Credit Suisse Group AG (CS) 2011 Q3 法說會逐字稿

Welcome, everybody. Thanks for joining us for our third quarter earnings presentation. I'm joined by David Mathers, our CFO, who'll deliver the results portion of today's discussion.

In addition to a review of our third quarter results this morning, we're also going to give an update on the steps that we're taking to evolve the client-focused capital efficient strategy of our integrated Bank to the new market and regulatory environment.

I'll begin by saying that we performed below our expectations in the third quarter, with reported net income of CHF700 million and underlying net income of CHF400 million.

As you well know, the environment in the quarter was characterized by a high degree of uncertainty and low levels of client activity across businesses, and extreme market volatility.

Escalating concerns around the European sovereign debt crisis and indications of a global economic slowdown contributed strongly, and obviously quite negatively, to a continued challenging operating environment. In spite of this, we reported a solid underlying return on equity of 12% for the first nine months of 2011.

And we continued to gain share across our businesses' solid net asset inflows of CHF7.1 billion in the third quarter and CHF40.5 billion for the nine-month period, with strong contributions from ultra-high-net-worth and the emerging markets.

In addition, we saw increased market shares in our equity capital markets for the first nine months of 2011, and advanced to the number three ranking in global announced M&A volume. So, clearly a tough quarter.

But viewed in the context of our resilient business model and strong franchise, I'd like to make two major points. First, our status as a first mover in adapting our business model puts Credit Suisse in a position of financial strength; a differentiation that clients, counterparties, and investors recognize.

We were early in adapting our strategy to operate with a lower risk profile and a greater focus on clients. This early transition positions us for improved profitability and more sustainable returns, while our peers will only be beginning to adjust for the new capital and regulatory framework.

We were among the first in 2008 to proactively establish a client-focused capital-efficient business model that we've been executing against ever since.

This strategy and discipline has given us an advantage during a period of unprecedented market volatility and industry change, generating best-in-class average ROE at 14.9% since the beginning of 2009.

We also anticipated and actively implemented many of the regulatory developments, too big to fail, liquidity requirements, Basel III, contingent capital, among others, into our operating model, which puts us ahead of the curve versus those of our peers who still have many of these challenges ahead of them.

Today, we continue to have a strong capital position with a Basel II Tier 1 ratio of 17.7%. We have already been operating under Basel 2.5 standards since the beginning of the year and we currently have a Basel 2.5 core Tier 1 ratio of 10%.

In addition, in February, we successfully secured about 70% of our high trigger contingent capital requirement, further enhancing our capital profile and potentially positioning us for more favorable financing terms in the future.

Today, we have a highly liquid balance sheet and a net stable funding ratio of 97%. Our funding spreads remain among the tightest of the peer group, and our long-term funding plan for 2011 is substantially completed.

We also have a high quality clean balance sheet, with minimal exposure to the peripheral European countries. Our total net sovereign exposure to these countries as of the end of the quarter was EUR900 million.

All of this has been achieved despite the headwinds affecting our businesses, particularly over the past year or so. Our client-focused strategy, coupled with our strong capital base, conservative funding and liquidity position and clean balance sheet, has enabled us to continue to gain market share across our businesses and deliver industry leading returns to investors.

The second major point that I'd like to make is the strategic steps that we're taking to further evolve our client-focused capital-efficient business model to ensure that we continue to achieve best-in-class returns despite challenging secular trends.

Obviously, we had all hoped that the headwinds to our business, including low levels of client activity, low interest rates, market volatility, and political uncertainty around the world, would subside. It's now clear, however, that these secular trends may persist for an extended period, and we determined our best course of action would be to significantly adapt our strategy to ensure that we continue to produce superior returns for our shareholders and maintain client market share momentum even if these conditions do persist.

In terms of the specific steps that we're taking to further evolve our strategy, I'm going to provide more detail later, but, in summary, first, in Private Banking, we're instigating changes which will improve our pre-tax profitability by CHF800 million by the end of 2014.

In the Investment Bank, we're implementing changes to ensure that the division as a whole, and the individual departments within the Investment Bank, earn ROEs in excess of the Group target of 15%.

Third, in Asset Management, we build on the strategy that we put in place and have been executing for the past three years. We'll continue to grow our fee-based revenues and expand our range of alternative products.

And fourth, we're going to reorient our entire business towards clients in faster-growing economies.

Finally, we have increased our efficiency targets and are implementing additional measures beyond what we communicated in July.

We believe in the strength of our business model, and our early and continued refinement of the strategy, along with increased discipline on the costs side, positions us exceptionally well to excel when the operating environment improves.

Greater client activity, higher interest rates, and lower market volatility would all create substantial momentum for our business. The measures I've just described are designed to maintain the strong momentum of the client franchise we've built over the last three years and achieve best-in-class returns.

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

Thank you, Brady. Good morning. I'll start my presentation on slide 6, with an overview of the financial results.

We achieved underlying revenues of CHF5.5 billion; pre-tax income of CHF0.5 billion; and net income of CHF0.4 billion.

Diluted earnings per share were CHF0.34; the pre-tax income margin 9%; and post-tax return on equity 6%.

Total net new asset inflows were CHF7.1 billion this quarter.

Looking at the nine-month results, and excluding fair value and debt moves, restructuring litigation costs, we achieved a return on equity of 12%. And whilst this was below our KPI target of a 15% return on equity, it remains above the cost of equity and is one of the highest return on equities in the industry.

Reported third quarter pre-tax income was CHF1 billion. That includes CHF1.3 billion of fair value and debt gains, offset by CHF478 million of litigation provisions in Wealth Management, and CHF291 million of severance costs related to our cost reduction initiatives and booked to the Corporate Center.

Before we move to the divisional overview of our Group results, I'd like to highlight the progress on our cost reduction program on slide 7. We've increased our net expense reduction target gain of 2012 by CHF200 million to CHF1.2 billion. The majority of the savings will be in Investment Banking.

You'll recall that we targeted a 4% headcount reduction across the Bank, and by the end of October 75% of these reductions have been achieved.

Overall realignment costs are now estimated to total CHF550 million, of which a total of CHF433 million have already been recognized by the end of the third quarter.

If we turn now to slide 8 for a divisional overview of the results. Given the impact on Private Banking's results from the CHF478 million of litigation provisions, the adjusted [pools] on this slide shows the operating numbers for Wealth Management and Corporate & Institutional Clients.

Adjusted pre-tax income for Wealth Management stood at CHF444 million; and the pre-tax income margin was 21%, compared to 23% in the previous quarter.

Pre-tax income in Corporate & Institutional Clients remained strong at CHF217 million in the third quarter, with a pre-tax margin of 47%.

If we turn now to those business lines in detail, let's go to slide 9 for Wealth Management. As the scale of the year-on-year FX moves continues to be significant, we've separated out the quarterly trend in revenues and expenses relating to both FX and the underlying operational performance.

So for Wealth Management, comparing the third quarter to a year ago, you can see that on an FX neutral basis pre-tax income would have been CHF67 million, or 10% lower, with broadly stable revenues, offset by a CHF41 million, or 2%, increase in operating costs, primarily due to higher IT investments relating to increased regulatory requirements.

But pre-tax income was further impacted by a CHF145 million reduction from the strengthening of the Swiss franc, resulting in the 32% lower pre-tax reported profit that you see here.

The bottom table shows you the same trends against the second quarter.

Let's now turn to slide 10. Looking in more detail at each revenue component, the underlying trends are somewhat masked by the FX moves. But, overall, after a weaker second quarter, transaction-based revenues improved in the third quarter by 4%, due to higher revenues from both client FX activity and integrated solutions; although the continued low level of client confidence resulted in subdued brokerage and product issuing fees.

This was the main driver in the 3 basis point improvement in adjusted gross margin to 114 basis points, excluding the CHF72 million second quarter gain that we took on real estate sales back in June.

Recurring commissions and fees decreased by 9% compared to the second quarter as the result of a 7% decline in average assets under management and the absence of semi-annual performance fees, resulting in a slight decrease in the gross margin.

Net interest income declined by 4% and continues to be adversely affected by FX moves, as well as by the low level of interest rates.

Slide 11. Wealth Management has solid net new asset inflows of CHF6.6 billion this quarter. Contributions from ultra-high-net-worth and emerging market clients remained strong.

The annualized net new asset growth rate for the first nine months was 5.6%, with over 15% growth in Asia Pacific.

Let me now turn to Corporate & Institutional Clients. Pre-tax income remained strong at CHF217 million in the third quarter, with a pre-tax margin of 47%.

Continued low credit provisions reflect the high quality of the Corporate loan book and the resilient fundamentals of the Swiss economy.

Let me turn now to Investment Banking. The Investment Bank posted a small third quarter loss due to difficult trading conditions and subdued client activity. Revenues were down 12% in the second quarter, and 27% from the third quarter last year, with all of our businesses suffering from reduced client activity.

FX movements continued to have a significant impact on the P&L trends. On an FX neutral basis, revenues were only down 9% from the second quarter, and 14% from the third quarter last year.

The Investment Bank's revenues include DVA gains of CHF538 million related to structured note liabilities, as well as a CHF83 million loss associated with a shift in the OIS calculation basis.

Finally, I'd point out that the third quarter expenses include nine months, or three quarters, of the UK bank levy accrual for a cost of CHF90 million.

Slide 14. We have again provided a US dollar denominated P&L for the Investment Bank to give a more meaningful comparison to our US peers. If we look at this analysis, particularly for the nine-month period, you can see we delivered a resilient performance in advisory underwriting businesses, with revenues increasing in all three areas, notwithstanding a subdued market environment.

