterthur, the financial results of Winterthur are reflected in what we call ‘income from discontinued operations’ in our consolidated income statements. The assets and liabilities of Winterthur have been presented, as assets and liabilities of discontinued operations held for sale in the balance sheet.

The sales proceeds of CHF12.3b are fixed at this amount. The ultimate gain on the sale is dependent on the net income contribution from this business, until the completion of the sale. There is a short press release, including key financials, that is available via Winterthur’s website.

This concludes the discussion of segment results and brings to me the final slides for the Group starting, with slide 26 which talks about capital.

At the end of the quarter the Group’s consolidated BIS Tier 1 ratio stood at 10.6%, as the Tier 1 capital decreased slightly by CHF760m. The contribution from this quarter’s next income was mainly offset by quarterly dividend accruals, the increased deduction from Treasury sales, the weakening of the U.S. against the Swiss franc, and lower, unrealized gains at Winterthur which reduced Winterthur’s equity accordingly.

The change in Winterthur’s shareholders’ equity will affect our capital ratio until completion of the transaction. As the sale proceeds are fixed, any temporary fluctuations in Winterthur’s equity like this quarter are effectively hedged from a Tier 1 capital perspective. Which means we will get it back once this transaction has turned out.

The Group continued the share buyback program, repurchasing 17.3m shares worth CHF1.2b during the quarter. Since the launch of the program, we have bought back 51.4m shares worth CHF3.1b, as we remain committed to complete the CHF6b program latest in the first half of next year.

Slide number 27 which summarizes our half year performance against our mid-term targets, shows you the key performance indicator which we have set out earlier. We are pleased with the momentum that we are building through our organic growth strategy. Seven months ago we launched our integrated organization. And we are already seeing evidence of the increased value we can deliver to clients, by working closely together across the businesses in serving our clients.

Our people are connecting with each other in new ways, and working much closer together in serving our clients. Continued global economic momentum is providing an excellent environment in which Credit Suisse can grow. The rapid pace at which wealth is created, is fuelling demand for the range of products and services we offer in Wealth Management.

Our investment bank is ideally positioned to benefit from increased corporate activity, particularly in the emerging markets. As Asset Management in the future will be a much more focused franchise, it will be positioned to benefit from the strong growth trends in the industry. Revenues and operational synergies from the integration, together with a firm focus on costs, will also contribute to further improvements in profitability.

With that, I would like to thank you and ask Ozzy to open the questions and answer session

Thank you very much, Renato. Now as usual we will take questions from the analysts here in the room first, and then from the analysts on the phone. Then we will make a short break to allow the analysts to go back to work if they want to, and then we will have the media to ask questions if they should have any. So, may I take the first question here in the room? Yes, please.

The first question is from Mrs. Fiona Swaffield of Execution. Please go ahead madam.

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

Philipp Zieschang from UBS. Three questions if I may, please. First on Asset Management. Is the restructuring only related to the U.S. business? And could you please comment whether the CHF100m pre-tax profit swing you were flagging for 2007, what additional associated costs are required? I think in the quarterly report you are hinting to additional restructuring costs.

Second question on Private Banking, please. I think it’s now the second quarter in a row that you didn’t mention Asia as a specific growth driver. And we all know that, I think, [Saracen] and also [inaudible], they have former Credit Suisse Asia private bankers in place. Could you just comment on your development in Asia, please, in terms of inflows, in terms of hiring momentum or the resignation momentum?

Third question on the investment bank. Would you be willing to make a comment what your client related equity trading revenues would look like year-over-year and quarter-over-quarter, in line what Deutsche yesterday disclosed? Thank you.

Thank you very much and we love it when you ask three questions in a row. So let’s start with the beginning on Asset Management and certainly with the reduction of -- from -- in the U.S. from 750 people to 450. There will be savings next year and -- which will cut in during the course of next year. There will be some cost associated with letting the people go but that will go through the normal P&L, and we don’t think we have to make any special provisions there.

The seconds question on Private Banking in Asia. We mentioned Private Banking in Asia in the past, that has become normal thing now. Asia has become a normal private banking market, as you know very well, and we just hired a new head of Asia from UBS and -- so -- But it is a normal market environment there. And I think as we also said before, we are concentrating on other markets around the world, and especially Asset Management and Private Banking for onshore -- actually also developing onshore markets in emerging markets.

Be it in Middle or South America, be it in Eastern Europe or in the Middle East. And I think if you want to express it like that, we are a little bit ahead of the curve, so -- and that’s why we probably do not especially mention Asia anymore. And Asia is also a big place and I would think in future one has to look at probably specific countries, new specific countries, and develop there.

