Credit Suisse Group AG (CS) 2009 Q1 法說會逐字稿

Thank you very much, and thank you all for joining us on this call to discuss our first quarter results. I have with me today Renato Fassbind, our CFO, and Paul Calello, the CEO of the Investment Bank.

I believe the results that we've announced today with net income over CHF2 billion and, in particular, our strong return on equity of well over 22%, shows that our differentiated strategy and integrated business model, together with a lower risk profile, can be a powerful generator of earnings.

Our results also show the benefit of the measures we took last year across the Bank, including cost reductions and the further strengthening of our capital position.

The acceleration of our long-term strategy and measures we put in place last year have ensured that Credit Suisse is well positioned in the new industry landscape. The results also demonstrate that our integrated platform is well suited to weather difficult conditions, should they persist, and perform well when market opportunities present themselves.

What's particularly pleasing is that in the first quarter, our strategically important client-facing businesses have proved to be resilient. Our Wealth Management and our Swiss Corporate and Retail Banking businesses were strongly profitable, and had total net new assets of CHF11.4 billion.

We're benefiting from the steps that we've taken over recent years to expand our international footprint and build a more efficient platform. I believe our Wealth Management business is well positioned for success in a changing industry landscape, and we will continue to invest in growth, both globally and in our Swiss business.

Investment Banking made a strong return to profit while continuing to reduce its risk profile and execute on its client-focused capital-efficient strategy. We believe that our realigned platform is capable of delivering sustainable profitability and good returns on capital with reduced earnings volatility.

During the quarter, we saw many of our key client businesses generate strong revenue growth and gain market share. At the same time, we made substantial progress in repositioning a number of previously loss-making businesses, returning these areas to profit this quarter through changed operating models and revised risk limits.

In Asset Management, we've continued to make progress on our strategy to focus on asset allocation, our Swiss businesses and Alternative Investments, and closely align them with the integrated bank.

Our principal investments declined in value in the difficult first quarter environment, in line with the public markets, which led to an overall pre-tax loss for the division. However, we are convinced that Alternative Investments will be an important asset class for our clients, and one in which we can excel in providing the best returns in the business.

You'll note that we've continued to strengthen our capital position with a Tier 1 ratio of over 14%. We see an unquestioned capital position as a distinct advantage in the current environment. And for those of you who focus on the tangible book value per share, I point out that the quarter-end tangible book value increased by 15% to over CHF22 per share.

We've also continued to take a prudent and consistent approach to fair value accounting. We did not early adopt the new accounting guidance concerning fair value issued in April 2009. We will be required to adopt these new standards in the second quarter, but this will not change our valuation approach.

During the first quarter, we had further write-downs on our much reduced portfolio of illiquid assets.

We continue to focus on efficiency across the Bank, and are on track to deliver the savings we announced in December last year. In the first quarter, we achieved a cost income ratio of 66%.

You'll also note that non-compensation costs in the Investment Bank, for instance, are down 19% in dollar terms compared to the same period last year, and that Private Banking has continued to control its costs.

Credit Suisse's strengths are increasingly recognized by existing and potential clients, and this provides us with a distinct competitive advantage.

Our combination of a strong capital position, strong funding and liquidity, well-positioned businesses, a robust business model, a clear strategy, a significantly lower risk profile with one of the cleanest balance sheets in the industry, and no government ownership, makes Credit Suisse a trusted partner for clients.

We remain optimistic about the prospects for Credit Suisse, particularly in the context of the overall industry. Our prudent approach in the new market environment has served us well in the first quarter, and we will continue to manage our business in this manner.

While we may still be affected by continued volatility and market disruptions if difficult conditions persist, we believe that we're in a position to weather the storms and perform well when market opportunities arise.

Today, we're also announcing that Toby Guldimann, Chief Risk Officer for the Group, will be assuming the additional responsibilities of Chief Risk Officer for the Bank from Wilson Ervin.

Wilson and Toby have worked closely together over the last 10 years in the development of our risk strategy and, more recently, in planning the transition. This will ensure continuity in our disciplined approach to risk at an important time. I wish Toby every success in his extended role which he will take up from June 1.

After 10 years in risk, Wilson will step down from the Executive Board and transition to a new role as a senior adviser, reporting to me. Wilson has served on the ExB as Chief Risk Officer for the last four years and has provided strong leadership and wise counsel over a critical period. I'd like to thank Wilson for his enormous contributions to Credit Suisse thus far, and I look forward to continuing to work closely with him in the future.

Renato will now take you through the details of the financials, after which Paul will talk about the Investment Bank, and then we'll be happy to take your questions. Renato?

Thank you, Brady, and good morning. I will start my presentation on slide five with an overview of the first quarter results.

We achieved strong results in the first quarter of 2009, reflecting our robust business model, and delivering on our strategy following the actions we took last year across our firm. Revenues totaled CHF9.6 billion.

We have capitalized on the client momentum achieved since the start of the economic downturn, resulting in market share gains across a number of our businesses.

Pre-tax income was just over CHF3 billion in continuing challenging markets. We did not adopt the new accounting guidance concerning fair value issued by the FASB this month. We are required though to adopt these standards in the second quarter, but it won't change our valuation approach.

On a divisional basis, Private Banking achieved a solid result with pre-tax income of nearly CHF1 billion. Investment Banking delivered a strong result, with pre-tax income of CHF2.4 billion, having made significant progress in executing its client-focused capital-efficient strategy.

In Asset Management, we continued to make progress on delivering a more focused business aligned to the rest of the Group. However, we suffered further unrealized investment losses on our private equity portfolio in line with the public equity markets, resulting in a pre-tax loss of CHF490 million.

The Group's net income was just over CHF2 billion. The effective tax rate was 32%, reflecting the geographical mix of the results, the stronger relative performance from the higher tax jurisdictions. We expect the effective tax rate to trend downwards towards a rate in the high 20s for 2009.

Diluted earnings per share stood at CHF1.60, and I would like to remind you that we have less shares outstanding today than at the beginning of 2006. The return on equity was 22.6% in the quarter, and the overall cost income ratio was 66.1%.

On slide six, you see that Wealth Management recorded a pre-tax income of CHF646 million. This result includes CHF100 million insurance recovery of non-credit related provisions. The Wealth Management results continue to be affected by a lower asset base. However, the business model remains resilient in these challenging markets, and we continue to deliver stable gross margins and good asset inflows, as you will see on the next two slides.

Relationship managers have been reduced by net of 120, or 3%, during the quarter. As well as the bank-wide cost initiative and, given the slowdown in wealth creation, we announced further efficiency plans in December to create space for talent upgrades, particularly in respect of senior advisers.

We are continuing to expand our global footprint in a disciplined way. For example, we have launched domestic Private Banking in Mexico, and are increasing the global coverage of our Solutions partners Group.

On slide seven, we show the Wealth Management revenues levels on the left hand side, and the gross margin on the right. The 6% reduction in revenues compared to last quarter was in line with the decline in average assets under management. We continue to maintain a stable gross margin level at 116 basis points.

Our recurring margin was 86 basis points as the net interest income contribution benefited from increased deposit volumes and higher margins. This increase was offset by lower asset based commissions and fee income, especially from managed investment products.

The transactional margin was unchanged from the fourth quarter, reflecting the continued cautious client behavior we had seen in the fourth quarter, with low client activity and defensive investment decisions.

Let me turn to net new assets on slide eight. Despite the lack of wealth creation in the first quarter, we continue to see good overall levels of asset inflows, representing market share gains as the overall [wallet] share of our clients' assets increased.

We achieved net new assets of CHF9 billion, with inflows across all the regions. There were good contributions from Europe and the Middle East, Asia Pacific and Switzerland. In absolute terms, they are only just below the quarterly average inflows experienced in 2008. The client de-leveraging we experienced at the end of last year was negligible in this quarter. And finally, analyzed net new asset growth increased to 5.6% compared to last year.

Slide nine shows the development of assets under management in the first quarter of 2009. Although average assets under management fell 5% quarter-on-quarter, total assets under management increased 3% to CHF667 billion at the end of March. Net new assets and positive currency movements were partially offset by negative market movements.