Turning to Fixed Income, our businesses have suffered from a more challenging environment, particularly in securitized products and in credit, whilst in equities we're pleased to have seen an 8% revenue growth, notwithstanding the considerable market volatility we've experienced so far in 2011.

And, as a final point, the increase in other operating expenses here reflects a combination of adverse FX trends due to the higher translation of our non-dollar costs into US dollar in this format, particularly in respect to the allocation, infrastructure, and central costs, as well as additional costs related to increased regulatory [change], including the UK bank levy that I mentioned earlier on.

So now let's look at Fixed Income on slide 15. Revenues were influenced by the following factors. In credit, the weaker results were driven by a substantial widening of credit spreads, low levels of client trading volumes, and inventory losses as we significantly reduced our market-making positions in the light of a deteriorating environment.

Within securitized products, results continued on the low level that we experienced in the second quarter of 2011, with both client activity and the trading environment remaining subdued. But against these trends, our rates and FX businesses showed improved performance.

On slide 16, as you can see, we had slightly lower equity revenues quarter on quarter due to the more difficult market environment. The continuing resilient performance in prime services benefited from a steady inflow of client balances.

Our cash equities revenues were lower, driven by more challenging trading conditions. And our equity derivatives business continued to perform well, albeit lower than in the second quarter.

Slide 17. Underwriting and advisory revenues were lower in the quarter, consistent with a decline in activity levels. Debt underwriting levels declined, driven by a reduced high yield and investment grade issuance.

Despite continued market share momentum, equity underwriting revenues were lower across all products, and advisory fees reduced due to the slowdown in completed M&A activity.

We have a substantial backlog of transactions across all these products that are being delayed due to market conditions.

Let's now turn to Asset Management on slide 18. Pre-tax income in Asset Management was CHF92 million. Fee-based revenues continued to grow; however, lower market values led to unrealized losses on our private equity portfolio.

The continued realization of operating efficiencies from platform rationalization and exiting subscale businesses delivered lower expenses, both quarter on quarter and year on year.

Slide 19. You can see that the profitability reflects the improvement in fee-based revenues, comprising most the CHF124 million and CHF22 million increase from 3Q 2010 and 2Q '11 respectively; lower investment gains compared to previous periods; but also lower operating expense of CHF26 million and CHF39 million, respectively. And the fee-based margin improved to 48 basis points in the quarter.

Slide 20. Asset Management also experienced positive net new asset inflows in the quarter, notwithstanding difficult market conditions. Net inflows in our private equity segment were driven by new fundraisings.

We saw continued positive inflows in ETFs and index mandates, although we did see some outflows from our asset allocation business, MACS, as well as certain Swiss advisory assets.

Let's now turn to capital liquidity on slide 21. We continued to maintain a strong capital position with our Basel II Tier 1 ratio at 17.7%. Our Basel II core Tier 1 ratio, which excludes hybrid capital, stood at 12.6%; and the Basel 2.5 core Tier 1 ratio at 10%.

Although the Swiss banks are not subject to the recently announced EBA stress test, we're already above the 9% requirement, as laid out in the draft rules that have been published. And I note that these rules specifically include contingent capital and, hence, the buffer capital not issues that we issued in February would qualify in these calculations.

Let's look at funding and liquidity on slide 22. Our funding and liquidity positions remain strong and we're well prepared for the Basel III requirements.

Our Basel III NSFR ratio, or net stable funding ratio, stood at 97% at the end of September 2011; up from 95% at the end of the second quarter.

The liquidity coverage ratio, LCR, is also well in excess of future requirements.

Our regulatory leverage ratio, under Swiss rules, stood at 4.9%, which is at the top of the required range.

Finally, I'd point out that our long-term debt funding plan is now substantially complete for the balance of this year.

Slide 23. This slide looks specifically at our funding and liquidity profiles. There have been a number of discussions on this topic as to how it's measured and we thought this analysis would be a simple and a relevant way of describing it. The important issue here is to look at both sides of the balance sheet in the two charts to assess our funding and liquidity profile.

The top chart shows that we've grown our surplus short-term liquidity position from CHF43 billion in 2007 to CHF110 billion by the end of 3Q '11, with substantial reduction in our reliance on short-term funding over the last four years.

The bottom chart shows that we have significant surplus long-term funding. Of the CHF110 billion surplus, around CHF50 billion is higher long-term debt and equity capital compared to our longer maturity assets; and a further CHF60 billion is surplus customer deposits in excess of our customer loans. And our coverage ratio for these assets improved to 125%.

We have improved this position primarily by keeping our long-term debt levels stable since 2007, whilst significantly deleveraging the balance sheet by reducing the amount of our longer dated assets.

Slide 24. With a continued focus on exposure to certain Eurozone countries, this slides shows that we have a limited exposure to both sovereign and non-sovereign counterparties. We're only CHF600 million of net exposed to Italy sovereign debt; an immaterial exposure to Greece, Ireland, Portugal, and Spain. And just to be clear, all of these positions are mark-to-market.

With that, I'd like to thank you and conclude presentation, and hand back to Brady.

Thanks, David. Now I'm going to spend a little bit more time going into some of the detail on the strategy evolution in our integrated client-focused capital-efficient business model.

We are proactively evolving our business model to ensure that we can continue to deliver industry best-in-class returns on capital against the backdrop of a difficult operating environment, and in response to the challenging secular trends we see for the financial services industry.

What are the conditions we see today? You're all very familiar with them. Global economic growth expectations are subdued. The developed markets in Western Europe and the US are recovering, but doing so at a slow rate over a long time horizon. Interest rates are likely to remain low for some time to come. Furthermore, macroeconomic and financial conditions are likely to result in the continued strength of the Swiss franc.

Uncertainty around the resolution of the EU situation is creating stressed markets and volatile trading conditions. Clients remain risk averse, creating subdued activity levels.

And the volume and complexity of the new regulation has business mix and platform implications for our business, so we have to continue to adapt our business model to ensure we establish the best configuration in the new operating environment.

In this persistent challenging environment, both from a market and regulatory perspective, we've continued to review our businesses to ensure that they continue to contribute to our overall return aspirations for the Group. This slide 27 lays out a series of strategic initiatives designed to substantially evolve our business model in response to the regulatory challenges and opportunities that we face. I'm going to cover these initiatives in detail in the next few slides.

Private Banking. Private Banking continues to be a key engine of growth and value. The performance of the business has been strong over the past three years. We've raised multiples, more in new client money than any competitor. The gross margin remains one of the best in the industry. And in combination with Investment Banking and Asset Management, it provides a unique proposition for our clients.

We remain committed to our long-term growth strategy and our KPI targets. We believe we can maintain our franchise momentum and yet, at the same time, improve profitability in the light of the ongoing challenging environment and regulatory changes. To do this, we will first continue to strengthen our dedicated coverage of ultra-high-net-worth clients and to invest in this, the fastest-growing and most profitable client segment.

Second; in our cross-border business we are focusing our coverage of those markets with sound economics and sufficient scale. We have deep relationships with a large number of affluent international clients, and they need to be serviced differently than high-net-worth clients. We will implement a more focused service model and product offering.

Third; in our onshore businesses we will intensify the focus on capturing international growth, particularly in emerging markets, reinforcing the benefits of our global footprint. We have well defined action plans to enhance the short-term profitability and accelerate the return on investments in growth platforms.

We will rationalize and adapt the use of infrastructure in our Western European markets to free up resources to accelerate investment in emerging onshore markets.

We are confident that these combined measures will result in a significant improvement in performance and are targeting an incremental pre-tax improvement of approximately CHF800 million by 2014.

Our ultra-high-net-worth client business remains one of our key strategic focuses and we're committed to growing their pre-tax income contribution a further 50% by 2014. We have a strong track record, benefiting from our integrated offering, as you can see in the chart on the left.

Ultra-high-net-worth assets under management represent 35% of overall assets under management; up 10 percentage points since 2008.

We have relationships with 35% of the world's billionaires; up from 25% in 2008.

55% of net new assets have come from ultra-high-net-worth clients since 2008, and the business operates with a high pre-tax income margin.

And as you can see from the chart on the right-hand side of this slide, ultra-high-net-worth is the fastest-growing segment in the market, so the momentum we have here is very productive.

Our strategies around this segment. Dedicated coverage with senior bankers, seamless collaboration across the integrated bank, a comprehensive leading-edge product suite, and an unrivalled networking platform for billionaires have been key in the momentum we have built, and are key to achieving our goal of increasing pre-tax income in this segment by 50% in 2014.

In our cross-border business, we're implementing a highly focused service model and offering for international clients. We'll focus on larger offshore markets and serve smaller markets, depending on the cost of doing business.

92% of our cross-border assets under management are from clients domiciled in the top 50 markets. The remaining 8% of assets under management are distributed across a number of other countries. We will serve these smaller markets opportunistically, primarily focusing on ultra-high-net-worth clients.

87% of cross-border assets under management relate to ultra-high-net-worth and high-net-worth clients, with only 13% from affluent clients. And only 21% of the client base are ultra or high-net-worth. Accordingly, we will establish cost-effective coverage for cross-border affluent clients, establishing dedicated teams that reduce cost, focused product and service offerings, and continuing to cross refer the high-net-worth segment.

In our onshore business, our objective is to materially increase the pre-tax profitability, with a target of CHF200 million to CHF250 million in incremental pre-tax income in 2014.