And on the equity business, I think Brady Dougan would like to give you a comment there. Brady?

Okay. The question was on client revenues, year-on-year and quarter-on-quarter. Year-on-year the equity revenues as a whole were up, I think, 63% first half of ’05 on first half of ’06. So obviously that’s a substantial increase, and a lot of that clearly comes down to client related revenues. So it’s been a substantial increase in the client related revenues on a yearly comparative basis.

Also, if you look quarter-on-quarter, obviously the second quarter is down from record first quarter numbers. And that’s a result really of client related activity being down in the second quarter over the first.

Do we have any further questions, please? Let’s take the lady first, please.

Claudia Meier from Bank Vontobel. I just have a clarification question. In the onshore European initiative, are you going to breakeven in ’07 or ’06? Thank you.

In the past we said the target is ’07 but today what I tried to get across or what we’re trying to get across is that it will be this year. So we are one year ahead of target.

Kilian Maier, NZB, Neue Zurcher Bank. I would have two questions. The first one would be on the corporate center. The results in corporate center, adjusted for minority interests, look better than in the previous quarters and probably you could comment on this? And the second one would be on Private Banking margin, and asset based margin declined two basis points, quarter-over-quarter. Is this only attributable to your excellent growth or are there other factors as well?

Okay, Renato.

The corporate center is obviously something you cannot follow on a quarterly basis. It can be pretty volatile, has a lot of adjustments also in there to eliminate intra segment positions. But the -- I think you should follow what we said before, that this will be approximately CHF200m negative for the full year, and that is what you can count on, on a totality.

Walter?

Okay. The stable margins are reached by two things. One is growth, two some reclassification of transaction driven -- from asset base in transaction driven. And thirdly from shift from equity products into money markets and fixed income, which have lower fixed fees.

If there are no more questions here from the room we will go to the telephone. Operator, are there any questions on the phone?

The first question is from Mrs. Fiona Swaffield, Execution. Please go ahead, madam.

-- questions. One is, coming back to the proprietary trading within the equities number. Could you give us some kind of feel for the extent of the contribution? What would be a normal contribution to that number from the proprietary trading, and what was it doing in the first half? Was it more -- Was it greater than normal?

Also on the non-staff costs within the investment bank and your plan. Would those plans that you're basically finalizing at the moment, would those be in addition to the One Bank synergies or are they part of the One Bank synergies? And when should we expect to see them coming into the numbers? Is this an ’07 impact or could we start to see some benefit in the non-staff costs in the second half?

And the third area is the reinvestment of the Winterthur proceeds. Have you had any further thoughts? I know you're going to talk about it in the Investor Day, but at this time have you had any further thoughts on where that money could be invested? Or whether you're thinking more about potentially giving it back? Thanks.

We are continuously thinking about how we want to invest our capital in the future, and that is a continuous process. But, as we said before, we will be more specific to our shareholders and to analysts at the Investor Day and -- because I think it’s appropriate that the deal first has to close, and we actually have to have the capital before we come out and tell you how we spend it.

Now, Brady you want to answer on the first question?

Yes. On the question of proprietary trading I think we’ve said before that we believe the appropriate compositional earnings would be the kind of proprietary trading contribution will be around 15% and it might get up to 20% in better periods for the better market conditions trading. I would say in the first half taken as a whole probably was around the 15% level and, you know, obviously that was probably a bit higher in the first quarter and a bit lower in the second but probably on the order of that kind of number.

With regard to the non-staff costs in Investment Banking clearly the integrated bank synergies are going to be helpful towards us achieving our goals, but we think that there are additional improvements that we can make. I think as Renato mentioned we went from [28/6] non-comp to revenue ratio in the first half of last year to [23/6] so we have made progress. But we do feel there is more progress that we can make and we are putting in place very specific plans around that. We have a higher dedicated people whose job is going to be strike down those non-comp costs. We’ve assigned people throughout the business involved in bringing those costs down and we’ve set very specific run rate targets for the end of the year in order to get our non-comp costs down. I believe that for the most part we’re start to real benefits in this in ’07 but clearly we are going to be bringing down our run rates during the course of this year as well. But I think the best answer is really that you’re see most of the benefits in ’07.

Thanks.

Thank you, can we have the next question please.

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

Yes, first question is related to other revenues in Institutional Securities, [CDS] losses in the first quarter and the gains in the second quarter, if you could give that to me?

Second question is coming back to Prop Trading, I think we all would like to have a little bit more insight of the delta between the first quarter and the second quarter to understand your numbers slightly better. I think that would be very helpful.