The current asset mix reflects continuous cautious client behavior we have seen over the last few quarters. There has been a shift of assets from client securities accounts where managed investment products have reduced significantly to on-balance sheet client deposits. For example, the structured derivative portfolio is at the multi-year low of CHF15 billion, but has now stabilized at half our peak levels.

Let me continue on slide 10. Our strategy over the last several years has anticipated recent changes in the industry landscape. These changes are both financial and regulatory in nature. The points on this slide address what we have done over the last several years to prepare for these changes.

First, the slowdown in global wealth creation is impacting us all, with assets under management now at more than 20% below their peak. While the timing, the scale and the speed of this development was not foreseeable, we always knew that we had to build the business for the long-term and remain focused on making the right investments.

As you may remember, we took a more prudent approach to hiring in the period from 2005 to 2007 compared to many of our peers who invested rapidly in their platform during a very buoyant and expensive period of the industry. During this time, we maintained focus on our long-term cost management initiatives. In addition, during the latter part of 2008, we also took further cost reduction measures to address the near-term revenue outlook.

Further, we have adapted our product range to meet changes in our client needs for more transparent, more liquid and efficient solutions, and then we have also been revising our product pricing to become less dependent on transaction volumes.

While the lack of wealth creation persists, we will be more selective in our hiring. We are especially focusing our hiring on attracting senior relationship managers that often bring with them established portfolios with ultra high net worth individuals' assets.

Second, there is an increased focus on cross-border banking services, not just over the last six months. Our strategy over the past several years has been to focus on expanding our international platforms in both mature and emerging markets, and our integrated business model, with strong ties to investment bank and Asset Management locally, will continue to enhance our strong strategic position in Wealth Management globally.

We believe that the Swiss Government's decision to adopt the OECD standards on administrative assistance in tax matters will remove uncertainty concerning banking secrecy. We are also convinced that our expertise, client solutions and product offerings will enable us to thrive with the creation of a more level playing field.

Cross-border banking will remain a key component of a wealth management service offering. We have invested significant resources over the past years in ensuring that we continue to provide compliant cross-border banking services in line with clients' demand. In summary, by anticipating these industry changes, it positions us well going forward.

On slide 11, I want to address any misconception around the topic of why our clients will continue to use cross-border banking. Let me be absolutely clear, cross-border banking will continue to be an important activity for the very reasons shown on this slide.

First, clients continue to seek means to diversify their financial assets due to political uncertainties in their home jurisdiction. In Switzerland, the financial and political stability provides best in class security globally.

Second, our home market of Switzerland provides the largest booking center and the most enhanced product and service offering. It is not economical for this Swiss service and product offering to be duplicated in all markets locally. The Swiss financial market has many advantages and attractions compared to many markets where our clients reside; better robust legal framework, strong regulations, and is highly sophisticated given our infrastructure economies of scale.

Third, client confidentiality will remain at the heart of Private Banking. Confidentiality continues to be one of the most important requirements to ensure the personal security of many of our clients.

And finally, for our ultra high net worth individuals, whose financial and corporate assets span the globe, they require a local service for their global assets in more than just one location. It is even more important that these clients in many cases do not live in one country or destination, so for us, we don't talk about onshore or offshore. When we talk about cross-border, we think about multi-shore.

So in summary, this highlights why cross-border banking is important and will continue to be part of our offering. Our investments have ensured that we are well placed to face the changes occurring in the wealth management landscape. By anticipating the changes that are happening, we believe that this positions us well vis-a-vis many of our competitors.

Let me now move to Corporate and Retail Banking on slide 12. Pre-tax income in Corporate and Retail Banking decreased to CHF346 million, and the assets inflows were strong at CHF2.4 billion, reflecting the continued client confidence in our business. We continued to support the local economy by expanding our loan volume by over 5%, or more than CHF5 billion, over the previous 12 months.

Provisions for credit losses were CHF45 million, rising from the beginning levels experienced over the last few years; sorry, rising from the benign levels experienced over the last few years. We have seen some deterioration in the credit environment, and could see our quarterly provisions [start to] rise somewhat from the quarterly level as we progress through 2009.

This quarter's result includes significant gains of over CHF50 million on loan portfolio hedges compared to the first and fourth quarter last year. We have had good initial client reaction to an organizational realignment in the Swiss market covering affluent clients and enhancing the value proposition, which will become effective from the third quarter of this year.

Let me turn to Investment Banking on slide 13. As Brady indicated, Paul will cover Investment Banking in more detail, but let me give you a brief overview of the results.

We reported a pre-tax income of CHF2.4 billion driven by strong results in our client inflow based businesses in both fixed income and equity. We achieved significant market share gains across many of our client businesses. We have taken decisive actions during 2008 as we move to a client focused, capital efficient strategy, with a low risk profile. These actions have translated into a strong result for the Investment Bank at the start of 2009.

You will continue to see significantly less risk capital allocated to Investment Banking as we continue to reduce the risk profile of the business as you can see from the risk-weighted asset and Value-at-Risk trends in the first quarter.

Slide 14 shows you a more detailed analysis of the CHF6.4 billion revenues achieved in the first quarter. At the fourth quarter results presentation in February, we indicated those businesses that are key client businesses for us going forward where we have built strong market positions, and businesses that we are repositioning where we can operate profitably and with lower earnings volatility by moving to a lower risk model.

As you can see, in the first quarter of 2009, the key client businesses generate CHF6.3 billion of revenues, and the repositioned businesses returned to profit and delivered CHF1.4 billion of revenues.

Many of you have asked us how much of our revenues have benefited from a bounce back in performance from the fourth quarter. This is more of an art than a science, but within key client businesses and repositioned businesses, we estimate approximately CHF1.3 billion of Investment Banking first quarter revenues were achieved as a result of the positive market rebound experienced in the first quarter. You can see on the slide that CHF700 million related to key client businesses, and CHF600 million to repositioned businesses.

We saw a reversal of some of the fourth quarter negative revenues as they relate to basis risk, credit spread widening, and increased market volatility. However, the benefit from a reversal of the fourth quarter negative revenue trends was limited to CHF1.3 billion in total, given that we aggressively managed down our risk exposures throughout the fourth quarter, and continued this in the first quarter.

Losses in the businesses we are exiting totaled CHF1.7 billion, of which CHF1.4 billion related to further write-downs in the CMBS portfolio.

In our February presentation, we provided you with the last four years of pro forma investment banking results as if we had adopted this realigned model. The profits we would have delivered on a pro forma basis gave us confidence that the realigned business could produce higher average margins and returns over the cycle. Our first quarter result reinforces this view. Finally, the fair value gain in the Investment Bank was CHF365 million.

From April 1, we have put in place a hedge that will remove most of the earnings volatility resulting from the movement of credit spreads in our own debt. Although not a perfect hedge, the fair value gains taken so far will be amortized over the life of our debt, irrespective of the short-term movements in spreads.

In the future, we expect some CHF300 million negative revenues each quarter. This will have no impact on our capital ratios, as fair value gains on own debt do not qualify as regulatory capital, and it also did not have an impact on first quarter earnings.

Let me move to Asset Management on slide 15. Looking at the first quarter performance, Asset Management reported a pre-tax loss of CHF490 million. The downturn in global markets resulted in unrealized losses on prior equity investments of CHF387 million, and CHF21 million of write-downs on the money market lift-out portfolio.

The net new asset development has stabilized compared to previous quarters, with a small overall outflow this quarter, but with continued net inflows achieved within the Alternative Investments business.

At the top of slide 16, we show you the assets under management, split into alternative investments, MACS, our Asset Allocation business, and the remaining traditional investment businesses. On the bottom half of the slide, we show the fee-based revenue levels and the resulting gross margin.

Assets under management has stabilized in the first quarter, although the average asset base is down by more than 27% compared to a year ago, reflecting a downward movement in the markets, but Asset Management fees held up well, down only 10% versus the previous quarter. They are down 19% year-on-year compared to the 27% asset base reduction as a result of the ongoing shift towards a higher margin Alternatives business.