Our performance in onshore markets is key for the continued momentum of the business. The emerging markets will continue to see excellent growth in wealth. And the onshore businesses support cross-border transformation of the business model and allows us to tap into the very important entrepreneurial wealth in mature markets, which are exceptionally well served by our integrated business model.

We are today extremely well positioned here with a broad international footprint. And over the past few years, close to two-thirds of our net new assets were in booking centers outside Switzerland.

We believe we can substantially improve the profitability of this business by implementing several initiatives. First, we'll look to increase efficiency across our onshore businesses by adopting uniform platforms, where feasible. We'll look to further build out and leverage our client offering, and introduce additional efficiency measures. Through all this, we believe we can produce an incremental CHF200 million to CHF250 million of pre-tax income by 2014.

Turning to Investment Banking on slide 32. Slide 32 sets out the issue that we, and, as you all know, the whole investment banking industry, faces. It shows the actual annualized average of Basel II and Basel III post-tax ROEs over the last 11 quarters for our three main investment banking division investment lines, namely, equities, IBD, Fixed Income, and for the Investment Banking division as a whole.

On the left-hand side you can see the actual Basel II returns from our businesses over the '09 to third quarter '11 period; 19% overall ROE and an 18% ROE in Fixed Income.

On the right-hand side you can see that exactly the same performance, but mapped against the capital treatment required under Basel III, results in a 10% overall ROE of the division, and 7% ROE for Fixed Income.

So the move from Basel II to Basel III results in a fall in Investment Banking returns from 19% to 10%, driven primarily by the reduction in Fixed Income from 18% to 7%, as the risk-weighted assets in Fixed Income go from CHF74 billion to CHF209 billion.

On slide 33 is the solution. By further evolving our business model, we're able to raise the returns close to the levels achieved under Basel II.

The left-hand side of the chart shows the actual performance of the business based on Basel III. This is the same as the right-hand side of the previous chart -- previous slide.

The right side estimates the pro forma returns the business would have made over the same period under our new business model. The pro forma calculation reduces risk-weighted assets by CHF100 billion in Fixed Income, and adjusts for the adverse impact on revenues and the benefit from substantial cost savings. This gets us back to a pro forma after tax ROE of 17% for Investment Banking and 16% for Fixed Income.

On slide 34 we give you more insight into how we're looking at our current portfolio of Investment Banking businesses. We've improved each main business based on the strategic approaches we're taking.

The column farthest to the left shows those business where we continue to invest and grow, where we have built strong market position or are focused on specific activity central to succeeding in the new environment, or relevant to our Wealth Management business.

The central column shows those businesses where we have a dominant position that we will defend, or where we want to evolve towards growth markets.

And the right column represents those businesses where we cannot meet our return hurdle and need to downsize or cut.

Now slide 35 provides you with the next level of granularity on the major businesses within Fixed Income, where we are mitigating risk-weighted assets in order to get a better picture of their annualized revenue contribution since 2009; the mitigating assets we're taking; and the approximate adverse pro forma revenue impact as we evolve our business model with an indication of the associated exit costs.

Looking at each category in turn. Within macro, we will mitigate RWAs by over 60%, or CHF40 billion, mainly in respect of the accelerated exit from low revenue, long-dated unsecured rate trades. While this is a large portion of the RWA consumed by the business, this was identified as an exit business when Basel III details were announced, given the capital costs for the businesses.

And this RWA has not been revenue productive over the past couple of years. As a result, the revenue impact is modest at less than 10% of the '09 to '11 revenues shown, although there will be some exit costs. In addition, there will be certain uncollaterized exposures that will either mature or can be hedged.

On the right-hand side you can see our outlook for the ongoing business is that while the overall market conditions will remain relatively static, we believe we can continue to build on our positive momentum here.

In the securitized products area, our low rated inventory positions will either roll off or be sold as we downscale the less capital-efficient business, reducing risk-weighted assets by nearly 50%, or CHF30 billion.

The adverse impact to our securitized product revenues is around 35%, although it's worth noting that the strong contribution we saw in '09 and '10 has not been sustained during '11.

Exit costs should be limited, given the highly liquid nature of the assets.

And you can see, on the right-hand side, that this segment we would expect the market conditions to improve from very difficult conditions we've seen over the past couple of quarters, and think that we will maintain market share as the whole industry will come under capital pressure.

In credit, there will be some right-sizing of our investment grade risk positions, which should have limited revenue impact as we optimize our positioning, although there will be some costs of implementation.

In emerging markets, there will be limited impact with risk-weighted asset reductions contributing less than 5% of historic revenues as we shift towards a more flow-based model.

And we will also accelerate the wind-down of the residual CID portfolio, which will be accretive to revenues compared to the '09 to third quarter '11 period, but also with some associated costs of exit.

Hopefully, this gives you a better insight into why by targeting the least productive risk-weighted assets under Basel III we're able to limit the adverse impact on revenues.

Slide 36 summarizes the aggregate financial impact of these plans. You can see in the upper-left chart the RWA progression, third quarter '11 [in] numbers under Basel II, the Basel III pro forma, 2012 mitigation, and the further mitigation between [in] 2012 and 2014, to end up at CHF170 billion of RWA.

As you can see in the bottom-left chart, this results in the composition of overall Group risk-weighted assets moving from 55% at [work in] Fixed Income at the end of third quarter '11 to an estimated 39% at the end of 2014.

The annualized 2009 to nine-month '11 pro forma pre-tax income, on the right-hand side, shows a small increase as reduced expense levels more than compensate for the reduction in net revenues.

So, in summary, the CHF100 billion of lower Fixed Income risk-weighted assets reduces their portion of Group RWAs from 55% to 39%.

On a pro forma basis, the annualized PTI from '09 through to nine-month '11 is materially unaffected as the revenue loss is more than offset by the targeted expense reduction.

There will be some costs for accelerated RWA mitigation, but they're difficult to calculate, being highly dependent on market conditions. We think one of the benefits of being a first mover here is that we'll be able to reduce these RWAs more cost effectively than many of our competitors, who will have to move later. As we work through the disposals, however, we will highlight a cost, if and as incurred, when they're significant.

But, most importantly, the pro forma Investment Banking return under Basel III, applying the new business model, results in an after tax ROE of 17%. Driving this kind of return on a lower risk business model should result in an exceptionally competitive return among Investment Banking businesses.

Now let me turn to how we plan to grow Group revenues in faster-growing markets, on slide 38.

We will target more resources towards the faster-growing markets, and, in doing so, we aim for these markets to provide an overall contribution to Group revenues of 25% by 2014; up significantly from the current 15%. In order to give you a flavor of how we intend to achieve this goal, I'll provide you with one example of growth plans in each of the regions.

Within Asia Pacific, our Southeast Asian business differentiates itself through its dominant position in high-net-worth and ultra-high-net-worth clients, our leading equities franchise, and a strong corporate client base. We intend to expand the breadth of our relationships in the region by delivering products and solutions in a more integrated manner, replicating and extending the success we've already had there.

In the Americas, Brazil is the key market for us where the priority is to leverage the overall dominance of our position in that country; and, in particular, to further leverage Hedging Griffo in order to advance our dominant position with institutional and high-net-worth clients.

In EMEA, we intend to build on our integrated banking franchise in Russia, leveraging off of our equities and IBD capability, where we're ranked number one, and growing our Fixed Income business by expanding our product offering locally, and targeting a top five position.

Net new asset growth from ultra-high-net-worth clients in this market has been impressive, and we are well positioned to continue to grow the business.

In addition to the strategic initiatives we've laid out in Investment Banking and Private Banking, further initiatives in both our front office and our infrastructure areas will enable us to realize a further CHF800 million of net expense reduction in 2012 and 2013. The savings will be realized by maximizing deployment opportunities as our existing business footprint is rationalized; by optimizing our processes and implementing a fully integrated operating model; streamlining operational and support infrastructure through the combination of several middle and back office support functions; and the continued centralization of our infrastructure.

The CHF800 million will take our total run rate expense savings to CHF2 billion by the end of 2013, giving us dramatically more operational flexibility.

Before summing up, we wanted to give you an update on how the impact of the risk-weighted asset reductions will affect the Basel III Group risk-weighted asset position at the end of 2014, and our Basel III CET1 capital simulation going into 2013.

And here, as we've used current market expectations for retained earnings, all the income-related items that we've just discussed as part of the significant evolution of the strategy are not reflected in the CET1 capital calculation.

But on the left-hand side of this slide, 40, we show you the detailed calculation supporting the updated progression in risk-weighted assets for the whole firm under the proposed Basel III rule changes, and taking account of the strategy realignment in Investment Banking.

If you start with the CHF210 billion of risk-weighted assets under Basel II in third quarter '11 on the left-hand of the chart, we'd add CHF160 billion for the expected Basel 2.5 and Basel III charges -- changes. The estimated mitigation benefit achievable by the end of 2012 is around CHF80 billion. And this will result in Basel III post-mitigation RWAs at around CHF290 billion at the end of 2012.

Further optimization in Investment Banking risk-weighted assets will be redeployed to grow other businesses in 2013 and '14, so we expect to achieve a Basel III RWA position of CHF285 billion at the end of 2014.

The right-hand chart is an illustrative model of how the CET1 ratio could develop based on our capital progression from now 'til the end of 2012 under the Basel III rules.