And the third point is litigation provisions, if you could take some in Investment Banking some in Private Banking, I’m just trying to understand how much litigation provisions you have taken ex the equity provision came back with the settlement that came back in the second quarter for the total Group.

Thank you. Brady, do you want to answer the first two? Other revenues in Institutional Securities.

I think the specific question was around the CDS gains and losses, I don’t know that we’re going to go into that level of detail. I would also say with regard to the Prop business, I mean, what we have said we were profitable, obviously very profitable in the first quarter, we’re also profitable in the second but I don’t think we’re going to get to that detail talking about specific results in those areas.

Thank you and Urs you want to say something about third question there, litigation provisions.

I think you’re probably referring to the CHF34m which was shown on slide in Investment Banking. Well, that’s basically the charge that we have booked relating to our litigation expenses and in our [sector sense] there are legal fees and so forth. As you know we have not made any material adjustments, we didn’t have to on the [inaudible] on our general litigation provisions, so there was no material issue in this regard in the second quarter.

In Private Banking you mentioned something in other expenses as well, about litigation provisions.

We had one additional provision in the Private Bank relating to one case where we had to make an adjustment based from the analysis of a case, and the adjustment was approximately CHF8m which reflected our analysis of that particular matter, all below, I would, the normal materiality standards for value with this closed individual litigation provision.

Thank you.

Thank you and can we have the next question please. There are no more questions, are there any more questions still?

The next question is from Mr. Solveig Babinet, Morgan Stanley.

Hi, actually it’s Mrs. First question, Mark [Crofee] I think has been with you for three months, can you share with us what his three priorities have been so far?

And second question, can you share your views on potential litigation related to unpaid or undisclosed kick backs? How do you assess the risk there?

And last quick question, on staff in Private Banking, you mentioned that relationship managers increased by 10%, I think, since ’05. Can you tell us what the trends have been since the start of ’06?

Thank you. So, what was the first one again [inaudible]?

Mark Crofee.

Mark Crofee, yes, and what his priorities, you want to say anything to that, he’s getting married, personal to him. His priorities are cutting costs so -–

I would just say our cost cutting process has been, first of all to set targets as to where we want to get too, secondly to assign roles within that, so as I mentioned driving it really throughout the organization and thirdly really is to get some very specific initial initiatives that were obviously were the beginning of an overall program to bring down those costs.

Well, you should not only focus on Investment Bank for cutting costs it’s throughout the bank we have to and will increase, and are in the process of increasing cost management. Now, on litigation provisions, again.

Now again the end bit of this Supreme Court decision on repossessions I think we have put that a little bit into prospective. Obviously we assess the legal framework on which we operate in every jurisdiction be it Switzerland or anywhere else, that includes obviously decisions by courts that are relevant to the decision that related to an external money manager, a very specific case. Our analysis of this decision is we feel comfortable that the way we run the business and the way we disclose our -– the way we do business is in line with our obligations whether they are our clients. So we do not make any adjustments relating to that kind of decision.

Okay, and on relationship managers, Urs.

Okay, this year we have hired about 80 relationship managers. There were net hires across all regions, obviously this question coming up about Asia, we are hiring in Asia. But I have to mention here as well though from my side I’m getting a bit more careful. I think compensation packages for relationship managers have reached certain heights where you really have to consider whether you want to push further ahead, as aggressive we did in the past.

Thank you.

Thank you. Can we have the next question please.

The next question is from Mr. Matthew Clark, KBW. Please go ahead sir.

Hi, good morning. Couple of questions. Firstly on the fixed income, sales and trading revenues which showed a steep decline versus the first quarter. Is some of that seasonal or is it really purely just a market environment? Is the first question.

Second question just on the value of at risk exceptions, I think you had 4 this quarter and some fairly large losses in the CHF75m to CHF100m region. Could you just say whether these were costed together or spread out and whether there’s anything particularly here to worry about or you think it’s just a natural consequence of doing business and you’re not too concerned about those large losses you see in this quarter? Thanks.

On the risk question, you are absolutely correct we are not too much concerned we have our risks under control. Yes, there were exceptions in a relatively short period within the quarter and followed by periods of years where you didn’t have any exceptions which shows that it is very much dependent on the market environment. The model actually is calculating one exception every 100 days but since it didn’t happen in the last two years so probably did some catching up. But it’s a [inaudible] what really happened is the market’s very volatile and you will find throughout the industry that people have exceptions mainly in May and June. I think probably the main reason was also that the cash market and the index market were drifting apart at some point.

On fixed income, Brady do you want to say something.