Slide 17 highlights the progress on our strategic agenda in Asset Management. The business is now focused around our core competencies in Alternative Investment and asset allocation strategies following the sale of our sub-scale traditional business to Aberdeen Asset Management. We remain on track to close the transaction in the second quarter.

Geographically, our focus is on Switzerland and the US, while maintaining a smaller regional presence in Europe and Asia Pacific. We have made good progress on strengthening our global distribution capabilities. We hired a new Global Head of Distribution and 25 distribution specialists who will focus on our institutional clients globally.

As the asset base is down, we need to intensify our focus on efficiency and profitability. We have further initiatives underway to reduce our cost base, and we have intensified the focus on investment performance.

As reference point, our flagship asset allocation product, managed by MACS, and offered to our Swiss and International Private Banking and institutional clients, has performed very solidly. Since the beginning of this year, 75% of our classic mandates in MACS outperformed their benchmark, and 90% of strategically important credit strategies performed above benchmarks within the one and five year time bands.

While financial performance was disappointing this quarter, we are convinced that we are on the right rack in Asset Management strategically to return the business to profitability.

This concludes the divisional results review. I will continue with the Group's funding and capital position on slide 18.

We have maintained a strong balance sheet structure this quarter that has supported the business through the challenging markets of the last 18 months. Although the balance sheet footings only reduced to CHF14 billion, business related reductions were CHF74 billion, partially offset by foreign exchange differences of CHF60 billion.

Let me look at the asset categories in turn. You can see at the top of the chart that cash balances, including cash due from banks, was CHF88 billion. Reverse repos were reduced further to CHF289 billion, reflecting general market conditions across all the regions. Trading assets are also down slightly in the quarter. Loans are up slightly, and they are underpinned by our strong deposit base, which is now 120% of loans outstanding.

We continue to make progress on further strengthening our liquidity structure. Our short-term financing requirements are down 24% from the end of the year, and now stand at CHF76 billion as a result of our balance sheet reduction, and by substituting short-term debt with longer-term debt and deposits.

As we continue to reduce our balance sheet, we may not need to refinance all of the CHF13 billion of long-term debt redeemable this year. Any additional funding costs on this debt, which is only 1% of total liabilities, will be more than compensated by our stable and low cost deposit base. We believe that this will continue to be a key competitive advantage, especially when compared to institutions that primarily rely on wholesale funding.

As a result of strong liquidity, we intend to redeem two upper Tier 2 issues callable in July 2009. We have already raised CHF6 billion of longer-term funding in the first quarter, and are one of only a handful of banks that were successful in issuing non-government guaranteed unsecured senior debt in the first quarter.

Let me now move and have a look at our credit risk positions on slide 19.

The next three slides are an update of the credit risk information Wilson Ervin provided in February. The figures we show for the first quarter are fairly stable compared to the fourth quarter. In the Investment Bank, most of our loans are in two areas, our Developed Markets loan portfolio and our Emerging Markets portfolio.

In the Developed Markets, the chart top right shows loans and unfunded exposures were stable in Swiss francs terms at CHF69 billion compared to CHF67 billion we showed you at the end of 2008. They're well diversified by industry and name, and are around 80% investment grade.

As you can see from the chart, we have significant hedges that we use to protect the value of this book on both a portfolio and name-specific basis. These hedges total some CHF23 billion. While the hedging effectiveness of our CDS has varied from quarter-to-quarter, they have been effective over the whole period in mitigating profit and loss movements on the assets side.

Loans and hedges are mostly accounted for on a fair value basis. We have marked down our gross loans and commitments by CHF3 billion since the beginning of last year as market spreads have widened. If these loans had been accounted for on an accrual basis, our provisions would have been about CHF700 million. Because of our fair value approach, our loans are carried at much bigger discounts to par than they would under an accrual method.

Overall Developed Market loans are carried at an average mark of approximately 95%, and we are more than four times covered compared to current impairment levels. We can, therefore, absorb any increase in credit provisions more easily.

At the bottom of the page is the emerging markets loans exposure of CHF21 billion, which are almost entirely funded. These loans are accounted for roughly half under accrual accounting, and the other half under fair value accounting.

We have CHF15 billion of specific hedges, so net exposure to emerging market lending is only about CHF6 billion. These exposures are well diversified, and this should be distributed fairly evenly across the major emerging market regions of EMEA, Americas and Asia.

Counterparty risk of the hedges are very well diversified by region and name. In addition to the hedges in place, our entire emerging loan portfolio carries an average mark of approximately 90%.

This gives you the two largest credit books in Investment Banking. The remaining book is largely positions with financial institutions, backed by pools of collateral with good haircuts.

So to summarize, our Investment Bank and credit exposure is generally highly rated, with significant mark-downs already taken through fair value discount, credit provisions on accrual loans, and significant hedges. Although we see potential for a tough credit environment given the recent economic developments, we feel these features provide significant protection against further charges to earnings.

Let me move to an overview of the loan portfolio in the Private Bank on slide 20. This portfolio is predominantly focused on Switzerland, and is accounted for on an accrual basis. Our loan portfolio is largely funded and around 85% is collateralized by securities or real estate. Combined with the high quality of the borrowers, the high rate of collateralization results in a portfolio that is over 90% investment grade.

Loans in Wealth Management total CHF71 billion. Just under half are Lombard or securities-backed positions, and the remainder are mortgages with conservative haircuts.

The Corporate and Retail Banking loan portfolio in Switzerland totals CHF106 billion, if you split roughly half and half between retail lending and corporate and commercial mortgage lending. Within the Swiss corporate book, about a third of the portfolio is commercial lending, with loan to value ratios of about 50%. The remaining two thirds is in corporate loans, where the credit quality is good, with low concentrations.

The Retail portfolio is primarily residential mortgages. The Swiss housing market remains conservative, with prices remaining very stable over the last 10 years, with annual gains averaging about 3% per annum. Underwriting is based on strict income and LTV requirements. Average loan to value ratios are about 65%.

We do have some consumer lending portfolios in Switzerland which total about CHF3.5 billion, and they continue to perform well. We do not make unsecured consumer loans outside Switzerland. As I mentioned earlier, we have seen some deterioration in the credit environment, and could see our quarterly provision charge rise somewhat within the corporate sector as we continue through 2009.

Finally, on slide 21 is an overview of the current risk issues in the market, as we provided you already in the past quarters. Firstly, we do not rely on any monolines to hedge our subprime positions in RMBS or CDOs. We do have some trading and other positions that are wrapped by monoclines, but we have CDS and other forms of protection against this exposure. And the gross exposures are modest.

Secondly, net exposure to US auto manufacturers and suppliers is less than CHF200 million. Third, our total exposure to private equity investments is CHF2.5 billion. Over the last six months, we have written down the book by 25%, and it remains well diversified, with exposure to mainly mid cap companies and with moderate leverage.

Fourth, our auction rate securities portfolio is among the smallest of the settlement banks with a market value of CHF400 million, and an average value on our books of $0.56 on the dollar.

Finally, we expect our level 3 assets in our final numbers to reduce by about 18% to around $74 billion in the first quarter. Just over half of the reduction was due to sales as we reduced our balance sheet in the first quarter. The remainder was split between market movements and changes in market price visibility.

$13 billion of these assets are private equity and other unlisted investments, of which $9 billion are in the form of third party minority interests in funds, where there is no economic risk to Credit Suisse.

This leaves about $60 billion of level 3 assets which consist of a couple of different categories. About half of the remaining level 3 assets have significant offset from level 3 liabilities that have similar characteristics and which are value based on similar market assumptions.

About $10 billion, or CHF12 billion, relate to the gross value of the dislocated asset categories, as we have shown you historically. I have not mentioned this category as Paul will cover it later.

Our largest exposure remaining is CMBS, where our exposure was CHF7 billion, prudently marked at 59% of par, down from 72%.

And another roughly 10% of CHF7 billion is related to the gross loans in our Investment Bank, as we mentioned on the previous slide. Here we feel fair value marks we have already made are a more conservative approach than an accrual method, as I discussed earlier. There are some other smaller categories, but I hope this demystifies the level 3 category to some extent for you.