The left-hand column shows current shareholders' equity. We've adjusted for regulatory deductions and the next 15 months current market expectations for retained earnings, which, I'll remind you again, do not represent forward-looking statements made by Credit Suisse, and we assume a benefit of CHF1.6 billion of issuing shares from conditional capital for share-based compensation awards. So by the beginning of 2013 our CET1 capital grows to CHF35.8 billion, to give the Basel III CET1 ratio of 12.3%.

We're committed to delivering a resilient performance for our shareholders and believe we're the best positioned institution in the industry to produce high returns on capital. We're in this position by virtue of our distinctive business model, and our proactive initiatives to aggressively evolve our strategy.

With the strategic measures announced today, we're building a business model to excel in a new environment; recognizing that the longer term secular trends will likely continue to be challenging for some time to come. And I'm convinced that being a first mover will continue to be a distinct advantage for Credit Suisse in pursuit of achieving industry leading returns. We've developed a plan that I believe will achieve this objective.

In Private Banking, the changes should add an incremental CHF800 million to pre-tax income by 2014. Pre-tax income margin will achieve 30% and will retain the operating leverage necessary to increase this beyond our 35% target as and when economic activity and interest rates increase.

In Investment Banking, in bottom line terms, this changes will ensure, first, that pre-tax income in a post-Basel III world will be at least the size before, with cost reductions offsetting any revenue loss from risk-weighted asset reductions.

Second; that the majority of the ROE impact from Basel III changes is offset by the RWA reduction measures.

And third; our pro forma analysis shows that, based on the last 11 quarters' results, all Investment Banking divisions achieved a Group ROE target of 15%, or greater.

In Asset Management, the strategy that we've put in place, re-orientating the business towards a lower cost fee-based model, has continued to pay off. Even in the current economic conditions, this gives us confidence in the substantial further upside potential that we can deliver.

The geographic reorientation of our portfolio towards faster-growing economies will result in 25% of our revenues coming from these markets by 2014, and will position us for stronger longer term growth in revenues, net assets, and profitability.

All of these plans are underpinned by a strong and conservative funding base, with the incremental costs of the Basel III liquidity regime already reflected in our profits. And this conservative approach continues to be a strategic advantage in winning new customers and increasing market share to deliver on our KPI targets, and, most importantly, achieving a sustainable ROE of greater than 15%.

So, thanks for your attention so far. And, with that, I think we're ready to open up to questions. So maybe we'll start here in the auditorium, before we go to webcast questions.

Kilian Maier, MainFirst. The first question would be on the provision for the US litigation. You --

(Operator Instructions).

US litigation.

The second question would be on Investment Banking. With the targeted reduction in risk-weighted assets, do you think that is a position that allows you to compete in the [bulk] bracket area? Or do you rather envisage a position as a focused niche player, like some of your local competitors; or actually, the one local competitor?

And the last question is on the loan book in Corporate & Institutional Clients. What's your view here? Any negative impact from the strong Swiss franc going forward? Or do you think the current level of provisions is sustainable?

Okay, thanks for those questions. On the first question, with regard to the provision for US litigation, obviously, we're limited in how much we can say about it. It's a complex issue. It's -- obviously, there are government-to-government issues involved; there are a lot of other institutions than just Credit Suisse who are involved in it. We obviously take it seriously. We have been working with all parties to get to a resolution; we'll continue to do that.

The third quarter provision that we've announced is really an accounting requirement. I don't know that I'd read that much into it in terms of the matter as a whole, but that does represent our provision for that issue.

On the second issue, on Investment Banking, no, our belief is that we'll be highly competitive in the businesses which we choose to be in. And, frankly, I think our belief is that we are proactively taking these steps.

But the whole industry is going to have to go in this direction. Obviously, this is mainly driven by the Basel III changes, the increased capital requirements that -- our belief is that the whole industry will have to adjust their business models in similar directions. So our belief is we can have a highly competitive model across a broad group of businesses with this strategy, so we feel confident about that.

I think with regard to, as you say, the loans in Switzerland, in the CIC division, we continue to believe we have a very high quality portfolio there. We obviously continue to take the appropriate provisions against that, and we haven't had a large tickup in provisions there.

Clearly, there are some segments and some industries within Switzerland that will continue to see stress from the foreign exchange differentials with some of the export markets. But our belief is that we continue to have a strong portfolio there. And obviously we'll have to see how that develops over time, but we think it is a -- we feel comfortable with the provisions that we have there now.

Christian Stark, CA Cheuvreux. I've got a question on the risk-weighted assets for the Investment Bank, which will bring you down from CHF270 billion to CHF170 billion, where you've taken a return approach, which will lead you to a return on investment, a return on equity of about 17%, which looks attractive.

I guess many investors will take the view that the 17% will still be very volatile, and people will be asking themselves, if you took a different approach and looked at the risk-weighted assets, how far could you reduce them in order to keep the Investment Bank at the size where you could significantly or sufficiently support your Wealth Management franchise?

If you took a different view, so rather than just looking at returns, and if you took a view that you wanted to keep the Investment Bank to a minimum, is there a lot more potential there to reduce the risk-weighted assets? Do you have any thoughts about looking at that kind of an approach?

Yes, I guess the first question is you make an assumption here that the 17% would be volatile. Obviously, our -- it would be a relatively capital efficient approach, so it certainly wouldn't be volatile as a result of big moves in the underlying inventory, etc.; it shouldn't be.

On the other hand, there will be obviously some operating -- there will be operating risk to the business because it will be more of a client-focused business, more capital efficient. So -- but I'm not sure that it will be volatile. Our hope would be we could have a relatively stable return on that business over time.

I think that our view is that this is the best configuration certainly to support our Wealth Management, our Private Banking business; but also to really leverage off the really strong positions that we have in a number of parts of our Investment Banking business, and to provide very good returns that are accretive to the overall return to the Group. So it's really a combination of those two.

We think this is the best structure, and the best approach, best strategy to take. So obviously we've looked at lots of different alternatives, but we think this is the one that really positions us best going forward.

Philipp Zieschang, UBS. A couple of questions, please. The first one actually relates just to the framework of the IB in the future. Here, I have a question on risk-weighted assets. You mentioned CHF170 billion, but in your Group chart you mentioned that you expect organic growth of CHF25 billion. Is all of that excluding or outside the Investment Bank?

Then again coming to the framework, your headcount went up to 21,500 in the quarter, I know you have started some cost reduction programs but where do you see headcount after these cost reductions, after downsizing your exit businesses?

Third one. On this framework, just your pre-tax margin seems to be unchanged in terms of the target with 25%, although you've mentioned that your costs and revenue impact should be offsetting each other, which could actually mean it's rather implied about 20%, so will you change the pre-tax margin target?

These are my framework questions. Then I have two more, if I may.

One is just on your ROE target, north of 15%. Is it right that it's calculated on 10% core Tier 1, which actually means you're adding the goodwill to make it work with your Group ROE target, would drive down the 15% IB target to roughly 11% because you state CHF6 billion goodwill which we should actually add to your targets? So what you're telling us is 15% is essentially a return on tangible target; if you just reconcile the new target for the IB with your overall Group target.

And finally, slide 40, your CHF1.6 billion positive impact for Basel III capital from these shares which are not expected to be bought back, to which degree are they reflected in your diluted number of shares for these unvested programs? Thank you. I know it was a lot; thank you.

What's the best way to address? I think with regard to, as you say, the RWA, you're talking about the 2012 and on period. You're talking about the CHF25 billion that we're saying will be reinvested in other growth businesses. And I think the idea is that, yes, that would be outside the Investment Bank. Was that your question?

Yes. So, basically, I'm trying to reconcile slide 40 with slide I think it is 36. In slide 40, you mention CHF25 billion organic growth.

The answer is we're showing that CHF25 billion is really outside of the Investment Bank, so that would be in Private Bank and Asset Management.

Clearly, this is a somewhat forward-looking statement to 2013 and 2014. I wouldn't say that one necessarily includes zero, but if one was to take away from those two charts that the vast bulk of that CHF25 million was outside the Investment Bank, you'd be entirely correct, Philipp.

Thank you.

Do you want to take the headcount question?

The headcount question; the reason the headcount didn't fall in the quarter, despite the redundancies, is because we actually had the incoming graduate class coming in, in the third quarter, which joins every third quarter. So this is always the seasonal high point in terms of headcount.

And I think in terms of making a forward-looking statement on headcount, you should expect that number to drop as we complete the remaining of the implied 4%, or 2,000 people, this year; and then the 3%, which I think is people interpreted around 1,500, there afterwards. But some of it will also be driven by (inaudible) the pyramid towards more junior employees in terms of the structure.

So it won't necessarily be full net in terms of the headcount number going down to suite any particular target for (inaudible). You should see it fall after the third quarter, which was inflated by the graduate intake coming in.

Should we add just an additional layer of reductions related to the exit businesses? They seem not to be included in your cost measures announced?

Well, the exit business, obviously you've seen already, I think, the CMBS announcement I think was actually leaked in the press a couple of weeks ago, so that will contribute an element of it. But I think as we move to the next stage of the cost reductions, I think, as Brady referred to, a lot of that comes from actually integrating your operating platforms and various internal synergies, as well as the sort of front office business reductions.

For instance, the exit businesses don't have a lot of headcount associated with it, if that's your specific question.

Exactly.

And I think your next question was on the pre-tax margin, I guess, in the Investment Bank. I think our view is that the 25% pre-tax margin is something that we should -- we would continue to have as a longer term goal for the business, so I don't think we're changing that. I don't know, you said your pro forma calculations get more than 20%?

