Credit Suisse Group AG (CS) 2009 Q4 法說會逐字稿

Good morning. This is the conference operator. Welcome, and thank you for joining the Credit Suisse Group results conference call. As a reminder, all participants are in a listen-only mode and the conference is recorded. You will have the opportunity to ask questions directly after the presentation. (Operator Instructions). At this time, I would like to turn the conference over to Mr. Brady Dougan, Chief Executive Officer of Credit Suisse Group. Please go ahead, Mr. Dougan.

Good morning. Welcome, everybody, to our full-year results presentation. Thanks for joining us. I'm going to make a brief introduction, and then Renato Fassbind will take you through the detail. We are also joined here by Walter Berchtold, Paul Calello and Eric Varvel and Rob Shafir, all of whom are going to be available for questions after the presentation.

Before we dive into the detail, I thought it would be important to step back and to talk more broadly about where Credit Suisse is positioned right now and where we are headed. Obviously many banks are in the midst of a process of difficult changes, given challenges in the market and the regulatory environment, while Credit Suisse has already anticipated and taken action relative to these changes and is positioned to perform well. I believe Credit Suisse has a distinctive strategy, that our bank is well positioned to handle both the current more challenging markets and the structural changes that will come to affect our industry.

We delivered strongly for our shareholders in 2009, picking up share and momentum across all parts of our franchise. And I believe we are in an excellent place to continue that progress, regardless of the environment, and that there is much more that we can achieve.

For the last 15 months, we at Credit Suisse have consistently made a couple of points. One, markets will not likely remain favorable on an uninterrupted basis. Seems obvious, but how quickly everyone forgets. And two, our strong view is that the regulatory environment was going to change materially. And every quarter, as we stress these points, I wondered to what extent people took notice and whether they believed we were acting on them. But we've all recently been reminded on both counts. Markets have been more challenging of late and the regulatory environment continues to evolve.

But these both were and are key features of our vision of the environment that we are in today. And acting on that vision, we've structured our business in such a way that we believe we can benefit from good markets and we'll outperform on a relative basis when markets are more difficult. And furthermore, we feel we are among the best positioned in the industry for the inevitable changes in the regulatory environment.

Just look at the evidence. We produced strong results in 2009, with one of the highest ROEs among the strongest capital bases in the industry, and with tremendous momentum with our employees and clients. We've met the multiple challenges faced by the industry and are proposing to pay a best-in-class dividend to our shareholders.

We had very strong net new asset flows during the year and have had consistent positive inflows in Private Banking throughout the crisis, in the face of pretty difficult cross-border banking backdrop for the industry. Even with the significant outflow due to the recent Italian Scudo process, we still had a resilient performance in the fourth quarter, with very solid inflows.

And just to remind you, in Private Banking we adjusted our strategy several years ago. We've transformed our business into a multi-shore, client-centric model, based on the capabilities of the integrated bank. We've invested significantly in the growth of our onshore businesses, serving our clients in their own markets. And as a result, growth in our Western European offshore business has been limited and its size has reduced relative to our overall business.

Even if you were to assume that we were to have amnesties or similar adverse events across all Western European markets, which were as aggressive as the recent Italian Scudo, our estimate is that we would not lose more than CHF25b to CHF35b in assets under management over a period of years.

Importantly, since we'd already anticipated these issues and adjusted our strategy accordingly, and we've also successfully managed issues such as the recent Scudo, where we retained two-thirds of the affected assets, we will meet our overall net new asset target of more than 6% over the cycle and the growth plan that we outlined at the recent Investor Day.

To summarize, I think our performance in Private Banking, with net inflows every quarter over a very challenging period, while at the same time implementing an industry-leading compliance program, shows that our business is well positioned even in the face of continuing challenges.

Our Investment Banking business, with its new client focus and capital-efficient model, produced a record year with good margins and ROE. The fourth quarter was our slowest of the year, but solely due to industry-wide volumes. Our returns remain high and our business performed well, and in fact we gained momentum.

And our Asset Management business has been solidly repositioned during the course of the year, with some major successful strategic moves, consistently improving financial performance and strong asset inflows.

But not only has our performance been strong, at the same time we have addressed the key challenges facing us early and decisively. We reduced risk and notional balance sheet. We have among the best capital ratios in the industry. We addressed issues of leverage early on. We were first mover in addressing compensation with responsible measures.

And let's talk a little bit more about the compensation topic. We clearly recognize the need for institutions in the industry to change the way people are rewarded and incentivized. We think we've been thoughtful and responsible on the topic and for some years have had in place measures which have been seen as industry leading. For example, last year we gave many of our senior people the so-called PAF Program, based on a portfolio of illiquid assets rather than shares as variable compensation.

We were the first firm to announce that we'd be fully compliant with the measures recommended by the G-20, and we are doing this for the 2009 compensation year, which is a year early. Also, in addition for 2009 the Executive Board will not receive any variable cash compensation. That means that all the variable compensation for me and for my senior colleagues will be deferred and subject to performance criteria, which may result in claw-backs.

If you compare 2009 to 2007, the firm's total variable compensation is down 22%, and we have increased the proportion that is deferred. Average variable compensation awarded goes down from CHF180,000 in '07 to CHF144,000 in '09. For the firm as a whole, 60% of the variable compensation was in cash and is reflected in P&L and around 40% of all variable compensation is deferred. This deferral rises to close to 60% for managing directors.

Having said that, with the structure of previous plans and deferrals coming into 2009, we don't believe that the compensation line in 2009 was in any way flattered by these increases and deferrals into later years.

You can see that the fourth quarter of 2009 we had a negative compensation accrual in Investment Banking, which led to an all-time low compensation ratio of 41% for the year. And we also took what we thought was a balanced and thoughtful approach to the UK bonus tax. Our UK managing directors received 30% less variable compensation to reduce the tax. And our global variable compensation pool for '09 was reduced by 5%, to help fund the cost.

So, overall, we've tried to strike the right balance between paying our employees competitively, doing what's right for our shareholders and responding appropriately to regulatory initiatives, as well as political and public concerns. But this is a difficult issue, but we hope we've moved in the right direction.

I wanted to spend just a minute on our position during the crisis and how we acted as a positive force, as governments and central banks took the decisive actions that were instrumental in stabilizing the financial system. We wanted to stress the fact that we played our part as actually a provider of net liquidity through the crisis period. Not only did we receive no funding from central banks, we supplied on average CHF32b and at peak over CHF70b to their liquid asset reserves. We had no need to participate in any emergency or collateralized funding facilities. Obviously we didn't need any equity injection, guarantees or purchase of illiquid assets by central governments.

Over the period, we reduced our balance sheet by 24%, risk-weighted assets by 32%. We managed to raise funding over the period in both the secured and unsecured markets, without any guarantees. And we not only extended our funding profile over the crisis period, we also preemptively raised CHF10b from private shareholders. And we also have fewer shares issued today than we had at the start of 2006.

So, in summary, we took decisive and aggressive action to ensure that our business model, funding and capital were adjusted to meet the challenges so far. And we think we are well positioned to meet any further change in the industry landscape.

So our distinctive strategy is producing exceptional results for our shareholders. And people like to say the industry doesn't have much differentiation and that the industry has learned nothing from the events of the last couple of years, but we moved to a client-focused, capital-efficient strategy early and we've implemented it aggressively. We moved early to address compensation issues and we are the first bank to adopt G-20 principles. We have fewer shares in issue and we've produced an industry-leading ROE. And we are proposing to return CHF2 per share in dividend to our shareholders, demonstrating the strength of the business and our confidence in the business model.