Well, fixed income we actually had, we think, a very good quarter particularly weathering more difficult markets. I think the difference between the first and the second quarter, a record first quarter to second quarter partly is due to some seasonal factors. Clearly the first quarter is always, every year is a more active quarter than the second quarter, so I think there was some influence of that. But also market conditions were a little bit more difficult. In the second quarter, I think we actually faired quite well within that, you know the interest rate products were quite good, our main franchise businesses leveraged finance, commercial market back securities, residential mortgages back securities did extremely well. The emerging markets business was profitable but it was a more difficult quarter in the second quarter than the first so there was some impact from that. So, overall I would say, probably a little bit of both, both seasonal but also more challenging market conditions.

Okay, could I just follow up on your Prop Trading operations because you made quite a few hires last years and you said the commodities business has grown its revenues. Are those revenues large enough to really show up on a Group level yet or is that a benefit that we should expect to come in future quarters and years?

I think as Ozzy and Renato mentioned we are and were pleased with the building that we have done. We are on or ahead of schedule in terms of our builds in those areas, Commodities is a good example. There are obviously still –- these are still gaps for us versus our competition and we still have more to build there. But we’re confident that we’re going to be able to realize that particularly given the fact that we are on or ahead of schedule in those efforts so far.

Thank you.

Thank you very much. Next question please.

The next question is from Mrs. Joanna Nader, Lehman Brothers. Please go ahead madam.

Hi, good morning, a couple of questions. First of all just generally obviously the fixed income business evolves over time but I was just wondering when you anticipate having a sort of level of revenue diversity that you’re happy with in that segment in terms of filling in some of the gaps that you have within the areas of strength that you’re exhibiting now?

And then just in Prime Brokerages because you highlighted that also in the presentation, 10% market share seems pretty good, you had the joint venture with Paladine Systems. I just wonder what more you think you need to do in that area, is it just a question of capitalizing on the strengths that you have or is there is more build up you need to do in terms of systems or capabilities?

[Inaudible] you were asking about the Investment Banking business, no?

Yes.

Yes. Brady.

I think in fixed income when we’ll be happy with the level of diversity, I mean, as we mentioned we’re making good process on our builds but it does take time, they are organic builds so I think that we are getting happier with the diversity as time goes on, but this is still going to be a process that takes time before we get to the kind of levels that we would like to be at in terms of revenue production and therefore diversity the overall platform so and that will take more time.

As to the question of the Prime Brokerage business, we think we have a terrific platform, it get ranked sort of in the top three of most of the external surveys, it’s being growing faster than any of our competitors, we’ve been growing our balances at kind of double the rate of the any of our competitors and/or the average of the industry and so we’re actually very happy with the progress that we’re making there but it’s obviously again a business that simply takes time. We have been winning far more than our share of the big new launches that come out so we continue to see a lot of momentum in that product but, again, it is a business that is established over a long period of time. People don’t move Prime Brokerage relationships overnight and therefore it is going to take us time to continue to capitalize on the quality of that platform. But we see tremendous momentum there and we’re very positive about it.

Thank you, can we have the next questions please.

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

Thank you. I would just like to ask two questions please. One perhaps relating to Fiona’s question earlier. You have stepped up the pace of buybacks in the quarter. I just wonder if you expect that to continue in the coming quarters.

And then second question, can you talk in a bit more detail about the Asset Management restructuring. Why you’re restructuring, what you’re changing and what benefits you expect to get?

Thank you. On the buyback, yes, during the period we reported 17m shares more than we did before and I think our share price also was lower than before, so it did make more sense in that respect. I wouldn’t say that you could see any indication on how we go forward. You can argue, for example, fine why don’t you do a certain amount everyday and you get to your goal as well? And I think we would like to have a little bit more flexibility in that respect. But it also depends on what volume which is in the market and certainly it is easier to buyback stock if you have a higher volume than it is with the lower volume. And so far out of the CHF6b program that we have for two years we have bought something like CHF3.3b. So it leaves roughly CHF2.7b still to buy and I would think that we would do that during the course of –- next year we will finish the program.

And on Asset Management, David did you hear the question in New York?

Yes, Ozzy, good morning. The goal of the realignment is really to put our Asset Management business on a stable, sustainable platform for future growth. So we need to make certain adjustments with regard to our investment strategies where we not reached scale and profitability and also certain locations where we have not reached scale and profitability and fix that. And on the other side focus clearly on the areas where we can add value to our clients such as alternative investments but also in the traditional asset management business in certain fixed income and also equity strategies and grow those over the course of the next quarters and years.

So is it a revenue program or a cost program?