You basically just said that if you deduct that costs are expected to -- or the cost savings are expected to match the revenue losses, and if you did that then the ratio would fall having the same profit number.

Yes, I think the target's still 25%.

Still 25%, yes. So, do you want David to take the question about the ROE target given goodwill and --?

So obviously, as you're aware, Philipp, we have a technical situation between 2013 and 2019 because, as you understand, the capital CET1 ratios under the Basel III rules actually will include goodwill. That's the analysis you gave here as well as the ex-goodwill calculations. So that gives the 12% number that you see in the simulation.

You then obviously get to a period; you go through the 2013 to 2019, in which goodwill becomes progressively less effective at 20% per annum, until you actually reach the Basel III end state.

So I think it's probably fair to say that there isn't that much difference in terms of the opening years. But if we were having this conversation towards the middle or the end of that period, this will probably become more fairly an ROTE calculation rather than an ROE calculation because the goodwill becomes less relevant at that point for capital purposes.

But don't you define the equity base for your simulation on slide 33 on your risk-weighted asset number?

Yes, I'm pointing out, though, that essentially, under -- as you can see from the difference between the numbers in the appendix, which show the look-through transition where the ratio is less than 10%, clearly, as you go through post the period, you will actually have to build up to 10% under that measure; as well as including the goodwill numbers.

The calculations, though, we actually show here are actually calculated on a 10% RWA, so as if we have 10%. So it's a full calculation. But I think your point is if you take that 10% and you add goodwill for that as well then that would result in a different number, which I think is correct.

Yes, my point is basically that your slide 33 seems to be a return on tangible equity [curve calculation], which needs to be matched to your Group target (inaudible)?

It's a return on 10% of the RWAs as applied at that time, basically. So clearly, if a capital measure includes goodwill, which you know it does, at the beginning of the period then that would be added towards the end. But clearly, it doesn't; in which case I think you're correct, that it becomes a ROE -- ROTE calculation towards the end of the period.

And the last question was around you said the Basel III targets --

Yes, basically, it's against slide 40, where you saw this CHF1.6 billion positive impact from this share-based --

Right, but you're saying whether that's concluded in the fully diluted number of shares?

To which degree this is included in the current number of the diluted shares for unvested; the CHF73 million, which you saw?

Yes, we'll revert to you on that just in terms of how much is vested and how much unvested, Philip. I'll get back to you on that.

Thank you.

Are there questions in the room, or should we go -- we can come back to the room after we go through. I'm sure they'll be a number of questions on the call. Okay, now first question on the call?

Derek de Vries, Bank of America.

I had just two questions, if I might. The first one is a bit detail-orientated. But just looking at the Q3 numbers, there's a, I guess, CHF6.5 billion increase in risk-weighted assets and about a CHF10 billion increase in the credit risk-weighted assets. I suspect there's something in there in the detail explaining this, but I didn't get to that so if you could give us some color there it would be helpful?

And then I guess back to the first question that was asked. If I look at the FICC business, it looks like the US -- the leaders in the FICC business are doing about $2 billion to $3 billion, and you guys are about 750 million per quarter, adjusting for all the CVA, DVA, etc. And I guess my question is do you expect that gap to widen over time as you exit some businesses to focus where you're good, while the leaders are probably good across the board? Or do you expect that gap, them doing -- you doing a third to 25% of those guys to maintain?

Thanks, Derek. Do you want to answer the RWA question, first?

Derek, are you referring to page 51?

I wasn't, but that might be where the numbers are. I was just looking at the risk-weighted asset progression between Q2 and Q3.

Yes, I'm not sure if you're referring to the credit risk page, page 51, which shows the accumulative increase, which goes from CHF147 billion to CHF157.9 billion.

Yes, that's the CHF10 billion.

The majority of that, I think all of it, is actually driven by FX moves. Because at the end of the second quarter we actually converted our US risk-weighted assets obviously from the Investment Bank at 0.83, whereas this quarter it was done at just over 0.9, so that's the currency move there.

But then you don't seem to have an offsetting FX move in the capital base, right? So is that what we should expect going forward, is any risk-weighted asset -- any currency impact on the risk-weighted assets isn't offset at all on the regulatory capital?

No. I think the issue is also an issue in balance because, increasingly, what we're actually focused on is the B2.5 ratio, for which you see the deductions over the page -- actually later in that section, which you see actually fell in the period. So there was a slight shift in terms of our B2.5, B2 assets in the quarter. So if you were to look at it for -- on a B2.5 basis then it is approximately neutral. On a B2 basis, there was a shift between B2 and B2.5 assets.

On a point of fact, in terms of the FX neutralization, we partially hedge our FX [mutuality]. So in a position in which the dollar were to rise very sharply then the Tier I ratio would -- well, the CET1 B2.5 ratio would drop slightly; and the reverse would be true if the dollar were to actually fall. But it's approximately 75% to 80% hedged, so the movement is not going to be that material.

But in this case, it was driven by FX and by, I think, a rebalancing between some of our B2.5 and B2 assets. And obviously, I think, when we actually move to aligning the BIS reporting for this, then this gap between the two measures will drop out.

I think, Derek, on your second question, obviously the question whether the absolute revenue numbers will widen or narrow in gap, I guess it depends upon your beliefs around whether other institutions are going to go to Basel III and are going to have higher capital requirements.

Our belief is that the industry is going to have -- is going to broadly go to Basel III, and are going to have higher capital requirements as well based on the BIS guidelines, etc. And I think when that happens, there are a number of businesses that just don't actually provide the returns that are necessary.

And so my belief is that every institution will have to go through and look at this, obviously with different strengths and weaknesses in their business. But they'll have to go through this all, so my guess is that the absolute would narrow. But, obviously, it depends upon your beliefs.

But the more important thing for us is we're not really focused on the absolute amount of revenue. We're focused on the returns that we can drive from the business.

And our belief is that we can get our Fixed Income, our fixed business, to a 16% return on equity on a pro forma basis against 2009 to '11, which we think, as an environmental assumption for the next couple of years, is not an unreasonable central case to have. You obviously may have your own views on that.

But we've obviously had some good periods there, some bad periods. But I think as a central case, it's not a bad assumption. And if we can do that, if we can actually get our Fixed Income business to be a above 15% ROE, I think that's going to be a pretty best-in-class-type number. So that's what we're really focused on, is the returns on the business.

Great. Thank you very much.

Derek, just one addendum, by the way. I would just note there was about CHF1.5 billion increase in Private Banking lending in that credit risk number. So it's not all the Investment Bank, just to be clear.

Okay, thank you.

Thanks, Derek. Next question?

Huw van Steenis, Morgan Stanley.

I've got three questions. The first [was] on the CHF40 billion of macro RWAs you're looking to shrink. Whilst you mentioned your first mover advantage, it strikes me that every single bank is trying to get out of long-dated structural rates product. To the extent you can't sell them more quickly, could you share with us what the average duration is of that CHF40 billion book of RWAs?

Number two is on mitigation. Obviously, you said it's very difficult to ascertain effectively what the cost of the mitigation will be at the moment. To the extent that it's a very wide bid ask, how does that inform your view of the dividend? Would it be prudent -- given your full look-through Basel III ratios are probably now bottom quartile with your global peers and your uncertainty about the derisking, do you think it would be prudent to maybe skip the dividend for this year? Or how do you think about that?

And my third question is on a slightly different topic, so I'm very happy to hold that back, or deliver it now.

Go ahead; [why don't you ask]?

And third one, I'd really be more interested in your views about sovereign risk. Given the proposal to -- not to trigger the CDS on Greek sovereign debt, does that make you -- how does that make you think about the validity and usefulness of the hedges you've got on Italian sovereign debt?

Do you think we, as investors, or you, as management, should really think that for all European sovereign CDS exposure one should really say they're of questionable value and we should really look at the gross rather than the net exposures? Thanks.

I think with regard to your third question, which we'll take first, obviously, as you say, the developments in the market are something that I think we have to take note of, and we certainly have. And I think participants in the market obviously will, and should.

I think that -- I don't think it would be -- I think it would be too extreme to say that no CDS (technical difficulty) has any value because, clearly, I think it does have value. But there may be situations where, as with, I guess, happening in Greece, it may not be triggered.

On the other hand, also, I think you have to assume -- you have to also look at the nature of the sovereign risk as well. So, for instance, there are obviously government bond holdings, which is one thing, but there are also types of exposure, derivatives exposure, etc. And so I think the questions of how that would be triggered and how that would relate to CDS, etc., are a little bit more complex.

So I think it's certainly something that bears a lot of focus. It's certainly something that we think about. But I also think that it's a more nuanced question than just, hey, are CDS going to be effective in hedging sovereign risk. It depends on what kind of sovereign risk, etc., because there are different types of sovereign risk. And I think you have to -- I think it's a little bit more nuanced than that.

Do you want to try to address the first question?

Sure. So on the CHF40 billion, Huw, it splits really into two components. So CHF20 billion has a duration of less than three years and in reality, therefore, one would expect to be able to run off relatively easily; and the other CHF20 billion has somewhat longer duration. I'm not sure if I can give you an average, but clearly between three and six years with some [outliers] from that. So I think that's probably where -- if there are exit costs to be incurred, that's where we'd expect them to be actually seen.

In terms of potential buyers for that, clearly one point about this counterparty risk of course is that other banks may have the opposite position almost than counterparties. So it is not necessarily true that add -- selling position to another bank necessarily adds to their problems. It may, in fact, result in a net gain for both parties. So I wouldn't regard it necessarily as a zero sum gain; it may, in fact, be a positive sum gain in terms of the mathematics.