Our strategy means that we are very well positioned for good and bad markets. We'll do well when markets are good, but we can outperform the industry when things are more difficult.

We come into 2010 with our businesses poised to perform even better and build on our 2009 momentum, and the first five weeks of the quarter have validated that positioning. We have had a strong start to the quarter, with strong client activity. Our transaction pipelines and net new asset inflows are the best that we've seen since the crisis.

But most importantly, we feel we are ideally positioned to weather the more difficult markets that we've seen of late and that we will fare very well in the regulatory debate and the change that will come. We saw the future that we are experiencing now and we transformed our business model to allow us to thrive in these kinds of environments, and I am fully convinced that we'll do so.

So, just to sum up before I hand over to Renato, we are very pleased with the resilience of our business model and the results arising from our distinctive strategy. Our performance in 2009 shows that we seem to have taken many of the right strategic decisions. 2010 has gotten off to a good start and we think that we are well positioned to address the challenges of the unfolding changes in the political and the regulatory landscape.

With that, I'll turn it over to Renato.

Thank you, Brady, and good morning. I will start my presentation on slide seven, with an overview of the key financial highlights.

For the full year, we were able to achieve a strong performance in 2009 with revenues of CHF33.6b and net income of CHF6.7b. The return on equity for the year stood at 18%. Diluted earnings per share for the year stood at CHF5.14.

As in previous quarters, we also show our underlying results adjusted for the impact from movements in credit spreads on own debt, certain legal provisions and discrete tax items. On this underlying basis, our full-year numbers look even stronger, with a net income of CHF7.7b on revenues of CHF34.4b. The underlying return on equity amounted to 21% for the full year.

Our business was resilient in the fourth quarter, despite lower client trading activity in November and December. For the fourth quarter, we achieved revenues of CHF6.5b, net income of CHF793m and a return on equity of 8%. Net impact from tightening credit spreads resulted in a charge of CHF272m in the quarter, recorded primarily in the Investment Bank. And as previously announced, our corporate center results included a settlement charge of CHF467m related to the investigation into US dollar payments involving parties that are subject to US economic sanctions. Adjusted for these items, the underlying net income for the quarter stood at CHF1.4b, representing an after-tax return on equity of 15%.

Total credit provisions stood at CHF0.5b for the year, including a small net release of CHF40m recorded in the fourth quarter. The fourth-quarter provisions reflected the low level of new provisions in both the Private Bank and the Investment Bank.

In summary, our environment and the way we do business have changed fundamentally over the past two years. Credit Suisse responded swiftly and responsively to these changes, with the implementation of a business model that enables us to generate strong and consistent results.

Let me turn to slide eight for an overview of our results in the Private Bank. Despite continued challenges in the market environment and an evolving industry landscape, Private Banking reported solid full-year results. Net new assets of CHF42b are a reflection of our stable platform and a strong client franchise. During 2009, we demonstrated the value of our industry-leading multi-shore business model, with solid and consistently positive net asset inflows across all regions.

We stayed close to our clients, enhancing our value proposition and client service. Client satisfaction remained on a high level and we were able to further improve our market share in the high net worth and ultra high net worth client segment.

We continued with our talent upgrades, especially with focus on senior relationship managers. As a result, net new assets from new hires in 2009 more than doubled compared with 2007. We continued our investments in our multi-shore platform, as we believe that our business model provides significant upside potential from operating leverage as markets normalize.

In summary, 2009 was a very successful year for Credit Suisse Private Banking, as we were able to increase market shares. Starting into 2010, assets under management are up 16% from last year's start and we expect market share gains to continue.

Let me continue with further detail of our Private Banking results, starting with our Wealth Management business on slide nine. Pre-tax income for Wealth Management clients was CHF692m, a decrease of 4% from the prior quarter. As anticipated, we saw a 5 basis points rebound from the seasonally low gross margin in the third quarter, to 130 basis points in the fourth quarter, but more on this in a minute.

We continued to invest in our business to support future growth in the fourth quarter, invest in our client service tools, most of which are IT related, and also incurred higher marketing and sales expenses as our relationship mangers engaged in year-end-related client-facing activities, and saw an increase in compensation as we invest into our client-facing workforce. Asset inflows remained solid, but partially offset by outflows related to the Italian tax amnesty. We continued hiring, adding an additional 50 relationship advisors, and continued our talent upgrade process.

In summary, assets continued to trend upwards with continued strong inflows. And we are seeing good opportunities to hire senior relationship managers, as we take advantage of our competitive position.

Let me turn to net new assets, on slide 10. Underlying inflows were strong at CHF11b for the quarter. This amount was negatively affected by outflows of CHF5.6b related to the Scudo in Italy. Overall, these outflows are in line with previous experiences and we were able to successfully retain around two-thirds of the repatriated funds. A vast majority of our Italian assets are now booked onshore or have been processed through Scudo 1, 2 and 3 that were conducted in the past decade. For that reason, we also do not expect our net new assets to be noticeably impacted with further outflows.

Net new assets for the full year stood at a solid CHF35.3b. Even with the negative impact in the fourth quarter, our full-year asset inflows growth rate stood at 5.1%, only slightly below our 6% target rate. We believe that these strong and regionally balanced inflows evidenced that our business is building momentum. They are a testimony of our out-performance in a still challenging but slowly improving market environment.

On slide 11, we show the gross revenue margin analysis on the bar chart to the left and key net revenue trends affecting the margin to the right. While occasionally more volatile due to seasonal trends, the margin shows a remarkable stability on an annual basis, ending at 131 basis points for the last three years.

In terms of client activity, we ended the year with the majority of our clients remaining conservative in their investment behavior, being cautious with regard to more sophisticated investment products, while favoring direct investments in money markets, bonds and equities. As a consequence, the level of product issuing and management fees has been negatively affected.

In the fourth quarter, the gross margin rebounded to 130 basis points, almost in line with the full-year level. The increase in the recurring margin during the quarter, from 92 to 96 basis points, was primarily driven by higher interest income and higher management fees, the latter mainly from semi-annual performance fees. The transaction-based margin stayed rather flat, as the decrease from lower brokerage income was more than offset by higher client foreign exchange income and higher integrated solutions revenues.

In summary, we believe that the encouraging stability in our gross margin leaves the business poised to benefit from an improvement in the environment and the normalization in our clients' activity.

I will continue with our Corporate and Institutional Clients business now, on slide 12. Pre-tax income in this business increased by 15% to CHF165m. Net new asset inflows continued to be solid, at CHF1b, reflecting continued institutional client confidence in our business. Revenues remained stable from the third quarter, when adjusting for the volatility in the fair value changes on loan portfolio hedges. Provisions for credit losses stood at a low CHF17m, reflecting the strong performance of our credit portfolio, despite the challenging economic conditions.

Let me explain the significant drop in the annual pre-tax income shown in the chart on the left. On first sight, the decrease looks rather dramatic. But from the detail shown in the boxes below and indicated by the arrows, you can see that the fair value changes and the swing in credit provisions from a net release to net provisions together account for CHF383m of the decline. The residual CHF205m of the decline mostly is driven by lower loan revenues, reflecting increased refinancing costs. Notwithstanding the decrease in income and margin, we consider the full-year result of CHF753m as very solid, which is also evidenced by the strong pre-tax income margin of 42% for the year.

With that, let me turn to Investment Banking on slide 13. 2009 was a record year for the Investment Bank, both in terms of revenues and pre-tax income, as our client-focused, capital-efficient model yielded strong results. Our results reflected good performances in our client and flow-based businesses, as we continued to gain market share across many product areas. We achieved these results in conjunction with significant reduction in risk and capital usage, resulting in high quality of earnings and a superior return on economic risk capital. We did see an industry-wide slowdown in client activity in the fourth quarter, though. I will explain this in more detail in a minute.