Let me go to slide number 22 on the capital position. During the quarter, the Basel 2 Tier 1 ratio improved by 80 basis points to 14.1%, making us one of the best, if not the best capitalized bank globally. Our core Tier 1 ratio, excluding [hybrid] capital now stands at over 9%.

The FINMA regulatory leverage ratio, where we now disclose the calculation in detail on page 55 of the quarterly report, stands at 3.8%, already comfortably in excess of the 3% minimum requirement which is effective from 2013. The regulatory capital level includes a deduction for a significant but prudent 2009 dividend accrual.

Risk-weighted assets rose slightly in the quarter, resulting mainly from the weakening of the Swiss franc against most major currencies. Risk-weighted assets also increased by CHF12 billion due to the regulatory treatment of certain assets. Using constant exchange rates and excluding these methodology changes, risk-weighted assets reduced by 9%, or CHF22 billion in the quarter.

This concludes my presentation, and with that, I will hand over to Paul. Please, Paul.

Thank you, Renato, and good morning to everyone. You've had an overview of the quarter from a Group perspective, demonstrating the potential of our integrated bank model. Now I'm going to provide you with an update on our progress implementing the strategy for the Investment Bank; as we discussed in detail in December, our client focused capital efficient model.

As Renato highlighted earlier, for the first quarter, the Investment Bank produced revenues of CHF6.4 billion, and pre-tax income of CHF2.4 billion. As to how we achieved these results, I want to go back and remind you of this view shown on slide 24, which I discussed at our fourth quarter earnings presentation.

This slide shows how we are managing our franchise and allocating our resources across the Investment Bank. Each of our businesses is aligned to a category seen here, starting with the darkest shaded column on the left key client, and moving across to the repositioned, and exit to the far right.

The Group at the farthest to the left are key client businesses, the ones we consider core to our strategy. They meet our strategic criteria by being client-oriented, capital-efficient, less volatile, less complex, more liquid, and those in which we believe we have a strong strategic advantage.

The repositioned category, those shown in the middle, are the businesses that are important to our franchise, but which did not meet our strategic criteria. We believe they can be repositioned to run with an operating model that does fit our strategy, with importantly a lower risk profile; businesses like emerging markets and US Leverage Finance.

And the exit group, the one to the far right, are the businesses that are fundamentally disadvantaged in this environment, or that we feel cannot be repositioned to fit our strategic criteria. They do not meet our clients' needs, they provide low return on balance sheet or capital. They're more volatile, more complex so less liquid, or businesses where we don't feel we have any particular competitive advantage.

We developed this strategy, as you know, in early 2008, accelerated its implementation through the year, and we can now point to good progress in the first quarter of 2009 on executing on this client-focused capital efficient strategy.

On slide 25, you can see the core elements of our strategy are to grow market share with clients to become more capital-efficient and reduce our risk and volatility, and to cut costs. Executing on each aspect of the strategy, we've had a good quarter. We're growing the client flow businesses, with CHF6.3 billion of revenues in client businesses driven by market share gains, and highly favorable market conditions in some businesses. We've had a focus on improving our performance in the repositioned businesses. At CHF1.4 billion gain over the quarter, remember these areas lost approximately CHF4.5 billion for all of last year.

And as for the exit category, our results included losses of CHF1.7 billion over this quarter, primarily a result of the CHF1.4 billion write-down in CMBS, which I'll speak more to later.

We continued to reduce risk, as evidenced by a reduction in underlying RWA by 11% and VaR down by 14% over the quarter, and dislocated assets down 31% over that same period. We reduced costs with non-comp expenses down 19% year-on-year, and significantly more quarter-on-quarter in dollar terms.

If you turn now to slide 26, we'll take a look at the businesses that drove our results. Here is fixed income where we had a very strong quarter. We achieved record results in several key client businesses, including rates and foreign exchange, investment grade trading, and we had strong performance in US secondary mortgage trading with clients. And we saw improved activity in revenues from investment grade debt issuance.

We made good progress in turning around the repositioned businesses by implementing new operating models and lowering the level of risk. Specifically, we improved our performance in emerging markets in US Leverage Finance.

And on the right, you can see the trend for our exit businesses, significantly lower write-downs and continued exposure reduction in these legacy assets. For the quarter, CMBS write-downs were CHF1.4 billion, and we reduced marks further during the quarter, moving the average entire portfolio price from 72% to 59%.

On slide 27, you see equities, which posted a very good result, even in the face of low primary activity, reduced secondary market volumes and lower market levels. We drove strong results in key client businesses, prime services, cash equities and flow derivatives, with good progress in market share. We achieved a solid turnaround for our repositioned businesses with lower risk and new operating [model].

We saw improved contribution from convertibles with our continued risk reduction, the sell-down of inventory in the convertible trading book, which is down 86% from the beginning of 2008, and is now mostly complete. And we achieved good results from our equity trading business, which is now very focused on quantitative and liquid strategies.

As you can see, the exit business here, we consider risk reduction for our illiquid crop trading activities also largely complete.

Turning to slide 28, I mentioned risk reduction as a prerequisite to executing on our strategy, and we continue to show a good trend here. Headline risk-weighted assets ended the quarter at $154 billion, including the impact of methodology changes. Excluding the methodology changes, RWA was just $145 billion, an 11% decline from the fourth quarter.

I think it's important to note that we're not just cutting risk. We're rebalancing and reallocating our capital to our key client business. By doing this, we're able to address our clients' needs and decrease our risk and P&L volatility. In fact, we have increased a proportion of risk capital, or RWA, allocated to our key client businesses during the quarter, while decreasing that for both the exit and the repositioned businesses on an absolute and relative basis.

In the quarter, average one day VaR also fell. It fell sequentially quarter-on-quarter 14%, and 30% year-on-year.

We've talked about being disciplined and early to act on reducing risk, and we've consistently reduced exposures in distressed areas. On slide 29, which we've shown you before, you can see our progress here. We've brought dislocated assets down 92% since the end of the third quarter in 2007. Residual risk is concentrated in CMBS, our last legacy area with material exposure. In the first quarter, CMBS was reduced by 20% through a combination of sales and write-downs. We have more detailed information about CMBS exposure in the appendix to this presentation on slide 39.

In summary, I would reiterate that we continue to have a consistent, conservative approach to valuations, with no reclassifications to hold or accrual books.

Slide 30 speaks to developments on our expense line. The compensation number on the top right is the one you see that's up from prior periods, reflecting a couple of things. Number one, the vesting of our partner asset facility, the PAF, that was the illiquid asset portfolio that was distributed to employees as part of their 2008 compensation. And the vesting of other deferred compensation awards is included in this number.

A variable compensation accrual also reflects a risk-adjusted profit in contribution of the Investment Bank by business line. I want to highlight here that comp to revenue is not the basis of our variable compensation accrual, it's simply a mathematical result of our risk-adjusted contribution driven process.

On the bottom, you see our non-comp expenses down 19% in dollar terms versus the first quarter of 2008; and down more than that, I think 28% on the fourth quarter, but there is some seasonal adjustment here.

Well, this reflects our long-standing focus on reducing non-comp expenses, which has been additionally boosted by the efficiency measures that we announced in the second half of last year, and from lower [BC&E] expenses in equities.

I think slide 31 is an interesting slide, and it's our attempt to describe some of the industry dynamics for our major business lines. These measures all compared with fourth quarter of last year reflect where we think industry volumes and margins have trended for each of the businesses shown on the left.

The last two columns show you how Credit Suisse's market share and revenues are developing in each product area over the same period. Obviously, market shares are affected by the fact there are fewer firms. But what we've also highlighted here is the overall trends in the key businesses where we have focused our resources. And I'll take a second to touch on some of the specific examples behind these trends.

Let's start with the top section of the page. In rates, we've benefited from both strong industry volumes and improved market share. In foreign exchange, while volumes did fall over the quarter, we were able to double our market share from 3% to 6% and partially offset this impact. In mortgage trading, we increased our lending market share, and pass-throughs, and rank number one so far this year in secondary trading with clients.