I think we also probably look to see buyers outside of the Basel III arena in terms of alternative fund managed hedge funds, etc., who would not be affected by this. Because the CDA calibration under Basel III is obviously quite onerous in terms of the terms, and there is clearly an alternative returns structure, which [would be available] for holding those assets.

Yes, Huw, I think on your question around mitigation costs, etc., in a sense there is a wide bid ask because, actually, it may be possible that we make money on some of these disposals. So it's not a -- I don't think it's a given that there will be necessarily even costs associated with many of the disposals, but it is obviously dependent upon markets and how things develop so, in a sense, I guess it's a wide bid ask. But it could also be positive as well as negative, so I think that's important to keep in mind.

I think that the question of the dividend in general is a separate question. We have accrued at the one 1.3 annual dividend rate in the third quarter. That's what's actually calculated into the capital numbers, etc.

Obviously, we'll have to take a look at that in the light of fourth quarter and full-year performance, and a number of different issues at the end of the year and before the Board makes its recommendation to the shareholders as to what we do on dividend. But -- so obviously I think that's something that obviously can only be determined in the context of the whole -- of the entire -- in a broader context.

I think with regard to the capital levels, though, we continue to feel that we're in strong shape. If you look at our overall capital position, look at total capital, which is obviously relative to senior debt holders, depositors, counterparties, etc., it's extremely strong. And we still think that the glide path that we have on the capital developments is one that's very secure.

But, again, I think difficult to comment on industry average [this year]. But I would point out that, if we just look at the EBS stress test, we already exceed the 9% in any event, basically. So I wonder a little bit about the comment in terms of [relative] position. And, clearly, the fact we actually issued the buffer capital notes is a further gain in terms of this, which isn't reflected in the glide path calculations you see there.

We can pick up offline, but I think I was referring more to the top 12 investment banks, where most of them are trying to guide between an 8% to 10% look-through Basel III ratio by the end of next year. But I agree with you; relative to most European banks, you look extraordinarily well capitalized.

Okay, thanks, Huw. Next question?

Jon Peace, Nomura.

A couple of questions, please. Firstly, Brady, I just wanted to follow up on your observation that you thought, for the Investment Bank, the 2009 to nine-month '11 run rate was not unreasonable as a central case looking forward. That's pretty favorable compared with the current consensus. It's about 50% higher, as I look at it. So my question is how sensitive is your 15% ROE target to achieving that historic run rate? And what if it was more like the run rate we've seen over the last 18 months?

And the second question is just to come back on your Basel III look-through. You're telling us it's 7.4% to the end of 2012; last quarter you had 8.8%, so that's gone down quite a bit. The first question is do regulators actually care? Do they look at this at all? And do they have a back-of-envelope number below which they'd be uncomfortable?

And secondly, if you could walk us through why it's come down. I can see the regulatory deductions have moved quite a bit, amongst other things. Thanks.

I'll take the first question, and maybe David can address the second.

Obviously, as you say, everybody can have a different perspective on what they think is a reasonable prognosis for markets going forward. And I certainly don't think we have any special insight that would give us a better view of that than you.

But what we have done is we certainly have looked at the numbers. And, as you say, exactly that, which is to try to -- if you think that 2010 and '11 is more of a central case for the next couple of years in terms of the overall business environment, when we run the numbers on that on a pro forma basis the Investment Bank comes out at a 11% to 12% return area; and the group as a whole still comes up above the 15%.

So I guess it's resilient in the sense that even if you think that 2010/'11 is what we're going to -- that average level of activity is what we're going to experience for the next two/three years, that our belief is we still get over the 15% target for the Group as a whole, and you end up with 11% to 12% for the Investment Bank.

So in terms of the CET1 ratio, we provided obviously two simulations; the first being on the transitionary basis, or the CET1 ratio, and the second being the so-called look-through, which has all the deductions as per 2019.

I think our understanding has been -- and we've discussed this before, I think remains that, certainly in the discussions with FINMA and the BIS, it's very much the transitional ratio which includes the transitional adjustments that is the focus for regulatory ratios. On the other hand, I think we know that people are interested in the look-through ratio as well, which is why we include that calculation on page 54.

So I guess the reasons for the reduction and the look-through ratio for this quarter compared to the second quarter then comes down to two issues.

The first one, if we actually look at slide 54, the CHF35.8 billion number, that clearly reflects the performance in the third quarter in terms of the absolute numbers and starting point, as well as the consensus expectations for Credit Suisse, from the analysts, from you, over the next 15 months. So to the extent those have fallen, that actually reduces the CET1 capital at the end of 2012. So that's clearly the first point.

The second point then is actually it relates to regulatory deductions. Those fall into two groups. The first is, as you know, there's 10% limit on the amount of deferred tax, so timing that's actually allowed, on the look-through under the Basel III rules. So you have to at least -- you can only have up to 10% of your common equity represented by deferred tax. And time limit is obviously separate from deferred tax on net operating losses, which is deducted immediately under the look-through transition calculation.

So to the extent that the CHF35.8 billion number was lower than it was in second quarter, the amount of DTA on timing, therefore, is slightly lower, so you [need to do] a leverage on that fact.

The second relates to -- is purely a technical reason related to the calculation of CVA reductions under the Basel III rules. Just as we go through the [QIF] there was approximately a CHF1 billion variance in that as we actually approach the DTA calculation, so that's just the Basel rules in practice.

And the third is a sort of a prudent provision that we've taken in terms of the pension position for the Group -- or the Swiss pension fund at the year end, reflecting the fact that the obviously interest rates have fallen in Switzerland, or particularly the 10-year corporate bond has fallen in Switzerland. So we've assumed a slight widening of the deficit calculation in this and that contributes to the final [bill] in, in this calculation.

Great, thanks.

In terms of the rule set for this, I think, as you're aware, the Swiss Parliament passed the TBTF rules before the election, so the next phase of implementation will be the draft capital [ordinance]. The draft capital ordinance is something we probably expect to be released I think probably early in the first quarter for consultation.

So at that point, essentially, the glide path that FINMA will require between the entry point to Basel III from January, 1, 2013 towards the 10% requirement under the Swiss rules by 2019 [to be distributed], as well as the requirement for buffer capital notes above and beyond that 10%.

Kian Abouhossein, JPMorgan.

Two questions. The first one, just coming back to slide 54, the CHF6 billion deduction compares to CHF3.4 billion that you gave last quarter. And I understand you just gave some details regarding the additional changes, but can you maybe breakdown the difference between CHF6 billion and CHF3.4 billion? What exactly the difference [is].

The second question is related to risk-weighted assets. The CHF100 billion deduction -- or reduction in Fixed Income risk-weighted assets clearly includes the mitigation that you already announced a while ago, roughly [CHF55 billion], or so, for mitigation, and I'm just trying to square the numbers. What has changed? Is it that the mitigations are not achievable any more? Or have the mitigations always been part of Fixed Income risk-weighted assets under Basel III?

And in that context, the third question is on your increase in risk-weighted assets due to growing the business. Is it the Asset Management and Private Banking that's roughly 20% of the capital allocated to those two divisions? I'm just wondering why you need additional capital for those businesses.

Yes, maybe I can answer the third question first, and then, David, you can go into detail on first and the second.

I think, again, as David mentioned, we're planning to provide some of that reinvestment into the businesses. We do think the bulk would be in Private Banking, Asset Management. And there are number of businesses -- we would like to increase our risk-weighted assets in those businesses.

So if you look at our lending businesses within Private Banking and the ultra-high-net-worth business, we see a lot of opportunities to productively deploy risk-weighted assets in that area. It's a slower process. It's not something where you can change it dramatically from day to day. But I think as we continue to build our business forward, both Asset Management/Private Banking area is where I think we will see opportunities, potentially, to be able to deploy risk-weighted assets so, yes.

I'm sorry, [does that include] acquisitions, or --?

Sorry?

That would include acquisitions on the CHF25 billion? Or is this just organic?

I guess it could. It's not really -- obviously, it's a 2012 through 2014 so it's kind of a forward view. But it's mostly, I think, viewed to be organic. I guess it could include some acquisitions if there were acquisitions that made sense to do. But it's not -- there's not a specific plan right now, particular acquisitions or whatever. It could include some acquisitions, I guess, but I think it's more likely to be -- the assumption is it's organic.

I think just in terms of the delta between the CHF3.4 billion and CHF6 billion, I'm sorry, I mustn't have been entirely clear in my previous answer, the difference between those two numbers reflects three factors.

The first relates to the 10% limit on the amount of deferred tax on timing that's allowed, and this is obviously the end stage, or the look-through ratio in 2019. So you're only actually allowed to actually count a maximum of 10% on the 2019 definition of capital deferred tax on timing. So if, for example, that CHF35.8 billion was higher then you'd be able to have a higher allowance; if it was lower, you'd have a lower allowance.

Because the earnings realized over the last three months are less than what was forecast, therefore, the CHF35.8 billion is lower, so, therefore, you have a reduced allowed deferred tax on timing in this. So that's the first component.

The second component, as I said, I guess, a prudent provision, shall we say, for the Swiss pension fund deficit because under the Basel III rules the majority of the Swiss pension fund deficit must be deducted. And I think what we're looking at is Swiss corporate bond yields being lower than they were at the end of 2010; therefore, the deficit on the Swiss pension fund, as calculated under Basel III, under US GAAP, will be higher than it was at 2010, the year before, so, therefore, we're factoring that in.