Our full-year non-compensation expenses declined 9% from 2008 and 11% from 2007, reflecting our continued expense discipline. As Brady mentioned, our compensation structure, which takes a full-year view of the risk-adjusted profitability of the business, continues to be well aligned with the interests of our shareholders, our employees and the guidelines as outlined by G-20.

Our full-year compensation to revenue ratio, which is an output but not a driver of our compensation model, stood at a historic low of 41%. This includes a negative accrual in the fourth quarter, as we reversed performance-related compensation accrued in the prior quarters.

Let me now move to our detailed results, starting with slide 14. We had record revenues of CHF20.9b and pre-tax income of CHF7.2b. We achieved these results despite a subdued fourth quarter which was impacted by a decline in client activity. Our pre-tax return on economic capital continues to be extremely strong, with a 35% return for the full year and a 27% return in the quarter.

Slide 15 shows you a more detailed analysis of the CHF20.9b revenues achieved during the year. As to how we achieved these results, I want to remind you of our strategy which we first articulated in late 2008 and have successfully executed in 2009, splitting our Investment Bank into key client, repositioned and exit businesses. We had strong results, with revenues of CHF18.2b in our key client businesses, the ones we consider core to our strategy, including global rates, foreign exchange, cash equities and prime services.

We were able to turn around our repositioned businesses, those that are important to our franchise but where we needed to make some fundamental changes, including leveraged finance and emerging markets. We transformed these into businesses that are more client-focused, with low risk profiles and more efficient users of capital. They improved their contribution throughout the year and generated revenues of CHF5.4b in 2009.

And we exited businesses that no longer fit our strategic criteria, even though they were significant contributors to our results in the past, for example, CMBS. Our exit losses of CHF2.7b were significantly lower compared to 2008 and declined consistently throughout 2009, reflecting our early and aggressive efforts in risk reduction.

And looking ahead into 2010, we would expect that we will no longer incur meaningful losses in these areas, as exposures have been reduced and valuations have been significantly written down. Given the strategic decisions made in 2008 and the successful execution of our strategy in 2009, we entered 2010 with tremendous business momentum and upside.

Let me move to revenue trends within our businesses, starting with slide 16. We had near record equity revenues as our key client businesses, particularly cash equities, prime services and flow and corporate derivatives, performed extremely well in 2009 as we continued to extend our market share gains across many products. Also, as we pointed out last quarter, the risk reduction in the exit businesses is largely complete. As a result, the revenue impact from these businesses has been minimal during the year.

We also saw a significant increase in equity underwriting revenues towards the end of the year, as equity capital markets, particularly the IPO market, picked up significantly in the fourth quarter. This helped partially offset the decline in sales and trading revenues in the quarter caused by the slowdown in client activity. In short, a very good year for our equities business, notwithstanding the slowdown in the fourth quarter.

Our total fixed income revenues for the year, as shown on slide 17, were CHF12b. This is a strong performance, which reflects the momentum in our key client businesses, our success in turning around our repositioned businesses and significantly reduced exit losses, reflecting our early, consistent and aggressive risk reduction.

Similar to equities, fixed income sales and trading revenues in the fourth quarter were impacted by weaker market volumes and the decline in client activity across the industry. In addition, revenues were affected by lower volatility. The reduction in revenues was again partially offset by improved debt underwriting fees, particularly in high yield.

Let us now turn our focus to underwriting and advisory revenues, on slide 18. 2009 underwriting and advisory revenues were up 19%, compared to 2008. Fourth quarter revenues were up 53%, compared to the prior quarter. The significant increase, both on a year-on-year and a sequential basis, was driven by an improvement in both industry activity and our market share. Throughout 2009, we made market share gains across most products and regions. As a result, we ended the year with the number two share of investment banking revenues in Europe and the Middle East, as well as Asia Pacific.

Our outlook for this business is an optimistic one. We are starting 2010 with a strong pipeline. The fourth quarter saw signs of an improving market for global M&A activity and we expect this to continue as financing becomes more available and CEO confidence continues to improve. We also expect a resurgence in IPO activity and we see a significant high yield refinancing opportunity in the coming years, with an estimated CHF75b of high yield bonds expected to mature in the next couple of years.

Turning now to risk trends within the Investment Bank, on slide 19. This slide, which we have been showing for many quarters now, shows the risk trends for the Investment Bank in US dollars. As we have mentioned in prior quarters, our priority is to free up existing risk capital from exit portfolios for reinvestment into our targeted client businesses. Consistent with this objective, we saw a slight increase in risk-weighted assets in our ongoing businesses, while risk-weighted assets in exit businesses continued to decline.

Average VaR increased from the third quarter, primarily reflecting the impact of a methodology change and increased VaR usage, reflecting client activity across equity and fixed income. And we did not record any back-testing exceptions in 2009.

Our equity results in 2009 were driven by the significant momentum that we gained with our clients, as we made significant progress in implementing our strategy. On slide 20, we portray a long-term view of our market share progression across a sampling of our major businesses. In most of these businesses, we have made significant strides in both market share and rankings over the past few years.

In equities we have a leadership position in many of our businesses, including cash equities and prime services that we will continue to expand. In fixed income, we have significant momentum across products but still have a way to go in certain areas, specifically rates and foreign exchange. And in underwriting and advisory, we look to reestablish leadership in products where we have been historically strong, for example, high yield and IPOs.

Across all these businesses, there are still a number of areas where we have significant upside potential from extending our market share gains, and I will address them as we turn to the next slide. The chart on the left-hand side of slide 21 shows the relative revenue contributions from our major businesses in the Investment Bank in 2009 and the medium-term prospects for these businesses, as markets return to more normalized levels. The trends that we are seeing in these businesses are consistent with what we had forecasted earlier in the year, when we first started showing this chart.

As we enter 2010, we continue to be well positioned to benefit from increased business volumes as macroeconomic conditions recover. Nevertheless, the volume improvement is likely to be offset by some bid/offer spread normalization. There are a number of businesses where we have significant upside potential from an improving market environment, as well as from extending our market share gains.

We are focused on aligning our resources with environment and market opportunities. For example, we have specific growth initiatives aimed at growing our client flows and broadening our client footprint. We will do this by expanding our distribution coverage, expanding our sales force, particularly in fixed income, and making significant IT investments.

This concludes the review of the Investment Banking results, and I will now continue with Asset Management on slide 22.

We continued to take decisive and tangible steps to implement our Asset Management business model, and see encouraging initial successes as a result. Last fall, we successfully completed the sale of part of our traditional fund management business to Aberdeen Asset Management and also have exited two non-core joint ventures in Poland and Korea. We strengthened our sales team, hiring over 20 senior professionals throughout the year.

In terms of asset gathering, the two halves of the year were quite different. We are showing a positive momentum, as we were able to record CHF8b inflows in the second half, more than offsetting the outflows we still recorded in the first half of the year. And we continued to focus on driving platform efficiencies, evidenced as G&A expenses are down 8% on a full-year basis.

Let me turn to slide 23. Throughout the year, the business has been showing a consistently improving operating performance with stronger net revenues and finishing the year with a small profit. While total losses on investments and on securities purchased from our money market funds continued to be a drag in the first quarter of the year, we are encouraged by the improvement in the underlying margin of the business, which moved from 38 basis points in 2008 to 43 basis points in 2009.

Overall, we believe that the business performed well in the quarter and is now in a position to benefit from a more stabilized market environment and continues to record higher management fees, as we show on the next slide.