Equities is highlighted in the middle section of the page. In cash equities, our market share in the US and Europe grew from 9% in 2008 to 11% this quarter. These market share gains more than offset the impact from the lower volumes in this market. In electronic trading, our market share of total US electronic trading volume also grew to over 7% in the first quarter, and in prime services, we estimate our market share has increased from 6% in 2007 to about 10% in 2008. Our revenues have continued to grow, and our improvement to a top three market position has clearly helped us offset the impact of the hedge fund deleveraging that we've seen during the course of 2008.

And finally, in our Investment Banking businesses, revenues and activity levels have generally been lower in the first quarter. That said, we've seen some areas of improvement, especially in Europe, where we are ranked number one in announced M&A in the first quarter. And we've also been involved in several key transactions since quarter end. Recently, the sole adviser to Sun on its sale to Oracle is just one example.

Much of our focus in the IBD business is on pitching and winning new business and focusing on the key industry segments where we expect to see activity pick up during the second half of 2009.

So that's an overview of how we are thinking about some of the key dynamics and trends in our business as we execute on our strategy.

Now turning to slide 32 and wrapping up on the Investment Bank, we are confident that our strategy is the right one. And we think, having been at it for a while now, that we are seeing real evidence of our progress and real interest from clients who want to do more business with Credit Suisse.

Of course, this is just one quarter and we don't expect 2009 to be without its challenges. But we are clear on what we need to do to drive our strategy through the rest of the year, and this includes growing our client flow based businesses, and our market share with clients, improving the contribution from our repositioned businesses, staying disciplined about reducing risk, particularly by maintaining our focus on the orderly wind-down in exit areas and redeploying their capital released, and achieving our cost targets through the balance of the year.

We're positioned to address any continued challenges in the market, and we're able to identify and capture good opportunities as they arise in our key focus businesses. Our leaders in the Investment Bank are committed to working hard to execute on this strategy, and we feel confident that we will continue to produce good progress and results.

With that, I thank you for your attention, and I'll turn the agenda back to Brady. Brady.

Thanks very much, Paul. So I think with that, we are ready to open it up to Q&A. Operator, do we have any questions in the queue?

We will now begin the question and answer. (Operator Instructions). Your first question today comes from Kian Abouhossein from JP Morgan. Please ask your question.

Yes, hi. First of all, could you clarify the tax rate going forward, as it's soon impacted by deferred tax releases? And how should we look at this going forwards compared to the historic tax rate?

The second question's on your comp ratio. You mentioned this is a results, it's not an input. You're running at 48% in the IBX CDS gains. Could you tell me, should we assume that as a run rate going forward?

And the last question's on Asset Management. When should we expect that you actually make a profit in Asset Management? Thanks.

Okay, thanks very much for those questions. Why don't we start with tax rate? Renato, could you address that?

Sure, the high tax rate we have in -- coming from the business mix has benefitted us of course in 2008 when we had our losses. But, of course, it [hits] us now and profits come back because they are in the high tax countries predominantly and, therefore, we have a higher tax rate than we typically had. We gave you guidance that it will be in the upper part of the 20s for the full year going forward. [But once this] -- as I say, we have worked out is this position, we will go back to the normalized tax rate we have seen in the past.

I think with regard to the compensation issue, and I'll maybe just answer it more from a bank-wide point of view, obviously, the -- it's a very dynamic environment in terms of compensation in the industry. There's a lot of dialog with regulators, etc., at this point, and we obviously do have the comp accruals, not only in the Investment Bank but for the Bank as a whole.

I think our view is at this point that was a -- when we look at how we think about we accrue compensation particularly in the Investment Bank, we have adopted an approach which is much more in line. We're looking at returns on capital, risk-taking, etc. So it's a much more nuanced approach than simply some percentage of revenues, which is why we mention that the -- that is not really the way we're looking at it in terms of just a straight percentage of revenues but really it's linked into returns on capital, business mix, and how well the business does.

But I'd say at this point, it's pretty hard to predict in what direction the compensation environment will go, but our view is that that was a reasonable accrual for the first quarter. And I don't know, Paul, if you have anything to add to that.

No, I think that's right. As you said, was -- for the Investment Bank, and as we said, it's a mathematical result, it was 45% and 48%, the fair value own debt calculation; that's right.

I think with regard to Asset Management. Obviously, the absolute result on the first quarter is disappointing, but it's obviously also in line with, as you know well, how the markets in general and how private equity investments have performance in general. We believe we have excellent capabilities in the Alternatives area. We think we've got a very good private equity portfolio but, obviously, in this kind of an environment, it will naturally suffer.

I think the more important for us is to focus on the strategy. We think we have taken a number of important strategic steps; the decision to sell our traditional business to Aberdeen which, as we mentioned, we're on track to closing; we think is a very important step towards allowing us to focus our strategy on businesses that we can be excellent at, where we think we can provide great returns to our client, and where we think we will get very good returns for our shareholders.

So we're going to continue to drive that, but obviously the performance in the Asset Management area will continue to have an element of how the markets perform, and then we obviously can't predict that. So we do continue to believe, though, that we will make progress on our strategy, that that will over time continue to improve the bottom line performance, and we're obviously going to do that as quickly as we can.

And if I can have one more follow-up. Can you just talk a bit about revenue? You mention CHF6.3 billion of ongoing business in the IB. Can you talk a bit about the movement of revenues that you have seen through the quarter from January into March between fixed income and equities?

Yes, maybe I'll just answer for the overall firm, and then Paul could add from the Investment Banking bit. I think the question of the revenue development, one thing just to note, and I think it's important, is that the first quarter was not a uniformly good environment for all our businesses. In fact, it was challenging in probably almost every one of our businesses during the first quarter, and I think you're all aware of a lot of the things that happened. So it wasn't -- this result wasn't delivered in the context of a easy environment to produce. So I think that's an important thing to point out, and as a result, there were challenges that came up during the quarter and -- but I think this result was delivered in spite of that.

I would say in general we -- I would not differentiate between the different times in the quarter in terms of how our businesses performed, and I'd say it was reasonably consistent. And we've also made the statement that we've really continued in -- through April, even though it's obviously a short period of time, we've continued to see consistent performance of the businesses this month-to-date as well.

The only thing I may add to that is, first of all, the ongoing revenues as you saw on that slide 14 was CHF7.7 billion, not the CHF6.3 billion. You have to add the repositioned businesses to that, CHF6.3 billion to CHF1.4 billion.

And in the -- as Brady said, no real discernable difference month-to-month in the market conditions and the progression of our P&L. And I think also importantly is that we showed no back testing exceptions, which just show a level of stability, [really] stability of our earnings, I think, is as a result of some of the long standing reductions in risk that you followed that we have [made].

Okay, thank you.

Thanks a lot. Next question.

Your next question today comes from Derek De Vries of Bank of America, Merrill Lynch. Please ask your question.

Thanks, I have a couple of question on banking secrecy, actually. Let me practice it by saying I've read slide 11, and it all makes perfect sense to me and agree 100% with slide 11. But my questions are going to the strategy. First and foremost, I guess, what are you doing to try and get on the front foot ahead of double taxation treaties, if anything?

Number two, are you doing any contingency planning in anticipation of tax amnesty programs out in the future?

Number three would be, in the event of a tax amnesty, do you think you could take market share with your onshore/offshore business model?

And then the fourth question's, if so, which type of competitors would you be targeting; not specific names but who's disadvantaged in that environment?

And then my last question has nothing to do with banking secrecy, it's just in your 14.1% Tier 1 ratio, is there a dividend accrual, or are we at the same level as last year?

Thanks very much. Well, on the first question, it's obviously an important question, we have been -- we have basically been driving the strategy in structuring of the business over the past several years in our Private Banking business, really in order to make sure that we're, we are -- we continue to be well positioned in what was clearly going to be, continuing, I think, focus on the cross-border business.

So I think the strategy -- it's not really a question of things that we're doing right now so much as things that we've been doing for the last two or three years. So we've been over the past, I'd say, three to five years, been aggressively building up our onshore businesses all around the world, and that obviously positions us well. In addition, we've made a big effort to make sure that we're compliant with all other regulations that apply to the business all around the world.

So we feel like we are -- we have a business that's resilient. Just take a look at the first quarter net new asset flows in the business. To be up CHF11.4 billion across our Private Banking division is, I think, shows that we've continued to have very strong client flows in.