And then the third component is a purely technical change relating to just exactly how CVA is actually calculated in the Basel deductions, and that was about CHF1 million in terms of that component.

So those were the three components for it. The first is very elastic. So if the CET1 increases then that would be recovered; and if it was to decrease further then that would run the other way. The second is really a function of pension fund mathematics in terms of how much you manage that liability.

In terms of the overall risk-weighted asset number, you're correct. What we actually show on slide 40 is a total of CHF110 billion of mitigation. That is an increase, it's not additional to, it's an increase from what we actually said before, both when we actually first discussed this last year and in the second quarter. Some of that increase, you can clearly see, is between now and the end of 2012 and is, therefore, a significant acceleration.

We've also now given a target really for the 2013/'14 mitigation as well. And I think that really reflects a balance of risk and return that says, clearly, some of the stuff, as we said before, probably cost us some money, depending on market conditions, to actually release those earlier. And I think that certainly is really a balance in terms of how we actually see those positions being run off.

But it is a total in terms of CHF110 billion. You'd be correct; that includes the number which we actually did give before in terms of that.

And assuming that the markets don't open up and you cannot sell assets at a good price, what would you say could be the mitigation of the CHF110 billion, i.e., how much is actually roughly related to just maturity?

I think I'd probably question whether markets have to open up. Because I think most of these assets are actually liquid trading positions, which certainly within the credit and securitized products' position so are pretty liquid. I think it's more just a question about -- and how we actually want to want to time and phase this out. I don't think there's any particular issue in terms of selling them down.

In terms of the rates' position, as we said before, you can really split that portfolio into two halves, that CHF40 billion. CHF20 billion, essentially, relates to stuff that is probably going to run off more or less naturally through the course of this; the other CHF20 billion is where we would expect some effort, and potentially some costs, to be incurred in terms of [exit for them].

Okay, thank you very much.

Jernej Omahen, Goldman Sachs.

I just have two very brief questions left, actually. The first one relates to your risk-weighted asset communication. I was just wondering, the risk-weighted asset number, the CHF290 billion that you're targeting, is that in any meaningful way new? Or is it basically the same to what you have before communicated in the first and the second?

The answer to that question is it's lower. I think before we indicated a mid-range of CHF300 billion. This is CHF290 billion below it in that sense so, yes. And I think there's some FX moves against it as well because you're seeing some currency. So, yes, I guess it is lower in that sense.

Sorry, I'm looking (multiple speakers)

The (multiple speakers) [between] 2012/2014 clearly is new.

Okay. Because I'm looking at slide 25 of your second quarter presentation and it looks -- it was very similar. But given the amount of [this] (technical difficulty), I thought I would just [ask] (technical difficulty).

The second question I wanted to ask is you made frequent references of Credit Suisse passing the EBA 9% hurdle rate being imposed onto the European banks, and I was just hoping if you could run us through the broad map of how you get there. Because I get Credit Suisse not getting there, so I'd just like to understand what you think gets you over the 9% EBA hurdle rate.

Have you included the buffer capital notes, I think would be the question?

The CoCos?

Yes, that's right.

Well, I -- so I guess that's a question back to you. Do you think they should be included, because the EBA makes it explicit that only CoCos issued on their terms, newly-issued CoCos, would count towards core Tier 1? So do you think that what you've got currently will be compliant with that, in a sense, is the question?

I think the answer to that, I think we'll be very confident they would be compliant with that. The structures are actually agreed in co-ordination with the FINMA and the [SMV] before we issued it. And I think obviously the FINMA is a member of the Basel committee. I think it's probably fair to say that the buffer capital notes probably pioneered the market in terms of structure, so I think it sets a precedent for this. So I think, yes, the answer.

Okay, thanks a lot.

Fiona Swaffield, Royal Bank of Canada.

Three issues. One, the incremental cost saves. I know you gave a restructuring charge, I think, from memory, CHF550 million, but was that related to the increasing from CHF1 billion to CHF1.2 billion? Or is that related to the CHF800 million delta that's on the slide? Or is that extra 1,500 headcount not really an issue?

And the second is just generally on Volcker and the Volcker rule and kind of trying to understand whether any of this is anything related to that. Or how you feel about the ability to make inventory gains, particularly in the securitized business, RMBS, because you had some positives and minuses that you've disclosed in the past, and so how you feel post the [proposals].

And, sorry, I think there's a bit of interference on the line. But slide 36, I'm struggling with it a little bit, and that's the bit on the right-hand side, whether you can help us. So does that mean the gross number, the CHF210 million cost, is much higher if we add back this unwind of negative revenues?

And then is that CHF420 million pro forma expense within the CHF2 billion of cost saves you announced? I'm just trying to understand how all the numbers tie up. Thanks very much.

I think with regard to the second question, and I'll let David take the first and the third, obviously things, as you say, like the Dodd-Frank bill are still in process its -- in terms of how it's going to be implemented, what the impacts are going to be. I think there's a range of outcomes on that in terms of the level of impact.

So I think that there are obviously -- the environment from (inaudible) point of view, there are a number of things out there; some are proposed, some are further down the line, some are more preliminary. So there are a lot of things out there that could become bigger or less big factors in the future. There's obviously a lot of uncertainty around that.

I think our general view is that the business model that we're evolving to will put us in a better position to deal with almost all of that. But it's not really been designed with any particular set of measures in mind. So I think it will put us in a much better place to actually deal with all of that, but it's not really designed to be responsive to any one particular issue.

David?

So on the first point, Fiona, we haven't actually formally given an estimate of what the cost savings. So, from a first point, the answer is the CHF550 million I referred to is in relation to the existing program of CHF1.2 billion of cost saves which will be in the run rate by the beginning of next year.

In terms of the incremental CHF800 million of cost saves that we intend to achieve beyond that, we haven't given an estimate for what we expect those costs to be. We're in the process of finalizing those plans. However, I think it's probably fair to say, Fiona, we would expect those costs to be a similar order of magnitude to the CHF550 million we've taken so far. And we'll actually be incurring those as essentially we move to precision.

The US [account committee] don't really allow us to take an upfront restructuring provision; they require us to actually incur them as we actually get quite specific in terms of exact changes.

So then on the third point then in terms of slide 36, and I think also slide 35 in terms of the concept of this, you're correct in the sense what we actually show here is the pro forma net revenue impact of minus CHF210 million, adding back the CHF925 million of [wind] debt. So if you add those two together you get a gross number of CHF1.1 billion.

So if you go back then to slide 35, which actually shows it by area, that essentially runs through where we actually expect those revenue impacts to be. And clearly, what we've actually said here, as Brady outlined, is that less than 10% of the rates revenues would be affected by this; approximately 35% of the securitized product revenues.

I think the point to make here, clearly, is that if we had done this in the early years, 2009, when these particular risks were actually generating revenues, then the impact would have been CHF1.1 billion.

Clearly, as we've hardly obviously not entered into new long-dated unsecured, uncollateralized rates trades in the last 18 months or so, and also, as you can see, we've given here -- disclosed the revenue of securitized products business as somewhat lower, then the impact on a more recent period would be less than that.

But I think in terms of just the analysis on slide 36, again if you can revert to that, as that relates to those three periods, you've got both the CID wind-down assets and those numbers there.

And, sorry, just to clarify, because obviously we can do our own math now on those numbers, but the nine-month numbers, that's just not annualized; that's just nine months, so we need to annualize that?

That's just nine months, Fiona, yes.

Okay, thank you.

And just to be clear, the costs saving there is the pro forma reduction, the expenses for that. It's a little difficult to relate to these numbers because clearly it relates to three years of costs as opposed to the one-year number. But the cost savings we're actually planning to, clearly get you to at least this number.

Okay, thanks.

Matthew Clark, KBW.

A couple of questions. Firstly, on Investment Banking compensation, it seems to be up a bit both third quarter versus second quarter and nine month on nine month in dollar terms. I'm just wondering how you think about that; whether that's the appropriate kind of accrual rate for this year, or whether you're just waiting until the full year to decide whether you've got the scope to chew down a bit on that line.

And then secondly, sorry if I'm being slow, but just to come back to Fiona's question on the various cost impacts, am I right to be thinking that the CHF1.2 billion net costs saved by next year should be with respect to the first half of 2011 cost rate, whereas the revenue add-back of CHF925 million relates to the average of the last three years, effectively? Is that the right way to think about it? So it doesn't look like an apples and apples scope if we're trying to work out the gross and net impact of those cost saves. Thanks.

I think on the IB compensation side, obviously there are a number of different ways you can compare it. I think in Swiss franc terms, which is the way we primarily look at it, it's down about 23% on the previous year's quarter; about flat with the second quarter. But, as you know, really, these numbers are just accruals. And we'll actually determine where we'll come out in the context of full-year performance after the fourth quarter, etc., so I'm not sure it's that significant.

But it is flat on second quarter. In Swiss franc terms, it's down a lot on the last third quarter. I actually don't know the nine-month number. So, anyway, I think -- but, obviously, the most important point is that, look, as you know, it's an accrual. And we'll judge what's appropriate in the context of what the industry does, etc., and what our performance is in the fourth quarter.

Can I just quickly follow up? Can you give a rough indication of what proportion of your Investment Banking headcount are Swiss based if you say that the Swiss franc is the most appropriate way to look at it? I'm just a bit surprised by that.