Business showed a consistent increase in asset management fees throughout the year. In addition, the fee base remained very well diversified, with no single strategy accounting for more than 16% of the asset management fees. In addition, we do not expect that our alternatives business will be materially impacted by proposed US regulatory changes.

I'll continue with slide 25, where we show you current assets under management levels, fourth quarter and full-year net new asset inflows and full-year gross margin of our businesses side by side.

In the net new asset column in the middle, you can see that we saw continued strong inflows into our alternatives business. These flows are mainly in the area of our real estate funds and in our recently enlarged exchange-related funds platform, which was broadened in direct and quick response to our clients' demand for less complex and more transparent products.

Flows in asset allocation products called MACS turned negative in the fourth quarter, after first encouraging inflows in the third quarter. But the outflows this quarter were driven by the Scudo in Italy, as clients liquidated discretionary mandates to repatriate their funds.

Inflows in our Swiss platform for traditional products have been slightly positive for the quarter and the year, while outflows for the businesses that we discontinued have amounted to CHF4.6b for the year, but also have largely come to an end.

In summary, we continued to make progress in refocusing the business on its core strength and better aligning it with the integrated bank. We saw encouraging asset inflows into our target asset classes, which we believe is a sign of the strengthening in our institutional client relationships. The profitability of the business continues to improve, as we report improving underling gross margins, a stabilized private equity portfolio and the near complete disposal of the money market lift-out portfolio, while delivering further reductions in general and administrative expenses.

This concludes the divisional results review and I will now continue with the Group's funding and capital position, on slide 26. We continue to hold our position as one of the best capitalized banks globally, as Basel 2 Tier 1 ratio improved by 300 basis points in the year, to 16.3%. Our Core Tier 1 ratio, excluding hybrid capital, remained above 11%.

Risk-weighted assets remained flat during the quarter, but were down 14% during the year. Since the end of 2007, risk-weighted assets were reduced by 32%, reflecting our disciplined approach to risk utilization and the rigorous implementation of our client-focused and capital-efficient strategy.

As already mentioned by Brady, we today announced the Board's decision to propose a dividend of CHF2 per share for the year 2009. While still part of shareholders' equity until paid out in early May 2010, this dividend is already fully considered in the current capital ratio.

We have also maintained a strong balance sheet this quarter, as you can see on slide 27. The Swiss regulatory leverage ratio increased further, to 4.2%. For some time, we have pointed out the advantages of our stable and low-cost customer deposit base, which covers more than 122% of our loan portfolio.

As already mentioned by Brady, we have also increased the term of our long-term debt funding. We have increased since 2006 the average duration of our long-term debt outstanding by 31%, to now 6.4 years. In addition, the proportion of our unsecured funding in the form of long-term debt has increased from 26% in 2006 to 32% in 2009. And for the calendar year 2010, we already now have completed 40% of our projected full-year long-term debt refinancing requirements.

Before I conclude my presentation, I want to give an outlook on the impact of known changes to the accounting principles, as shown on slide 28. New consolidation rules for Variable Interest Entities, VIEs, have to be adopted in the first quarter 2010. As a result, the opening consolidated balance sheet is going to increase by CHF15b, or nearly 1%. Also, we expect a reduction in opening retained earnings by approximately CHF2b, mostly related to the consolidation of Alpine, a previously unconsolidated commercial paper conduit.

Most importantly, there is no impact on BIS Tier 1 capital or risk-weighted assets. The consolidation of Alpine also affects the future recognition of movements in credit spreads on our own debt. And as you know, we entered in early 2009 into a transaction with Alpine designed to reduce the volatility of changes in own credit spreads on our results.

Following the consolidation, the remaining cumulative net gain of CHF1.5b will be amortized on a straight-line basis, resulting in a reduced charge of approximately CHF60m per quarter to the divisions, mostly to the Investment Bank. Any future positive or negative difference between the amortization amount, the straight-line amortization amount, and the impact from changes in credit spreads in the markets will continue to be included in the Corporate Center.

This concludes my presentation, and with that I will hand back to Brady for closing remarks. Please, Brady.

Thanks, Renato. We'll open it up in a second to your questions, but before we do that I wanted to just sum up by making five points.

First, strategy. 2009 demonstrates that we have successfully implemented our distinctive client-focused, capital-efficient business model, with strong financial, client and employee momentum.

Two, results. Our results were strong for the full year and the fourth-quarter results were solid in a difficult industry environment. For the full year, we produced an industry-leading 18% return on equity, ended the year with a 16.3% Tier 1 capital ratio and are recommending a best-in-class CHF2 dividend. Our Private Bank attracted CHF44b of net new assets during 2009 and produced a gross margin of 131 basis points for the year. Investment Banking produced record annual results on materially lower risk with strong franchise momentum. And Asset Management has been successfully repositioned and shows improving financial performance and strong asset inflows.

Third, resilience. Our business model will allow us to outperform in more adverse markets. Our fourth-quarter performance, with an underlying 15% ROE in a tougher industry environment, CHF6b of net new assets in the face of significant cross-border headwinds and a 27% return on economic risk capital in the Investment Bank, demonstrated the resiliency of the business.

Fourth, competitively advantaged for change. Our strategy positions us strongly for the future regulatory environment on capital, leverage, funding, compensation and cross-border issues. We anticipated change, acted early and are competitively advantaged for change.

And fifth, a strong start. The quarter has started strong, with strong client activity, and our transaction pipelines and net new asset inflows are the best that we've seen since the crisis.

Thanks very much for your attention. And with that, we'll open it up for questions.

I guess we'll start here in the room. Yes, and we'll go next back (multiple speakers).

Thanks very much. Good morning. Rainer Skierka from Bank Sarasin. Brady, you made a straightforward comment on the Scudo -- the potential European-wide Scudo effect on your asset outflows. Could you give us your thoughts what would happen if the automatic client information data exchange would happen? Would this materially worsen your figure or would it be about the same?

And second question, could you give us an update on the PIP Program, which I think has a duration this year and over the next year's financial effects, share price barriers, etc.? Thank you.

Yes. Thanks for the questions. I think, with regard to the comment we made on a potential Europe-wide Scudo effect, I guess what we were basically trying to communicate was the fact that the European offshore business, while obviously an important part of the business, is not that significant a part of the business. And so basically the total amount of assets that we have under management from the major European markets in our offshore business is less than CHF100b.

Obviously, when you look at something like the Italian Scudo process, where we were able to retain two-thirds of the assets under management in that process, clearly I think the prospect, therefore, even in a sort of bad case scenario, as we laid out, of similarly severe Scudo processes around all the markets in Europe, still leads to, we think, a very manageable outcome. And so, from our point of view, we think that's a very solid analysis of it.

With regard to other issues that are under discussion, things like automatic client exchange, information exchange, etc., obviously there are a lot of things out there. It's unclear what direction those might go in. So I don't think I'll get into a detailed discussion of those. In general, we've built strong onshore businesses. We've built a cross-border client business which is very compliant. We've got state-of-the-art compliance around that. We've seen the results in the business.

And we've had lots of issues over the last year and a half, right, US, France, Italian Scudo, issues in Germany. Over that whole period, we've had consistent inflows every quarter. You saw in the fourth quarter, actually, the underlying -- excluding the Scudo we had CHF12b of client inflows in the fourth quarter, which I think is a very strong result in what is seasonally -- as you know, the fourth quarter is seasonally a little bit less strong, usually. So I guess it's hard to predict what might come through, but we think that the business model has shown itself to be very resilient and will continue to be so.