We certainly have to work on both sides. Revenues and growth is of utmost importance so we’re really growing our business in the U.S. but also globally and as Ozzy mentioned we overall have to watch our costs and work on them as well.

Thank you.

Thank you, can we have the next question please.

The next question is from Mr. Christopher Wheeler, Bear Stearns. Please go ahead sir.

Hi, good morning. A couple of issues just to talk about. First one follows on from Jeremy’s comments just asking David a few more questions on Asset Management.

First of all the reduction of staff in New York is obviously quite substantial and you talk about changing your pledge to the way in which you operate out there, but clearly it’s a little bit more than just changing a pledge in terms of shedding 300 out of 750 staff. Is it possible just to share with us what it is you’re actually taking out of that business? Obviously you talk about what you want to focus on, alternatives and equity fixed income strategies and so on but can you give us an idea what you’re taking out.

Second point in the inflows, the inflows obviously CHF15.5b looked good, obviously it’s still very much eschewed to money market type products. What’s your outlook David in terms of actually starting to see the flows coming in to some of the higher margin areas?

And perhaps the third question, again which touches on what Jeremy asked, you’ve got this 35% pre-tax margin target, you’re not too far off. It’s only 28, 29% if you take out the restructuring. But what are the milestones you’ve set yourself over the next 18 months and importantly will you have all the restructuring done that you want to have done by the end of the year so that you can then kick on and actually get the business to start to develop?

And then just changing tack a bit and doing [technical difficulty] I asked Ozzy at the lunch recently, to Brady perhaps. This cost issue of [technical difficulty], can I just ask whether or not, is a lot of that issue just a matter of how you deal with central cost allocations rather than direct costs which you have obviously have very quick control over dealing with? And how are you going about dealing with that issue of pushing back those costs which is always a difficult thing to do?

Sorry to be so long.

Starting with the cost, certainly in terms of cost allocations, they are not -– I wouldn’t think that adjusting these around would bring much savings so we have to look into the business we are running especially also in shared services. We must not forget we only put together our shared services in the beginning of this year and now we see much better which areas can be centralized, make sense to be centralized and will therefore have cost savings and which other areas have to stay with the front and don’t make sense for them to be centralized and will have less cost savings. And as we said with our Channel of Excellence strategy we use technology which enables us to do a lot transactions, a lot of operational issues anywhere in the world because of technology. And to get to industry standard there within the next couple of years, that will be quite substantial.

To go back to Asset Management, so David if you understood the question, what kind of projections we have in the U.S. Let me just say at the beginning in the U.S. because we had over the last two, three years asset outflows but we did not adjust the platform and therefore it was time now to do adjust the platform. So, that’s not what we have now, until now it was not justified by the amount of assets we were managing in the U.S. but there were other important things which David then will tell you.

Thank you Ozzy. The repositioning of our U.S. asset management business is part of a global strategy and I think it’s important to mention we still have roughly around 20% of our global staff in the U.S. so it also shows we’re committed to this market, we’re committed to grow this important market. What we have to focus on from an investment strategy point of view we will focus on cash flow duration, high yield, but also new quantitative and enhanced index strategies, commodities and certainly our excellent alterative investment franchise. I think we’ll not go into detail about individual strategies which will transform or exit.

With regard to the net new assets, I think it’s important to mention as well that part of it is certainly money market cash related but also we have significant inflows in alternative investments which are higher margin products but also in our multi-ethical solutions which are for the Bank higher margin products. And I think that this trend has not only been a one quarterly trend, it’s now for two quarters and I’m very positive that we can grow those important segments going forward in the next quarters.

For me -– sorry -- to answer you third question what certain strategic targets are, I think it’s important we have to get the platform right. That we have the platform which is sustainable and stable for future growth, that we have to start growing our business in alternative investments where we have seen very good growth over the past. We have to diversify the revenues streams and in that particular area by getting into new strategies and not being dependent on Private Equity gains each and every quarter.

And secondly also growing our traditional Asset Management business with new strategies and strategies where we can add value to our client.

Thirdly, I think it’s important that we focus on our clients and provide them with solutions that are adding value to them and that are adequate in the current situations.

About your pre-tax number which you have already very near on it and since you make it such substantial improvements so shouldn’t it be higher going forward, I think was the question.

Certainly the target is at 35%, our aim is to reach and exceed that target with the measures we take at the revenue side but also on the expense side.

I’m just asking do you think you’d have put in place all the pieces that you would have want to by the end of the year so you actually can kick off into next year, whether you have the right platform.

I think we have made significant progress already in the first half of this year putting our business on to the platform we want to be. There will be further changes necessary and it’s continuous process but I’m very positive that we have accomplished a lot of goals by the end of the year.