I think with regard to the specifics you mentioned about tax amnesties, things like that, as you know, we've actually already lived through a few of those. I think we've been through two Italian tax amnesties and a German tax amnesty, and in each of those cases, we actually faired quite well through that, both, as you mention, because -- I think partly because our approach is a very compliant one, but secondly, because we do have the onshore capability as well. And in general, we've actually been able to maintain and in fact in both Italy and Germany, continued to grow our market shares through those periods.

So I think that certainly our -- what we've been planning for is this kind of an environment, and the truth is we believe that we hope we should be able to take advantage of that over time as this environment continues. So we do think that we're well positioned.

In terms of the type of competition, it's -- I would say it's hard to say where that business would come from. But again, with the strong global onshore network, the ability to offer those services, we think we are well positioned and we will hopefully continue to grow market share.

And with regard to the 14.1% Tier 1 accrual, I think as Renato mentioned, we have accrued a -- what we would call a substantial but a prudent dividend. So effectively, it's probably -- we're not going to go into the specifics of it, but it's down from the peak levels that we were probably at in past good market years, but it's still quite substantial.

Okay, just to follow-up quickly on the tax amnesty. Italy, and I'm sure I can go back and look this up, but I remember Italy having an impact and I remember seeing slides that we're net new money, net new money if you hadn't had the Italian tax amnesty. Just some order of magnitude in terms of -- do you have any quantitative order of magnitude in terms of how much you lost and then how you were able to regain later? Or is that -- anything there? Maybe it's unfair to hit with you that [over left] field?

I guess, it's a little hard to say because, obviously, as you recoup over time, it's hard to know how much of that is -- where those assets are coming from. I think our -- in one case, in one of the Italian tax amnesties, we actually kept about 80% of the assets under management.

Okay.

So we think we're -- and in fact, the businesses continued to maintain their momentum. So it's obviously -- we obviously believe there'll continue to be challenges in the business overall, but we do think that we're really well positioned for this changing industry landscape.

Okay, very helpful. Thank you very much.

Thank you. Next question.

Your next question today comes from Fiona Swaffield of Execution. Please ask your question.

Hi, I wanted to ask a question about capital and, obviously, your Tier 1 is rising quite fast. How are you looking at it going forward in terms of, firstly, risk-weighted assets? Because I think you do say $135 billion is still the number for the Investment Bank. So is it that we should start to see risk assets growing as you think the world becomes a better place? Or are you going to sit there and have the Q1 ratio going up well above [15]? Or are you looking at core Tier 1? I just want to understand a bit more about what it could look like going out.

And then, secondly, just on the Private Bank and the margin, so the 116 basis points. Could you just spend a bit more time on how resilient that is; whether you're surprised and expectations? I think 110 [basis points] is usually the number that the Head of Private Banking uses as the long-term. Thanks.

Thanks Fiona. I think on the capital point, as you mentioned, we are -- we, obviously, have taken steps over the past six months to make sure we are -- have an unquestioned capital position. We are -- we have a very cash generative model overall. So as you can see this quarter, if we can have reasonable markets, we will generate a lot of capital.

I think that as Paul mentioned in his comments, I think the important point is there we are reducing our risk-weighted assets in some areas, but we're also reinvesting that and making sure we have disciplined allocation of that capital. And that's something that we will continue to do. I think we will hopefully continue to have a very capital generative model. Our long-term target, as you know, is 12.5%, so we're well in excess of that at this point. And so I would expect that, as we continue to generate capital, some of that's certainly going to go into our businesses where we see excellent opportunities right now.

So -- but it's also -- it'll be something we'll gauge over time, but I certainly think that with the continued capital generation that'll be -- certainly we'll use some of that to take advantage of our opportunities.

On the Private Banking side, the 116 basis points as you say was a good performance in the first quarter. It has held up quite well. I think that there has been some shift in terms of the composition. The recurring commission based margin is down obviously with lower managed investment products, but the recurring interest based margin is up, and that overall has -- the interest margin is up, so overall, that has helped to keep that margin very stable. And I think we continue to have a lot of initiatives and efforts to continue to maintain that, and we'll see how markets will develop over time.

We also continue to be very focused on our overall margin that we're generating overall, including the liability side in which we still do see opportunities to grow, and also our cross-sell across the entire Bank where, as you know, that's a big focus of ours. And all that can help to increase the productivity out of our client base, provide better services to the clients as well, so all that will be a focus.

But we'll -- we're pleased that the gross margin continues to hold up, and I guess our hope is that that will continue.

Sorry, could I just ask a really quick follow-up on this fair value of own debt issue that Renato mentioned? So I just wanted to understand what the stock of own debt that you take the benefit through the equity is. And should I understand it that every year I'll get a tangible book value hit of about 1.2 billion, or is that tax affected? Could you help us a bit more about how it will -- what the absolute magnitude of it will be over time?

Yes, maybe I can give you an answer. The fair value of our own debt P&L that we have so far has not affected the capital at all. This is taken out from any capital calculation we have for regulatory purposes, so it will not affect the capital either when some of these amounts are coming back. But that is kept absolutely neutral from a capital point of view.

But it will affect the book values that you report, so I think you're saying that you're going to -- it's going to cost CHF300 million a quarter which I assume you'll get a tax shield from. I just didn't know the total amount that you've taken.

The total amount of the asset taken so far is about CHF6.9 billion [through the] program today, if I may say so. And the CHF300 million, you're absolutely right will, of course, go against the nominal balance sheet equity, as we report. But for capital purposes, that's then reversed.

Yes.

And just really, just for to make sure it's completely clear, this is a going forward issue. It did not impact the first quarter in any way.

And more so, sorry, to be absolutely precise, CHF6.9 billion is pre-tax, so you can easily deduct from that 25%.

Thanks.

Thank you. Next question.

Your next question today comes from Jon Peace of Nomura. Please ask your question.

Good morning. I'm just really after a couple of clarifications, please. Firstly on the Investment Bank, thank you very much for the detailed disclosure. On slide 14 where you give us your impression of ongoing revenues during the first quarter, Brady, did I understand you suggested that April had continued at a similar pace?

And the second question was just on the outlook for net new money in the Private Bank. You've obviously had this medium term target of around 6%. How achievable is that number in the light of the changes to Swiss banking policy? Thanks very much.

Thank you. Yes, with regard to the Investment Bank, yes, I would say, we're not making obviously very specific comments, but in general, as I mentioned, the business, pretty much across all the businesses including Investment Banking, have been pretty consistent with what we saw in the first quarter. So I'd say reasonably consistent.

And I'd say the same thing in terms of outlook for new money, our -- we've been, it's been probably one of the most reliable statistics over the past two years. We've pretty much, we've had very consistent net new money flows almost every quarter. I think our target is still 6%. It's not affected by any of these tax secrecy issues. And overall, we think that with the first quarter at 5.6%, even though there wasn't obviously any wealth creation in the first quarter, we think that obviously shows that we're taking market share and we've got a strong momentum in acquired franchise.

Right, thank you.

Thank you. Next question.

Your next question today comes from Huw van Steenis of Morgan Stanley. Please ask your question.

Yes, good morning. Well done, a good set of results. First question, I found it very useful to think about the increase in market share at the expense of your competitors. How long do you think this window of opportunity will last where you can seize market share, and how much more upside do you think you've got?

Secondly, thanks for the extra disclosure on level 3, but to what extent is this a concern for you, because level 3 remains three times your tangible column book value? That's [tangible common] equity, sorry. And I'm just wondering to what extent this is a focus for the Group to continue to manage this down.

And then thirdly, I think Renato said in one of the wires that market conditions remained strong in Q2 for Credit Suisse. I wonder if you could give any other color to that. Thanks.

Okay, Huw, thanks very much. Maybe, it sounds like your market share question is more towards Investment Banking products, so maybe I can ask Paul just to give his outlook on that.

Sure. Thanks, Huw. You know, the trends really, as we outlined in this chart, there are really three components; what are the industry volumes, what are the margins and what are the market share trends? But the first two, I think, are [giving] an outlook on -- I wouldn't project on where those two are going to go.