In terms of the PIP Program, as you mentioned, just to remind anybody who is not familiar with it, that was a program that was actually put in place five years ago. It's actually referred to now and looked at by many people in the industry as state-of-the-art now, in terms of the things that were a part of the program. It was long term. It was five years in duration. It was contingent on performance of the Company in each of the years, as well -- both in terms of P&L performance and share performance. And it was really laid out as an instrument where clearly our employees could do well if the shareholders did well, but wouldn't make anything if the shareholders didn't do well.

We've had periods -- over that period, we've had times when it's been worthless, but obviously now we are coming to the end of the period and the value will be determined over the course of the next period of time. So we are coming to a crystallization of the value of that. And really, the way we look at it, this was really a program in which the management was asked to invest five years ago, and what you are seeing now is really the capital gain or returns on that.

I think the most important points probably to make with regard to the financials, though, is that there is no expense impact of this program coming to fruition and there is no dilution impact of this program coming to fruition. So that's our view now, is that there'll be no expense or dilution impact from this.

Does that address the question?

(Inaudible question - microphone inaccessible).

What do you mean where do we fund it?

(Operator Instructions).

(inaudible) the expense. It was expensed, actually, years ago. The -- it's a little complex in terms of them, but it basically was expensed in prior years. And we have the -- again, we don't know exactly what the outcome of the program will be, but we have the shares that we need to deliver to employees.

Next question. Yes.

Yes, good morning. Jacques-Henri Gaulard from Autonomous Research. First question is you seem to have reaped the benefits of the market share gains on the advisory and underwriting business, and effectively the quarter averaged CHF1.2b. Is it fair to assume now, everything being equal, that the revenue of this quarter in that particular business will be higher than the average of the product for two quarter if we assume that we see you capitalizing on your market share gains there? That's the first question.

The second would be on regulation, maybe if you could actually let us know what the capital situation of the bank is in the US. I had a look in the Q4 presentation. It seems that you're adequately capitalized there. But I just wanted to make sure that versus other banks, like Barclays or Deutsche, that could have a capital hole, for example, you would be okay, in case you would be asked to locally capitalize effectively the US business of Credit Suisse.

And lastly, on the change of accounting principle, I would like to understand how the operating retained earnings can go down by CHF2b but the BIS Tier 1 ratio remain stable. Does it mean (inaudible) go up? If I can have a bit of clarification there. Thank you, gents.

Just so I can clarify your first, because your first question is specifically to the advisory piece of the Investment Banking revenue and you're noting the improvement in the fourth quarter and you're just asking how we can see that going forward. Okay. All right. I don't know, one of you, Paul, Eric, can you --?

Sure. Maybe I can take that one. First of all, the CHF1.2b, as you saw, was both the advisory and the underwriting, and it was a strong increase in the fourth quarter. And we saw that, I think, some big transactions started to clear in the fourth quarter, as we saw the markets open up and confidence also being brought to the CEO suite, some more M&A activity overall. And as we -- as you've already seen, there's been several M&A deals announced already this year. And in a few -- we completed over $1b IPO earlier this year, as well, on the Hong Kong stock exchange. So the market's opening up for some IPOs.

But we'll have to see, really, in terms of will the market remain constructive for us. And the pipeline, as we said earlier, is as good as we've seen since the crisis. So the question will be will the market remain constructive enough for us to be able to continue to roll out that pipeline of IPOs, and also the confidence remain to be able to complete the pipeline of M&A activity we see. So very difficult to answer without being able to read into the future of what these markets are going to look like. We're hopeful.

But if you look -- as Paul said, if you look at pipeline and you look at our increasing market share in those areas, we like what we're seeing there.

With regard to the regulatory issue, I would say in general, and I might ask Renato if he needs to make a specific answer on the US, but in general these issues around capitalization of subsidiaries, etc., we in general have had independently capitalized subsidiaries. So, as you say, we don't have issues around that, which I know some people have looked at and think there are issues. We don't have any issues around those points. We're sufficiently capitalized in all of our jurisdictions.

And then, do you want to answer the question on the change in accounting principle and the impact on the retained earnings?

If I could correctly answer, this is my last slide that I've shown, which -- that will happen in Q1. And the reason was that all the transactions that were related to fair value of own debt had by definition and by Basel II rules no impact on the Tier 1. So when we had the big gains in the beginning, that was not reflected and Tier 1 was deducted, so to say, from our equity. And now, when it's reversing, it's the other way around. So you will see basically a decline in real equity, but not in Tier 1.

Next question in the room. I'm sure we have a lot of people probably on the phone, I guess, but next question in the room.

Yes. Good morning. Thomas Braun, Classic Funds. Compensation ratio in IB, it looks pretty low. Can you give us a guidance where you would see normal ratio in the future? And would you see here a major change if you compare it to the past?

Well, I think in general -- first of all, one of the points we make is we don't really manage the business based on a comp-to-revenue ratio, and it's actually one of the things that we've taken out of the crisis. And one of the things that regulators have talked about is having a much more risk-based orientation towards how we look at compensation and allocate compensation. So, that number is really more a result than a number that we focus on. But I would say, clearly, both for 2009 and on an ongoing basis, that the amount of compensation that we pay and the percentage versus revenues or other statistics will be based on mostly the performance of the business and the competitive environment.

I think our general view is that, as we say, we're optimistic about how the business will perform and we think how it will perform competitively. So I think our hope is that we'll continue to be able to have a responsible and also a better sharing than we've seen historically between employee and shareholder in this area. But again, it will be -- probably a lot of it comes down to what the actual market conditions and performance of the business are and what the competitive environment is. But I don't know if there's anything to add. Is that okay?

Other questions here, or maybe we should go to the phone. Shall we go because there's probably a lot on there? Do we have questions? Great. She just held up a sign saying 26. Okay. Let's take the first one.

First question comes from Huw Van Steenis of Morgan Stanley. Please go ahead.

Morning, everyone. First question on the Private Bank. By my reckoning, you will overtake UBS as the largest private bank by the end of Q2. I was wondering if you could just probably put a little bit more color on your comment about the best quarter since the crisis. I think you did CHF16b in Q2. I'm assuming you're probably going to exceed that. If there's any more color you can offer, obviously delighted.

And then, number two, I think you've been extremely helpful in giving color on how you think the underlying trends in the Investment Bank have been going this year. Perhaps if I could just ask one nitpicky one. You have slightly underperformed your peers in equity trading and fixed income trading in the fourth quarter, quarter on quarter. But if I look on slide 36, you say that your market shares are probably flat to even up. And I was just wondering, how would you reconcile the swing? Is it you're asserting the other players had more prop and just credit mark-ups and because you've got a cleaner book you just have fewer mark-ups from the back book? Or is there some other missing factor that I'm just missing this morning, because I haven't had enough coffee? Thanks.

I think, with regard to the first question, as you say, we've been, I think, quite encouraged by the consistency of the inflows over the past quarters, by I think the -- by the broad participation in that from all regions. You see that in the fourth quarter as well. As you mention, if we look at the fourth quarter, if we hadn't had the Scudo process going on, we would have had CHF12b of inflows. And the first quarter has started off strong. But I don't know, Walter, if you want to add any flavor to that that would be helpful.

Well, if I understood you correctly, you said like we had one quarter where we had CHF16b, CHF17b. We had a very record start to the first quarter. We had a record month in the first quarter of 2010. This is (inaudible). But -- okay.

Thank you.

Well, the first five weeks of the quarter have been quite -- have been very strong. So, and as we said, we'll see how that carries through. But yes. And then, Paul, do you want to --?

Yes. Thanks, Huw. You clearly have had enough coffee because I think you've got it right on in terms of our change in business strategy. We didn't have big gains in prop or significant write-ups in the assets. I think you also have to look toward the business mix as well. So some of the businesses that performed very well across the street were in commodities and foreign exchange and as we've pointed out, we have smaller market share in those businesses. Both we're looking to build but I think it's also -- that would be the last one that I would add, is business mix to the fold.