Thank you very much.

Okay, thank you. Can we take one more question then we have to close the question session please.

The last question is from Mr. Kinner Lakhani, ABN Amro. Please go ahead sir.

Glad I got through. Firstly, on non-compensation expense, just wanted to come back to that. Do you -– are you basically implying that the second half non-comp expense should A, be lower than the first half and secondly we won’t necessary see the seasonal uptake in non-comp expenses that we have seen in the past in the fourth quarter?

Secondly, can you provide an update on Enron, post favorable settlement that Barclays has seen?

Thirdly, could you provide us with a little bit of guidance again on the Wealth Management revenue margin clearly it’s quite volatile on a quarterly basis?

And final question, perhaps if Brady could provide a bit of an outlook on the provisioning cycle and where we think we are in this point of time? Particularly in light of leverage multiples on leverage financed transactions, private equity transactions having gone up again over the last six months.

Okay, start with non-comp, Renato, and the outlook and the Bank that it was -– or did you mean only in Investment Banking?

Yes, Investment Banking.

Investment Banking, in that case, Brady. It’s up to you.

I think with regard non-comp in the second half versus the first half I don’t think I’d like to make any specific prediction. We are going to be working very hard to bring our run rates down now and we will see the impact of that over time.

And then second question was, if I understand correctly, in regard to Enron and the decision of Barclays in the case. Urs, do you want to say.

As I said before we always look at all the decisions where ever they are, to the extent they relate to our business obviously including the Barclays decision which follows another decision that was rendered a couple of weeks earlier, class certification decision already realigned the standard on the Central Bank. I would obviously not want to read to much in to any decision that doesn’t specifically relate to us directly, but one thing I would clearly say, it’s certainly a step into the right direction from our point of view and we have taken due note of that decision and will work on that basis going forward. It is no secret also we have filed additional papers as result of that [classification] decision.

On the Investment Management revenue margin and the volatility of it, if I mention shortly on that. There are several factors each quarter and they have a huge influence, these are exchange rates, these are market movements in the overall asset season, net new assets that are coming in, and all these fluctuations have an impact on the gross margin and that’s why it’s so volatile from quarter to quarter. But, again, I think better mention this is to happen, and look at it over a longer period of the year and they are, as I said, as we get this question since ’99, they are stable.

The provision cycle, we think actually that we –- the provisions could slightly go up like everybody thinks in the market. We had a long period now where provisions were [CO] or you even had positive results there. And one assumes that it will worsen a little bit but it did already that last year but so far we have been wrong. And actually the environment is alright and we do not see any special need to make, to budget for much higher provisions.

Brady, you want to say anything with regards to that leverage finance. We obviously don’t see there anything special there as far as I know.

I obviously wouldn’t add too much to what Ozzy said. I think obviously we are clearly at some point the cycle’s got to turn worse. I don’t think we’re particularly seeing that right now, but deals are being done at fairly aggressive levels now. But we feel like our approach to it which is both in terms of diversifying the portfolio and making sure that we’ve got hedging and that we’re managing our risk closely means that we’re hopefully well positioned for when it does turn. But I think what Ozzy said is right is you’ve got to believe it’s going to get worse at some point but frankly still not really seeing signs of that.

Okay, then we have one very last question.

The last question is from Mr. Michael Rohr, MainFirst Bank. Please go ahead sir.

Just two short questions. The last one on Asset Management, if you could specify this CHF127m write-down on intangible assets especially to which it referred in Q2.

And the second question would be on the synergy targets, if you could quantify the before mentioned additional improvement to the one bank synergies from your efforts in Investment Banking?

All other questions have been well asked, thank you very much.

Thank you. Renato you want to say anything on the intangible write-down on CHF127m.

We had to have a write-down on intangible assets which are basically intangibles that are dedicated to certain asset classes. And as we are exited those businesses now we have to, of course, write those assets or those intangibles down. This came from back when [inaudible] the time when we acquired the businesses at the time basically from deal chain.

Okay.

Synergy targets in Investment Banking.

[Technical difficulty], the overall synergies were [technical difficulty].

Can you repeat the question please?

Yes, sure. It’s about the synergy targets, if you could quantify the additional improvements to the already announced one bank synergies and the private bank integration synergies from your assets in Investment Banking, are there any targets available for us?

Not at this time, it will come out –-

It’s too early, alright. Okay.

It’s a little bit early, watch it coming. Thank you very much.

Thank you.

And now we give the analysts a chance to go home to work and we will start in five minutes with media questions.

[OPERATOR INSTRUCTIONS].