In terms of our market share and the trends there, they've been very good. Obviously, the significant gains that we've achieved in many of our business areas are a result of some of the market participants dropping out of the market. I think some of them are a result of just the focus we've put on many of these client businesses overall. To there have been good market share gains. I think we can keep them. I think there obviously was in the first quarter, over the last couple of quarters, probably the most benefit from some of those exiting the market.

So the trends are in place to fewer competitors. We are stable, well financed, seen as the counterparty of choice, so they are -- the trends that you've seen where we've gained market share have been in the areas that we've allocated more resources; those areas that we've discussed under those key client strategies.

So again, I think good trends and, hopefully, we'll maintain them and can gain even more in some of those specific business areas.

And, Huw, on the question level 3, we're actually not very concerned about it. We thought you guys were concerned about it, so that's why we mentioned it. I think that we -- there are various reasons why assets get categorized into level 3, obviously, but we do not view that as, for instance, a risky channel. I know it's -- I think in general people take it as a risky catch-all category. We believe we're being pretty transparent about what our risks are and letting you know where we think our risks are.

Frankly, and Renato I think tried to give a bit of an overview on that, a number of the areas in level 3 aren't even our assets, aren't even our risks, as we mentioned; for instance, in the case of CHF10 billion of minority interest on the private equity side. A lot of the others are actually completely matched against liabilities that are of the same nature, and so there really isn't very much risk in that.

So the truth is, no, we are not concerned about the actual assets in there, but we do think that probably, as we continue to reduce our illiquid risk areas like, say, CMBS, which we have mentioned, that does -- those are in the level three area, that will obviously help to bring it down.

In addition, we're obviously continuing to see more market -- more normalization of market pricing, and that will also help to improve the transparency and pricing, which will also move more out of the level 3 area, and obviously the 20%, close to 20% reduction from fourth quarter to first quarter is partly a reflection of that. So no, we don't have concerns about that, but we thought we would give you some disclosure on it.

And the last question you mentioned on market conditions. As I mentioned, we're seeing pretty consistent market conditions into April so far, and it's obviously early in the quarter. So who know where it will go from here, but we're seeing pretty consistent conditions, as we mentioned.

Okay, thank you so much.

Good, Huw. Thank you. Next question.

Your next question today comes from Matt Clark of KBW. Please ask your question.

Good morning. A couple of questions, please. Firstly, some of your US peers have given indications of their expected impact of potential changes to scope of consolidation of assets under FAS 140 and FIN 46. I'm just wondering if you've done a similar exercise and can give any indications on whether you think your total assets are going to go up or what might happen to your Tier 1 ratio. Because I think some of the US peers, again, have said their Tier 1 ratios might be affected. I'm not sure if the same would happen to you.

And then secondly, if you could just give a comment on how the zero rate environment's affected the Investment Banking revenues. Is this good, is this bad, what are the moving parts there? Thanks very much.

Yes, I think with regard to the question about changes to scope of assets, that's still something that we are working through, so we don't have really an answer for you right now. What we can say categorically is it will not affect the Tier 1 ratio.

It will not affect [risk-weighing], that's what we expect.

With regard to the zero interest rate environment, Paul, do you want to try to -- a view on that?

Yes, I would simply say that the -- overall, is that there is a lot volume, as I pointed to earlier, in the rates business. Generally, I think it plays to our -- one of our focus areas under our current strategy. We have a good presence in the government area as well and, overall, it's, I think, presented some opportunities for us in the business which you've seen come through in the first quarter.

Okay, thanks.

Thanks, Matt. Next question.

Your next question comes from Jeremy Sigee of Citigroup. Please ask your question.

Thank you. Good morning. Just a couple of questions on the Investment Bank, really. Firstly, after this fantastic Q1, does that change anything in terms of your strategic view, I guess particularly of your repositioning businesses? Either in terms of the definition of which businesses are in repositioning, or are in fact core, or the degree of repositioning or the direction of repositioning?

And with that, is there any change in your headcount target? You've come down here in the quarter from 19,600 to 18,800, and you've been targeting 17,500. Does that remain the case, or do you start to think about carrying more people because the conditions are better than expected?

Thanks, Jeremy. Thanks a lot for the question.

Yes, sure. I think, Jeremy, just with regards to the strategic view, the answer is no. We're very committed, as I said, to executing on our strategy here. We think it's -- we're committed and it's the right strategy, and within, to operate within the integrated bank and we'll stay committed to that.

With regards the headcount, I think the answer again is, no. We have done as we have done with our -- all our resources, I mentioned earlier that we are reallocating a significant amount of capital. As we free up capital in businesses, we exit, we re-allocate those to the key client business. The same is true with our headcount, and there is still further benefits of re-allocating some of that capital from the exit and repositioned businesses to the key client businesses. So we will -- again, we're committed to executing on this strategy, no changes there, and we're committed on our overall headcount. We're down to 18,800 as you've seen for the first quarter.

Okay, thank you.

Thanks, Jeremy. Next question.

Your next question today comes from Kinner Lakhani of RBS. Please ask your question.

Yes, good morning. Three questions, mainly on the Investment Bank. Coming back to slide 31, I just wanted to get your views on what you see as the sustainability of the wider bid offer spreads across a variety of products that we've seen in a couple -- over the last couple of quarters. It does seem to me that maybe bid offer spreads might be coming down from the peak levels that we saw in the fourth quarter; just to get your views on that.

Secondly, to what extent is the steep US yield curve supporting your fixed income trading revenues?

The final question on position risk disclosure, that's on page 58 of your report. I see a 17% sequential growth in international lending and counterparty exposure and emerging market at the levels of a year ago. So perhaps if you could provide some color on that. Many thanks.

Thank you. Maybe, Paul, maybe you can address the first two parts of that question first of all, which is sustainability of the wider bid [asset] spreads and then how a steeper yield curve might impact the business overall. And then we'll -- we can address the third question, but why don't you do those two first?

Yes, as I mentioned earlier, I do think that the -- we have seen gains, particularly from fewer clients in the market with regards to the margins. We have no doubt that as more players focus on the liquid client-facing businesses, there may be some pressure as some of these spreads come in somewhat. Having said that, I think some of it does reflect the changing nature of the market.

A good example of that would be swap spreads. Look at 10 year swap spreads. If you look a year ago they were about half of what they are today, and I don't see that normalizing. That may come in a bit, but I don't see that normalizing back to the levels that we saw a year ago. So I think you could see some marginal pressure there at some of those coming in, but some of them reflect new market realities, and I think we will continue to see them at more healthy levels than they were pre this crisis.

With regards to the yield curve, in our particular case there hasn't been -- it's presented opportunities, as I said before somewhat along the lines of the zero interest environment. The yield curve has created a lot of speculation, a lot of interest in trading, and volatility in the rate sector, and that, again, has created opportunities, but there's not a particular trade or benefit specific from the yield curve that we've benefited from.

I think with regard to the emerging markets question, I think actually that's most -- it's probably mostly accounted for by a reduction in counterparty rating. So we've taken a more conservative approach to how we're looking at our counterparties, and that's actually increased therefore the ERC we're allocating to that business, so it's not a reflection.

I would say, as you've seen in the past couple of quarters, we've given you a pretty transparent view of our emerging markets lending exposure, and I'd say that obviously we didn't give it to you for the first quarter of '08, but I would say it probably wasn't inconsistent with where we were in the first quarter.

So the ERC as a whole business I think has been reasonably -- it's probably been stable to down over that period, and I think it's actually the flatness, as indicated, I think is mostly explained by the decreases in counterparty ratings.

Thanks.

Thank you. Next question.

Your next question today comes from Peter Thorne of Helvea. Please ask your question.

Operator maybe we should move on to the next question.

Your next question today comes from Ivan Vatchkov of Algebris Investments. Please ask your question.

Ivan, are you there?

Okay, sorry. Maybe operator we'll move to the next.

Your next question today comes from Georg Kanders of WestLB. Please ask your question.

Sorry, the question has already been answered.

Okay. Thanks Georg. Next question then.