Otherwise, again, just to reiterate, even with that slowdown, I think the return on equity of 27% and the margins of 39%, even in the fourth quarter, are still quite attractive. Thanks, Huw.

And I think that's one of the encouraging things is that we've been putting out this bubble diagram for the last six or eight months, or whatever, and I think we still feel -- first of all, we've seen it actually move in that direction and we still feel that there is -- margin has continued to remain pretty durable. It's obviously reduced in some of the areas, but it's remained pretty durable, as we have been saying it would be. We are increasing market share in some of those areas that we have in the bottom part of that chart, which I think is good. And we have seen some pick-up in the overall market conditions of some of the other areas.

So I think all that -- again, it's obviously very much depends on market conditions, but we think all that is kind of moving in the direction that we had expected that it would.

Thank you very much.

Thanks, Huw. Next question?

Your next question comes from Fiona Swaffield of Execution Noble. Please go ahead.

Hi. Two questions, firstly on the dividend. I just wanted to check how you come up with CHF2 a share, because I don't think you've got a stated payout policy. But how do you look at it? Do you look at it relative to underlying profit or -- and is this giving us a signal what you think '10 or '11 earnings could be? I just wanted some idea about how you get to CHF2.

And then the second issue is on cost, or the lack of operating leverage in the Private Bank and WMC in particular. Obviously costs have gone up progressively over the quarters and we're not seeing any operating leverage. Could you talk about whether that will come through in 2010 and whether there's any one-off costs in Q4 that we could strip out? Thanks.

I think, on the first question about the dividend, we obviously think that we have, as we say, a business model that's performing well and that's resilient. We have very high levels of capitalization in the business and we feel we have a business model that is very cash and capital generative on an ongoing basis. And so, obviously, our -- the Board's recommendation to the shareholders as to a CHF2 dividend is probably a combination of both what's actually been produced and where we are, but also a -- reflects, I think, the confidence in the capital generation capability of the business going forward.

So obviously, still, there are obviously a lot of different influences out there in the markets, but I think that that is -- certainly is a reflection of the confidence that we have and the optimism we have around the business going forward.

I think, on the cost side, as we said, broadly -- and I can ask Walter if he wants to add any detail. Broadly, we still believe that the Private Banking business is positioned in place where we -- as we do see a pick-up in client activity, etc., that we are going to see a lot of operating leverage come through and we made that point back in September. We still feel that way. As you can see, in the fourth quarter we still didn't see quite the uplift that we would have liked to have seen. We saw an increase in revenues which was solid, but nonetheless we still think there's a lot more potential upside.

But we also continue to invest in the business. And so, when you look at some of the IT investments, some of the people investments that we've made, those are important investments that we think are going to pay off really well going forward. So -- but I don't know, Walter, if you want to add any flavor to that.

No. I think you basically highlighted the major points, Fiona. We obviously had a very small uplift on the revenue side but we are continuing in investing in our platform. We have -- as we said, we adapted it. We have an onshore/offshore model. We certainly have to do a lot more work around that. We have to invest in our platform. And uplift will really come, as well, through markets. So once markets come back, I think we will see tremendous uplift. But to look at this from quarter to quarter is a little bit problematic in the current environment.

Okay. Thanks very much.

Thanks, Fiona. Next question?

Derek De Vries of Banc of America. Please go ahead.

Hi, thanks. I've got two questions, but they're quick ones. So, on the gross margin, when you were talking about it, you cited higher performance fees in the quarter as one of the drivers of the nice increase. I was just wondering, could you give us just an indication what performance these are in basis points over the last couple of years? I'm not concerned about Q4 but just how much of the gross margin is performance fees, and then how that compares Credit Suisse versus industry average. Are you sort of average or more or less sensitive to performance fees?

And then, just a little detail question. You said you've completed 40% of your 2010 long-term debt funding. I just was wondering if you could give us a number there for the 2010 funding need. Thanks.

Okay. I don't know if you want to start with -- maybe we'll start with the second question first. Is the remaining, is the total, of which 40% is done. Yes, obviously, with our -- with funding that we've already done in the course of 2009, with what's happened with our balance sheet, etc., the long-term requirements are obviously pretty modest. The total program for 2010, if we wanted to sort of stay even, was about CHF12b, of which 40% is done. So at this point, we'd only have CHF8b remaining or CHF7b remaining to raise.

But I think also an important statistic we laid out there was just, when you look at the maturity of our wholesale liabilities, we've actually pushed them out pretty substantially, 30%, 40%, depending on how you actually measure them, over the last couple of years. And that was obviously in an environment where others were doing government guaranteed shorter issues, etc. We've actually pushed it out quite substantially and we're going to continue to maintain a very conservative profile on the liability side.

So do you want to -- I don't know if we disclose the performance information but --

We have roughly between 2 to 3 basis points over the year and in the fourth quarter it was about 4. Some of the performance fees are paid on a half-year basis.

Thank you very much.

And I would say, Derek, also I think that's -- as we continue to see -- I think our Asset Management business is going in a very positive direction and also just the general environment within Private Banking. Certainly our hope is that we're going to see more management -- more managed product, more fees from that and that may also lead to hopefully more performance fees over time.

Great. Thanks. Very clear.

Next question?

Your next question comes from Jernej Omahen of Goldman Sachs.

Yes. Hey there. It's Jernej here from Goldman. Just a few questions left, actually. The first one is just on the operating leverage in your Private Bank and I think Wealth Management business. And I think you've alluded to the fact there's a lot of operating leverage to go for. I remember at the Investor Day you were talking about a 40% pre-tax margin and you're currently at around 30%, I think, for the full year, or slightly lower for the fourth quarter. And I was just wondering if you're happy to essentially confirm that target again and maybe give us a timeline as to where and when you think that's achievable.

The second question is on the net new money. Record start -- a record month since the start of the crisis I think was the indication. I was just wondering whether you think that's a Credit Suisse specific development, or whether you think the market, or the industry environment, has just changed for the better in that area.

And finally, I guess, a broader question just relating to regulation. I think Credit Suisse's assets are down CHF32b, I think, this quarter. So you continue to cut the total size of your balance sheet. How do you look at this too big to fail debate and I guess just the debate of looking at banks as assets relative to GDP, which seems to have gained some traction in the US. I think that the largest US bank has around 15% of their assets relative to the US GDP. Obviously Credit Suisse has around twice the amount of total assets relative to the Swiss GDP. How do you look at that and do you think the regulator is [stopped] by that at all? Or is it a non-issue for you? Thank you.

Okay. Good. Thanks for those. You want to answer, Walter? I think we're still --

Well, just quickly on the leverage, or on our pre-tax margin, are we sticking to the 40% pre-tax margin. That is what we are managing towards, but certainly it will take some more quarters because it's as well depending on markets. But again, to reiterate our leverage, just to give you a little bit of comparison. 2009 was down 6.4% in asset-under-management basis. Versus '08, we will start from a much higher base now. We have the initiatives, as we discussed at the Investor Day, with, for example, managed investment products where we are seeing pick-up. So I'm quite convinced that this leverage will come through.

When it comes to our prediction here, obviously we speak for Credit Suisse. I cannot speak for the entire industry. But certainly we were very pleased with the inflow we had in the first five weeks.

And I think obviously, if you look in the fourth quarter, there was some significant diversions and different outcomes in terms of net new asset flows and things. So we -- but as Walter said, I guess all we can really comment on is our experience there.