And if there should be any questions on the phone, we will deal with them later. Are there any questions, or is everything so clear? No.

Just a clarification on the litigation, because it was mentioned that you had credit for [CHF74m]. But on Page 54, regarding litigation, it mentions that still the reserve is CHF1.3b. So what about the credit? You don’t deduct the credit you get for the litigation or is it [inaudible]?

What you get in from the insurance companies. With the insurance companies we settled with, they paid us that money and through U.S. GAAP accounting you cannot [add to] the reserves or do anything there, you have to book it through the cost line. So it introduces cost for that quarter whenever it’s coming in, and has nothing to do with the normal reserves you have for litigation. That stays unchanged. That is U.S. GAAP accounting.

[Inaudible].

Absolutely.

On that point, the figure that you’ve booked for this quarter seems to be quite a bit higher than the figure you’d foreshadowed in the first quarter. I think it was 392 that you would be putting in for this quarter, for the second quarter from the litigation. Can you just explain why the number is higher? Can you give some information about why and what it is exactly? Is this insurance being paid out for Enron or other cases, or?

Referring to the insurance payment that we booked in the second quarter, it’s a result -- we had a dispute or a discussion with an insurance company about our liability -- professional liability insurance coverage that we settled. And we got the money in under those programs, with those insurers. We have settled in the second quarter. That’s why this amount of CHF400m. It does not cover Enron only. It covers a wide area of litigation risks that are actually insured under those policies, basically two programs, but I don’t want to go into too much detail here. And just to also describe it, we have to book through the expense line and then when you get in you cannot just use and reduce your overall provision, so you book it as a negative cost in Q2 and the litigation provision as such stays the same.

I think though the question was, why is it higher than what we have announced previously. What we have announced was what was known at the time when we came out with the first quarter result early May. That was the amount you’re referring to, and during May and June, there was a further agreement that we reached with the insurance companies which added to the total that you can see now in the report.

[Inaudible].

Any further questions?

You said that you have your key focus on emerging markets. Will you grow there organically or by acquisitions? What do you prefer there? And the other question, can you perhaps make an end to all these rumors and speculations that you will probably leave the bank next year? Should you leave?

Would anybody like that? Firstly, in emerging market acquisitions, clearly in emerging markets, there is not much you can acquire, otherwise it wouldn’t be called emerging markets. But we are building our business, mainly organically. There are relatively small companies in certain countries, and to enhance the organic growth, I think it could be that in one or the other market, one would acquire a company just to [bulk us] faster and into growth, and may acquire local knowledge at a faster pace than learning it.

So that could happen, but the companies are relatively small there, and any emerging market, even in the bigger ones, and in some nice, really big ones, you can’t even buy anything like China, and so --

Then on my retirement, do I look like I retire? I have no plans to retire, and so it seems that clearly when you get at a ripe old age of 60, or what is today isn’t actually, so not any more, then these articles appear automatically, while [inaudible] get 100 years old these days so you probably can work longer than 60. I’ll have to see.

I hate to follow up on what must be an awkward question, but you’re obviously, I think, 63 now. Can you tell us how long you plan to work for Credit Suisse?

I’m 62, and at that kind of age you have to really insisting that the numbers are correct!

And so how much longer do you plan to work for Credit Suisse as CEO?

As long as it is necessary from my point of view but certainly that is not only my wishes are considered here, and so the Board, its job is to be happy with my work, and then decide on how long I should work with the company.

Okay. I just have two more verifications, in Private Banking and in Asset Management. The one in Private Banking, a number was mentioned of how many client advisors had been added this year. Could I ask you that number again, and also where that they had been added, and why the pace of adding client advisors is falling?

And the third question I had was about the pre-tax effect in Asset Management of closing down some of those businesses. That was an annual cost saving of CHF100m, starting next year?

Yes, and we added 80 asset managers, and we’ll deal with the question on asset --

[Inaudible].

80 relationship managers.

8-0.

From year to date, or what is that amount?

Year to date.

Yes, year to date, 80 net, so you lose some, you get some in. It’s like [natural] assets in a way, and so the balance is 80, and new relationship managers, and [inaudible] for that the costs in Private Banking are increasing, the personnel costs, and because everybody is chasing relationship managers, and so one has to also look at other ways to rationalize the business and make it more efficient.

Thank you.

Next question please.

I have a question to the Swiss retail market. I have seen that the volume of mortgage loans is down. You are losing market share at the moment. What’s happening there? Why are you losing volume at the moment?

Well, actually, if you look to Switzerland, I believe we had a growth rate of about 9% in terms of adding new mortgages, but we did a securitization of a portfolio of up to CHF1.5b which obviously has to be deducted from the existing volume. But that was a transaction we did, a targeted transaction.