Your next question comes from Kian Abouhossein of JP Morgan. Please ask your question.

Yes, a quick follow-up. PPIP, there's a lot of excitement about commercial or CMBS assets being put into PPIP, and we saw a bit of a rally in AAA CMBS. You're marking it down at 59 AAA; is it around CHF0.70? How do you see this affecting your book, especially considering your book is less US, more European? Why 59, and how does that affect potentially your pricing or disposal of your assets?

Well, I think in general this -- the announcement that PPIP has helped to stabilize the market a little bit, but it's -- as you know, the composition of our portfolio, I think we have a slide in the appendix that shows you that. A good portion of that's European. Some of it's in Asia as well, which are I think not eligible for the PPIP, I think. But in general, it's probably provided a little bit of a -- of support for the asset class generally, but I think that it's -- I'd say at this point it's unclear how much of that will follow through and how much it will benefit the asset class generally.

And we're not -- I'd say we're, because of the assets we have and where we are, we're unlikely to participate in it directly.

Yes, it's on slide 39. It shows the geographic break-up and the exposure by the loan type, you can see there. As we noted, about 23% of the portfolio is in the US. And as Brady said, I think it provided certainly some stability to the market, which is positive, and some confidence there, which has provided some support for the entire market.

How we get to the 59, it's a loan-by-loan process, as you're well aware. That's an average, so there's a good deal of -- there's a good variation obviously between the different loans, different parts of the capital structure that are held there.

The portfolio does continue to perform pretty well on a current basis, but we're obviously marking it appropriately conservatively, and we think that's probably the right place to be.

Great, thank you very much.

Next question.

Your next question today comes from Jerney Omahen of Goldman Sachs. Please ask your question.

Yes, hello. It's Jerney here from Goldmans. I only have three very small questions given your answers up until now have been very extensive already, so thank you for that. The three questions are as follows. First, on the net new money flows, you had clearly a high inflow during the quarter, and your slide 11 explains why you think, to some extent, this should continue going forward as well.

My question is as follows. After the point of time in Q1 when the verdict on UBS' settlement, or the news of UBS' settlement came in, was there a disruption to your net flows, or have you seen any impact in the dynamics during the quarter at all? I.e. was there a pick-up in the second half of the quarter or a fall-off?

The second question is purely a very technical question on your Tier 1 capital composition. Am I right in assuming that essentially all of the roughly CHF1 billion increase in your hybrid instruments is due to FX? I'm assuming the answer to that question is yes.

And the final question maybe, the last strategic question I would like answered is, Credit Suisse is clearly in a strong position within Switzerland as well. There's been interest from your side in some of the Swiss private banks before, and I think it's becoming clear from some of your small competitors that assets in Private Banking are going to come up for sale in Switzerland during 2009. I guess the question is whether there is any interest on the side of Credit Suisse to grow its own I guess Swiss Private Banking through that channel as well. Thanks.

Great, thank you. Thanks for the questions. On your first question about net new money flows, I think the answer is no impact. So there really was no impact; there's no discernable difference in pace during the quarter.

Secondly, on Tier 1 capital in terms of the increase on hybrid, yes, it's all FX. It's all FX. And then third. I think we've been -- as you know, we've been pretty conservative over the past year and a half in terms of making any tactical acquisitions. That served us pretty well. On the other hand, we've always said that we will certainly look at things opportunistically if there are opportunities out there. But I think that's still going to be through the lens of continuing to manage our business in a conservative way. It's served us pretty well so far.

But we will, obviously, look at opportunities, and if they're really very compelling, then we obviously might pursue them.

Is that okay?

Very clear. Thanks a lot.

Thank you very much. Next question.

Your next question today comes from Christopher Wheeler of MainFirst Bank. Please ask your question.

Yes, good morning, and congratulations on the results. A couple of questions, first of all on the net new money flows again. Switzerland CHF1.5 billion; obviously, given the outflows that we've seen elsewhere in the industry, and given what you did last year certainly in the first three quarters, what do you think is happening within Switzerland? Do you feel that you are being slightly affected by the overall noise around the big banks and that you're seeing clients perhaps not come to you from some of the other larger players? Or is it just that it was a slower quarter?

And the second question is to Paul, and that is the fact that historically, if I talked to your competitors about the Investment Banking business at Credit Suisse, people would say, yes, very good bank. Historically, number one is average finance and CMBS, sure; those are the businesses that have perhaps gone away now for the time being; but perhaps not top three players in many of the other major areas. And I'm just wondering what aspirations you have, given the change in the competitive landscape in terms of some of the main business lines within Investment Banking. And, obviously, you've touched on client broking as one where you think you've moved into the top three.

What aspirations do you have and are you setting your people to really get them to perhaps put that extra effort in to take some of the leading market positions in some of the market -- some of the segments, and obviously in that way perhaps take more of the share of the client's wallet? Thank you.

Chris, thank you very much. On the first question, as you mentioned, we were -- we did have good solid flows in Switzerland in the first quarter. But I think in general your point is correct that we've -- I think we've done okay. We've certainly held our own and we've had stable assets in Switzerland and some growth, but maybe not as much growth as you might expect given our stability through the crisis, etc.

And I do think -- in Switzerland I think there has been a tendency not to put new money with the big banks and in some cases to take some money away from big banks and put it with some of the capital banks etc., and I think that's somewhat peculiar to Switzerland. We have, obviously, because of our performance we've bucked that trend somewhat. But I think it certainly is -- I certainly think it is a fact that we've dealt with.

I do think we've continued to be very solid in Switzerland, and I think we -- I think continue to gain momentum there. If you look at the progression from fourth quarter where we had a lot of de-leveraging among the Swiss business to the first quarter, it's a really nice progression and turnaround. And I guess our hope is that we'll continue to see that follow through, but we'll see.

With regard to the Investment Banking business and our positions, maybe, Paul, I'll turn that over to you.

Yes, thank you for the question, Jerney. I would say that when we thought through our strategy, we were really thinking about what is it that our clients need, what businesses meet the criteria, as I mentioned before, capital efficiency, less volatile, less complex. And we also took into account, as I mentioned, those in which we believe we have strategic advantage.

So if you at Leverage Finance, for example, they're clearly the most attractive business. Leverage finance was the US Leverage Finance business, and we're still very committed to that business, as we mentioned. So we're not out of the business per se.

But also, I think if you look at our performance and our market positioning, our success is much broader. You look at the cash equities position, clearly a top three position, electronic trading a number one position; our prime services has moved to a top three position, and increasingly growing the position in rates and FX; number one position in RMBS. So I think if you look across many of our business lines, you'll see that we have really many businesses that meet our criteria, that meet our strategic advantage.

Thank you very much. Thank you.

Thanks Chris. Next question.

There are no further questions. Back to you, Mr. Dougan.

Well, thanks, everybody, for calling in. I know, obviously, these calls run a little bit long, but we're trading off hopefully more disclosure and transparency for taking up a little bit more of your time. I hope you find it useful.

I would just reiterate we are pleased with the first quarter performance, and in particular, the return on equity. We do feel like we've got a very robust business model which can, as we've seen in the first quarter, can be a powerful generator of earnings. Even with a disciplined risk profile, we think we've doing well with clients. They recognize our strengths. We're really viewed as I think one of the winners out of this period. We think our Wealth Management business is very well positioned in this change industry landscape; very strong revenue growth across our key businesses and Investment Banking on the client side. We think this realigned capital efficient platform is really capable of delivering sustainable profitability, very good returns and reduced earnings volatility.

We do think we've got our strategy right on Asset Management, and our focus there we think we will lead to success over the longer run; clearly, a differentiated strategy, strong capital position, strong funding liquidity. We think well positioned businesses, significantly lower risk profile. The fact that we don't have any government ownership we think puts us in a very strong position to be a trusted partner with our clients and an attractive place to work.

So we remain optimistic about the prospects for Credit Suisse, particularly in the context of the overall industry, and we think we continue to be positioned well for difficult markets, but also to benefit if things continue to be positive.

So thank you very much for your attention.

That does conclude today's conference. An email will be sent out shortly advising how to access the replay of this conference. Thank you for joining today's call. You may all disconnect.