I think, with regard to the too big to fail debate, obviously in general there are a number of issues that are still under discussion, debate, under construction in terms of the regulatory initiatives. I think that the industry and regulators in general are engaging in a good constructive debate. I think in many of these areas, as we've said before, I think we're narrowing down the outcomes. And I think we're -- again, I think we believe that from where we're positioned as a business we're in a good place in terms of being able to continue to drive the business model against that.

I think the question of too big to fail in general, it's obviously a very broad discussion. Part of it has to do with what steps have already been taken or could be taken to make the banks safer. So when we look at Credit Suisse, we have 40% more capital now than we did two years ago. We have a 30% smaller balance sheet. We have lower leverage. We have adopted a lower-risk business model, all of which makes us less systemically risky. I think also questions around making sure that we have in place different kind of resolution regimes between the different countries and all of this is probably -- is part of the discussion.

So I think in general, if your question is do we see this as an area where we might see negative developments, I think again, in general, I think the discussion and the debate is constructive and we'll end up with something that does help to make the financial systems safer, sounder, but also allows us to continue to pursue the business model in its current form.

Wonderful. Thanks a lot.

Your next question comes from Christopher Wheeler at MainFirst Bank. Please go ahead.

Yes. Good morning, everybody. I've got some questions on the Wealth Management business, if I may. The first one is really on the compensation increase in the quarter. I know we've talked about it but could you perhaps just talk about the rationale for the 9% increase, which does seem to mainly come through the compensation line? Is this 110 bonuses? What's the real makeup of that on the back of the 50 people you've hired?

And then, perhaps just talking about the hirings, if we look at Asia now, you lost another 20 financial advisers in the quarter. You're now down [8%] since the third quarter of '08. And I'm just wondering, is that shedding underperformers or are you just seeing it becoming very competitive in that market despite obviously your very strong position?

And perhaps just a final point. I really don't want to flog a dead horse on this leverage issue, but Walter was kind of insinuating there that you thought the gross margin might go up on the base of some of the product mix. My view is your gross margin is obviously very high and that's impressive. I just don't see how much higher it can go. And therefore, this is all about growth in assets and as I think Ernie pointed out earlier, it's a long way to that 40%. You're performing well, don't get me wrong, but it just seems that's a very high mountain to climb, off that 131 basis point gross margin. Thank you.

Okay. I guess your first question was around compensation, and particularly in the Private Bank and Wealth Management in the fourth quarter, and the increase in compensation. I think it's not -- we've always said the compensation line is obviously -- it's a pretty complex line in terms of previous year programs and their impact and how future programs, etc. So I do think there was an element of investment in the fourth quarter in terms of some of the advisors that we brought on. But a lot of that, frankly, is more noise around just different timing effects, I think, at the end of the day. So I don't think we view the compensation development on that line as a significant one in the fourth quarter, with the only point being that there is an element of investment on the people side.

But I don't know if you want to add to that, Walter, and also address this question about Asia Pac.

No, I think you pretty well covered it. Obviously there was this rather special effect when you compare it quarter over the quarter, because last year we had a special deferral with the [Crar], which obviously doesn't come in now. So that, as well, was contributing a little bit to it but Brady referred to that.

Then, when it comes to Asia, yes, we did lose another 20 but that's really forced. That still is part of our upgrading. We have hired mainly, in Asia, very senior people, which is as well obviously demonstrated by the very strong net new asset inflow we've seen over the year. And especially as well, in the last quarter in Asia, a lot of senior people actually came online, if you want, in the last quarter. I'll see a continuation of that but do expect now that from these levels relationship manager number in Asia will go back up again.

And it's not about us losing competitiveness in the marketplace. We are still, I think, an absolutely preferred employer. But we obviously had to correct a little bit our hiring we did back in 2006, 2007.

And then, to the growth, I do expect obviously the margins to stay around 130 basis points, but at the same time see growth on the asset side. This is really how we want to drive this and then clearly multiply times the 130, or what we always guided you to is 125, between 125 and 135.

And at the same time, we have to have an eye on efficiency. And, for example, in 2009, for example, when it comes to G&A expenses, we took out roughly CHF300m of expenses and this is how we want to run the business. But clearly, in order to get growth, we will have to further invest. So for some time, as I said, probably we will cruise below the 40% pre-tax but for us, in order to manage, this is still our key indicator.

Next question?

Next question comes from Kian Abouhossein of JP Morgan. Please go ahead.

Yes, hi. Three questions. The first one is on headcount in the IB. Could you talk about how we should look at that in 2010, relative to 2009, in what segments?

Secondly, on fixed income FX rates commodities, can you go a little bit more bottom up and tell us what you're doing in 2010 in terms of investment, and what areas? And why are you -- why is there such a big gap still, considering that you've been investing for a while now?

And lastly, on sovereign risk more generally, how has it impacted you, either in the IB or indirectly in Wealth Management, sovereign risk spreads increasing? And is there a risk in terms of liquidity that you are seeing in February, or that you're concerned about over the next few months?

Maybe I'll take the last question first and then I'll pass it over to Paul or Eric on the other two questions. I think, with regard to sovereign risk, obviously we've been watching the situation closely. We don't feel we have any material exposures there. The exposures that we have in some of the larger sovereign areas are clearly pretty liquid exposures and a lot of the very liquid traded markets. And so we actually feel like we're pretty -- we feel we're in pretty good shape on all that.

Haven't really seen a lot of liquidity issues so far, but I think it's something that we clearly need to continue to be -- to look at and to be focused on. But in general, I think our exposures in this area are relatively small and we're reasonably -- we're well positioned against that.

But Paul, do you want to address the headcount issue and then the --?

On headcount for 2010, we'll be selectively hiring. We've identified a few areas that we are focusing on, which are consistent with our client-focused, capital-efficient strategy. One is increasing headcount in IT because many of the areas, as we look to expand some of particularly our flow-based businesses, require continued investment on the IT platform, to take advantage of the premier position we have in products like our AES products, to expand some of that capability over to the fixed income side in particular. So IT is an important area.

Another area of selective expansion is going to be in sales in general because you won't hear us talking about increasing the trading platform. We have the product capability but looking to leverage that with greater sales capability overall. So those would be the two areas in particular that you would see selective headcount increases in particular. There are also some benefits in some of the support areas where actually we'll see some efficiencies in headcount.

And then, specifically with regard to your question on foreign exchange and commodities, I'll start. Foreign exchange, that's one of the areas that the sales headcount corresponds with your earlier question, where you'll see focus as we invest to expand our effort there. We think that there is great market share that can still -- that we've gained in the past couple of years, but we're still -- there's a lot of market share still to gain in that area.

Commodities in particular is one in which you know we have the joint venture with Glencorp and we continue to look to very carefully expand on that business, in a way that is again consistent with the client-focused, capital-efficient strategy. It can be more volatile underlying business overall, as you know. And I think that accounts, at least partly, for our caution in the way in which we build that business.

Okay? Thanks. Next question?

Next question, Jon Peace of Nomura.

Morning, everybody. Two very quick questions. Firstly, on the January trends, you told us that net new money was a record in Private Banking. Should we understanding trading in the Investment Bank was also a record in January, or if it wasn't would you just give us a feeling of how it compares with, say, the first quarter or the first half of 2009?

The second question is just on your full year net income. You give us a helpful slide that tells us that it was CHF6.7b, as stated, but it would be CHF7.7b on a clean basis, and I work out that's an EPS of CHF6.36. Should we think of that adjusted EPS of CHF6.36 as a base on which you would hope to grow, markets willing, in 2010? Thanks very much.