Outside Switzerland?

It was outside Switzerland, a portfolio we didn’t really have anything to do with Switzerland.

The mortgage volume declined because of that securitization, and that probably in the future would happen more often, that mortgages are getting securitized. [Inaudible].

Any further questions?

I have questions about the assets under management. Can you tell us which part inflows from organic growth, and which part is from hiring new teams?

Can we tell this?

Well, no. Well, A, we don’t tell it, and two, I couldn’t even tell you, but a lot of it is organic, and has to do with the One Bank. Clearly what came through in the second quarter was a follow-on from the first quarter as to One Bank asset which shows very encouraging results, and that is organic growth.

You had another question?

Yes, I had a quick follow-up question. This is an issue that was in the international press a few weeks and months ago. It was about the Swiss payments, and the monitoring of that by authorities in America. I’m just wondering, perhaps also on the private banking side, whether you’ve seen any adverse reaction from your clients, concerned that the confidentiality of their transactions may not be as what they originally thought?

No, we haven’t seen any adverse reaction, and I think even in that case, the confidentiality of clients actually was very much intact, and as far as we know, there was no great threat to that, actually. Urs, do you want to add anything there? No?

Any further questions?

The one question is [Mr. Fisher] going to work for Credit Suisse or?

He is still working for Credit Suisse, and certainly at least until the end of the year, or until the transaction closes actually, but --

And then?

Then we will see, but that is something I think doesn’t make much sense to speculate over it now, and before actually the transaction has closed. [Inaudible] the telephone?

Are there any questions from the telephone conference?

The next question is from Mrs. Jane [Merriman], Reuters. Please go ahead, Madam.

I just had two questions. One is what more do you need to do on commodities? And are there other gaps that you want to fill in Investment Banking? And the other question is on proprietary trading [technical difficulty]. The composition of trading revenues was about 15% to 20% and will that be how it looks for the second half? Will that be appropriate for the second half?

Great, thank you, for those questions. I’ll pass to Brady focusing on commodities trading and what other kind of trading we want to close.

Well, on commodities, as I mentioned, we’re at the beginning of an organic build of that business, and we’re pleased with the progress that we’re making, but we are continuing to expand. We will continue over time to expand, both geographically and into different products. so to date, it has been primarily a North American based business, focused on energy and natural gas as well as an oil business. I think we will continue to build that out, really in terms of products, both across North America in different regions as well as globally, and also in different products. So there’s quite a bit more building to do in that business, and again, we think that the initial results are promising. We expect to see more to come though.

In terms of other gaps in Investment Banking, we have outlined some of them. Prime Brokers is one we talked about before. It is already a significant contributor to revenues on the bottom-line, but we do believe that there’s a lot of upside potential in that business. Derivatives has been another area where we feel that there is more, and there is opportunity to grow further, and so those are things that we will continue to drive.

With regard to proprietary trading in the second half, our best guess would be that the results would be on that order. That’s our strategy, but obviously that will be dependent on market conditions.

Okay, thank you very much.

Can you give us, Mr. Grubel, your eternal outlook as far as the market is concerned in the second half of the year?

Yes, but the whole half is probably -- will be difficult, maybe on the crystal ball, so -- but I think we will have a little bit, or we’ll see a little bit more of an equity market recovery, and probably until the end of September so in the third quarter, and therefore probably a little bit more client activity as well.

At the moment we don’t see much changes, actually, in interest rates, and it seems the correction in the market we had was slightly higher interest rates, and this has happened. And so we see rates staying at that level because we do not see any big inflationary trends. And you view the price rises, and probably continued price rises in energy and raw materials but what you do not see is that these price rises can be passed on to the consumer. That doesn’t work yet because of globalization as it helps to keep prices steady, and also technology, which is helping to make production cheaper.

In the currencies, we do not see any big movements either because everybody knows the fundamental problems the U.S. dollar has but we do not think that it will in the short term, move into the next step. So it’s six months, just accordingly on a historical basis, the interest differential, it seems to be big enough for the U.S. dollar to keep it at a level where it is at the moment.

I don’t think they will last for much longer than for several years going forward, so the inherent weakness in the dollar could come through in the coming years when growth should not be as strong any more in the U.S. at some time in the future. And otherwise, it is what I said, so you’d probably say that it’s not very exciting, but we don’t think it will be very exciting at the same time. Thank you very much and have a nice day.

Ladies and gentlemen, the conference call is now over. You may disconnect your telephones. Thank you for calling. Have a nice day.