Yes. In terms of how the quarter's gone so far, as you know, what we have said is we've had a strong start and we've seen strong client flows. We didn't actually specifically comment on the trading results. And it's a little hard to compare that to '09 because, as you'll remember, we were, I think, pretty transparent about it. We had a pretty large amount of gains, which we call the rebound, profits in the first quarter of last year. And so -- and we -- as you may recall, we laid that out pretty clearly, segregated that out as what we determined to be sort of the bounce-back result.

So what we are seeing is very strong client flows and we've had a strong start to the year, but we didn't make a specific comment on the trading results in the Investment Bank. So I don't know if that helps or not but that's what we were saying.

I think, as you say, the underlying net income for 2009, I think -- I guess that calculation is correct. And I think, yes, I think that's probably a good base to look at going forward. And as we say, we feel like the business is well positioned and it will obviously depend on the opportunities that present themselves, but we certainly hope to take the business from there.

Next question?

Next question, Philipp Zieschang of UBS. Please go ahead.

Morning. Two questions, please. The first one is I'm trying to reconcile your previously recorded some CHF6b gains on own debt with the numbers now. According to your disclosure, you had about CHF750m write-downs on own debt over the past three quarters and now you say you book CHF2b into retained earnings and another CHF1.5b to come, so there's still about CHF2b missing versus the ones where you recorded the gains on. And if you could help me reconcile that one.

And the second question is just could you tell us what rate your treasury pays in terms of the fund transfer pricing to the Wealth Management business for the excess deposits of CHF80b? Thank you.

Okay. First question, I don't know, Renato, can you address that?

Yes. Thanks for asking that question. The delta between -- basically, the CHF2b is the net that we have to consolidate coming from Alpine, the net loss that was triggered there, and that is after tax. So the delta of it is roughly CHF1.7b, CHF1.8b that you were referring to is the tax amount.

And then I'm not exactly sure, when you talk about CHF80b of between, you said of transfer funding between the Private Bank and the treasury area, I'm not really sure. Generally, against all our businesses, we use market rates for in between the different units. So I'm actually not sure what the CHF80b is, though, so.

I don't know either.

Is that some number that's -- I didn't know if there's a number that's disclosed on that or -- anyway, we use market rates for all the transfers within the Company. So it would just be a -- it's just a market rate.

Okay. Next question?

Next question, Kinner Lakhani of Citi.

Yes, hi. Good morning. I just wanted to ask you two questions on strategy, actually. First one on emerging markets. Emerging markets seems to be part of your repositioned business, whereas for a number of your competitors it's a core part of the future growth strategy. So what's your view on there? Where do you see your strengths and weaknesses and opportunities?

And second question, really on your capital position. Clearly you're going to be spinning off -- continue to spin off a lot of capital over the next year or two, going forward. Just wondering what your views are on that and whether M&A plays a part.

Maybe I'll answer the second question first and then we can have Paul or Eric answer the first. Yes, obviously we do feel like we have a strong capital position. We do feel like we're going to generate a lot of capital over the periods to come, hopefully. Obviously we can use that capital to grow organically. We could use it to make acquisitions. And also, clearly another option is to return some of that capital to shareholders over time. We'll obviously try to be opportunistic about which of those we do, at what point in time.

We've been -- I'd say we've been fairly prudent or conservative around acquisitions. Certainly, if we see things that are attractive and that fit the business model, then we certainly will try to be opportunistic about that. But we actually feel that over the past couple of years there's probably been -- well, there's been opportunity. There's also been a lot of challenges to many of the acquisitions that have been made. And we feel like we've got great momentum. We're on a very clear track. We think we can organically grow the business very well.

And so, if you look at something like Private Banking where many of the acquisitions that are out there often amount to one quarter is net new asset -- organic net new asset growth for us. And so we certainly want to be opportunistic but we want to be careful about making sure that we can maintain our momentum going forward. So I don't know if that answers the question very well but that's obviously what we look at.

Eric, do you want to answer emerging markets?

Sure. The emerging markets part of our strategy is core. We've had strong legacy positions across Middle East, Brazil, China, Russia. And we're going to continue to focus on those markets. We have tended to have more capital in those markets. We're going to make those markets more capital efficient, with respect to building sales and trading in those markets. And we're also going to bring to bear the relationship we have across those markets, to bring more M&A and advisory business, more underwriting business. And we also think there's an opportunity for us to build specific third party capital models, both within countries as well as globally, to support our franchises in those markets. So we have a lot of plans there and it's going to be a fundamental part of our business.

I think we've been if not the certainly one of the leading players in those markets and we'll continue to be, but it will be consistent with our new strategy, as Eric mentioned, in terms of a client-focused, capital-efficient strategy. But I think it will continue to be a critical part of our growth strategy in Investment Banking.

Next question?

Georg Kanders of WestLB. Please go ahead.

Yes. Sorry. I have a question on this. Would you then say that the client activities at least were above the beginning of last year's level?

The second question that is left is just on the capital. You now said the CHF2 dividend are deducted from capital. This is then a full impact on the Tier 1 ratio on Q4. Is this -- did I get it right this way?

Yes. On your second questions, that's exactly right. So the dividend of CHF2 will be proposed at our AGM at the end of April and hopefully approved by the shareholders. But that is our recommended -- that's the recommendation from the Board to the shareholders will be CHF2. And in terms of our accounts in 2009, as of the end of the year our accounts assume the effect of that CHF2 being paid out. So the 16.3% Tier 1 ratio is after assuming that that dividend gets paid out, assuming that it will be approved by the shareholders.

And just to be clear on the first part of your question, again, I would just come back to what we've said is we've had a strong start to the year, we've seen strong client activity. And then we said our transaction pipeline and our client net new asset inflows are the best that we've seen since the crisis. And so that's our statement.

Next?

The last question comes from Matthew Clark of KBW. Please go ahead.

Good morning. Couple of questions, I'm afraid. Firstly, could you give some kind of tax rate guidance? I guess, given your business mixes moving a bit towards the Investment Bank, compared with pre-crisis, maybe there's some upwards pressure there.

Next question, just on the CHF100b of EU cross-border business you referred to. Just wanted to check whether this is the global cross-border assets of EU residents, or are you only talking about the Swiss platform? So, for example, if you have a German citizen who's got money in the Channel Islands or the Cayman Islands, would that be captured by that CHF100b figure?

And then, finally, on your Wealth Management deposits, could I just check what duration those are invested in because one of your competitors has been reporting margin pressure as they've had to reinvest it at lower rates? So just trying to check how you invest your deposits in the Wealth Management Division. Thanks.

Let me start with the tax rate, which, Renato, I'll turn over to you.

It's always an interesting question. And we have guided the market a little bit about half a year ago towards a higher tax rate, in the neighborhood of the mid 20s, high 20s. I think that's what you're going to see over the time, when we are amortizing also a deferred tax asset which has a slightly negative effect on the tax rate. That's where we're going to be.

Okay.

Walter, do you want to try to address the question of this EU offshore money and then the Wealth Management deposit issue?

Okay. First the deposits, as just described before, is really going through the treasury organization so we cannot really comment. We do not -- well, let's call it in different words. We, as a Private Banking Division, do not invest those deposits outside of the market. That's done centrally by the treasury.

When it comes to the CHF100b assets that is the Swiss booking platform, where by far the biggest majority is sitting. I think you ask as well what it represents. It represents the four major countries, which is Germany, UK, Italy and France.

Okay. I think there are no more questions on the phone, so any more -- anybody want to ask any questions here in the auditorium, before we finish up? Last chance. Okay. Well, good. Thank you, everybody on the phone and here in the auditorium. Thanks for your time and I appreciate your attention. Thank you.

That does conclude today's conference. An e-mail 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.