Well, no, I'm just saying it's our functional currency. So we look at the numbers, it's generally the way we look at it. I'm not sure; I don't actually know the number of headcount that's in Switzerland. But, as you say, you can look at it in dollar terms as well.

But, anyway, I think the more important point is it's a third quarter accrual, or it's nine month accrual, so the actual number will be determined in the context of the full-year performance, etc..

Okay.

Just in terms of the cost saves, Matthew, so the CHF1.2 billion reduction run rate will be effective from the beginning of next year, so January 2012 in that sense.

I'm not sure that -- what we tried to do really on slide 35 and 36 is to give enough information for you to make the forecast. I hope we're trying to be as helpful as possible. Clearly, in terms of the costs, as I said, the CHF1.2 billion is effective from the beginning of next year.

In terms of the revenue impact, the RWA reduction, I think it will clearly depend on how fast we sell down the assets and which assets we sell down. I don't think I'd want to get drawn into a quarter-by-quarter plan in terms of how that actually works through. And clearly it will be very -- clearly, the revenues of the business will obviously depend on what the market conditions are at that time.

But I think you need to think about the costs being lower; the further CHF800 million coming in then over 2012 and 2013; and then the adverse revenue impact of the reduction RWA, clearly depending very much on the market conditions you had in the starting place in terms of the [position] size.

Maybe I can just ask it quickly in another way. The CHF420 million pro forma expense reduction on slide 36, is that an element of the CHF1.2 billion or the CHF2 billion run rate Group cost cuts?

The CHF420 million is the reduction in the average expense from downscaling, again, the businesses over the three-year period, so represents the average over that period of time; whereas the CHF1.2 billion is a reduction, I think, as you may recall, when we discussed this in June -- July sorry, it's a CHF1.2 billion reduction from the first half expense rate times two, basically, so the annualized first half expense rate. So the CHF1.2 billion is a reduction in that.

So one is a comparison to a three-year average; the second is a comparison to the first half. So, yes, they're clearly related numbers, and, as I said, the cost numbers will at least meet that CHF420 million, but, technically, you're actually comparing to two different periods.

Okay, thank you.

Christopher Wheeler, Mediobanca.

First question is on the plan obviously for reduction of RWA within the Investment Bank. And obviously while it's very important that you're making these changes given the market conditions, I guess the thing that's confusing me a bit is this -- when I saw the headline of 50% reduction in RWA I was quite excited. And then I realized CHF70 billion of that was already something we talked about for over of the year; very much in terms of capital management, never about enhancing the terms.

And I just wondered when -- we've now got to the stage where you are talking about that, at what point did you really start to refocus off the fact that mitigation could be a very good thing, not just in terms of meeting Basel III but actually providing higher returns? That's the first question.

My second question goes back to something Huw asked already on the capital ratios. You're absolutely right in that your regulatory ratios look robust but we have a situation where certainly Goldman Sachs and Morgan Stanley are telling me they are going to be a 10% all in, in 2012 for competitive purposes. [Jeremy Diamond] had a road-to-Damascus moment at the third quarter and, in his words, changed his tone and said he thought he would be doing something similar; and clearly we have Barclays and your friends across the road doing something similar for competitive reasons.

Are you at all concerned that at CHF7.4 billion you look rather weak from a competitive position and that may impact on this plan that you're putting in place? Or do you go in the sort of Deutsche Bank class of saying we don't mind; our clients are very happy to deal with us regardless? Thank you.

Well, on the first question, I think we've always taken a consistent approach to it, which is the reductions in RWA are clearly necessary from a return and a structural point of view in the businesses. And they certainly impact both capital ratios, but also the returns on those businesses, so I don't -- what we have thought about today is obviously an acceleration and an additional steps taken, but I'm not sure that we ever viewed it -- it wasn't a phased approach.

Chris, I think if we look back at the announcement we actually gave in the first quarter of 2009, when you may recall we exited a number of businesses, complex structured derivatives, etc., I think that was not done with prescience of what the B3 rules would actually look like. But I think obviously they did prove to be reasonably close. And that was because, essentially, we'd actually looked at every business line ahead of that announcement, we'd looked at the return on capital it actually achieved at that point and over the previous -- over the cycle, and we made a decision as to what the viability was.

I think what you're seeing today is -- and that's a calculation that's been repeated over the last three years. What we're looking at today, I think, is a reflection that, one, I think there's probably a little bit more clarity around some of the details of the implications. Also, I think that the market environment and the economic outlook is proving tougher than we probably thought it was when we've looked at this before. So it's a tightening of that analysis.

But it's an exact continuation analysis that we actually did in late 2008/early 2009 which actually led to the announcement we made at that time.

I think on the question of the capital levels, again, I guess I would go back. First of all, I do think that the full capital stack is something that's important to look at. And we have, including our BCNs, our overall [capping], you start with an 18% Tier 1 ratio, which is relevant to many of our constituencies, our senior debt holders, our depositors, our counterparties. You add to that our BCN, which is another 3% or so, you've got -- I think it's, from that point of view, probably one of the best capitalized in the world. We're sort of 21% total capital, which is relevant to you if you're a senior debt holder or you're a depositor, etc.

I do still continue to believe that we have a solid glide path to being, I think, in a very good place on capital just on a narrow CET1 basis. And so I think we continue to believe that that's the right place to be. We're comfortable with where that falls out vis a vis our regulator. And we're comfortable that again, when you look at the overall capital situation, including that issue, we think we're in a very good position.

So our point of view is that we're one of the best capitalized banks in the world taken from a -- looking at it from all angles.

Thank you, gentlemen.

[Can I just point out], obviously, the numbers also both exclude the existing CHF2 billion of buffer capital notes, but also the fact that we also have already swapped a further CHF6 billion back in February in terms of that as well. So, if actually put those two together, I think the numbers look quite solid.

Thanks.

Florence Taj, MFS.

I have two questions, actually. One; in terms of how you disclose your sovereign exposure, do you include in that just the cash bonds that you own and the associated hedges? Or would you include as well the books of sovereign CDS you may have written as part of your trading business? So that's the first question.

The second question is I was wondering if you could touch on the provision you took in Wealth Management in the US, and how that was calculated.

If you could comment, also, on the various lawsuits that we've seen over the past two quarters related to your US mortgage securitization activities.

Okay, maybe take in reverse order, I can start with the first two. With regard to the litigation issues around US mortgages, our belief is that we've been a very responsible player in the mortgage markets.

We actually, as many of you know, cut back significantly our origination in 2006, which was well ahead of any crisis precipitating. So we actually cut our securitization activities in '06 because we weren't as comfortable with the underwriting environment of a lot of the product, etc., and obviously continued to do that through 2007. So our belief is we've actually had strong standards and, I think, done a good job for our clients and our investors in the activities that we've undertaken.

Obviously, as you say, there is a lot of litigation out there. We'll see how it runs its course. I think we, obviously, believe that we're adequately provisioned for that. And I believe that we'll actually fare pretty well because my belief is that we have done a responsible job of participating in that market.

With regard to the provisions [within] the US, I'm not sure there's a lot more we can say about it, to be honest. As I say, it's obviously an issue that we're going to be working towards resolution on. This was an accounting provision that we took in the quarter, and we'll have to see how it develops from there.

I think the [EUR900 million] number you see on that chart, that does include the net CDS position. I think just in terms of the next follow-up question, which tends to be so in terms of the CDS position you're actually showing, for example, in terms of the Italian net position, so who are the actual writers of that hedging, the majority of the writers of that are actually not Eurozone banks in terms of that protection.

Okay, thank you.

Matt Spick, Deutsche Bank.

I actually have quite a lot of detailed questions, but I think I'll take most of them offline with IR. But two top-down questions, if I could. Just coming back to the staff expenses in the Investment Bank, your deferred compensation expense, I think, fell this quarter from about CHF850 million to CHF500 million, so you're flat personnel in Q3 presumably includes an offsetting increase in the non-deferred part of the expense. So I still don't really understand under what mechanism you're getting an accrual that gives you a flat cost base in the Investment Bank quarter on quarter.

And if that's still too detailed to answer, can you give us a top-down view of roughly what percentage of the personnel expenditure you think is fixed now with, or with the deferred costs and the higher salaries.

The second question I had comes back to the business plan; not so much on the capital release, but the shape of the business in future. And you're obviously sticking with your credit franchise, but your credit franchise is very small relative to the peer group. Is it fair to say that you're not really retrenching to credit per se, which is a huge complex of products, but you're more retrenching to your traditional strengths in financial sponsor, [LPO], and high yield? Thanks.

On the second part of the question, I think, as we said, we do believe, in terms of the RWA usage in the credit business, we are focused on trimming back some of the investment grade positions there. So, as you say, in terms of the RWA focus, that is certainly where it is.

And, as you mentioned, we certainly have the leading franchise in terms of leverage finance. And, to that, I think that will continue to be a very core business line for us in the future. So, as you say, we still think that the credit business as a whole is a good business. It's one where we're well positioned and which will continue to be a core activity for us.

In terms of the RWA reductions, it's probably more on the investment grade side.

David, do you want to take the first part of the question?

So just in terms of the deferred compensation point, you're referring to, I think, the Group numbers for deferred compensation in terms of the change quarter on quarter. I think the point to note is there is an offsetting impact in the Corporate Center relating to deferred compensation which is actually driving that relating to the restructuring, so I think that may be confusing the analysis. But it's probably best if we take that offline, actually.

Okay, thank you.

Other questions here in the room. So there are no more questions on the phone? Okay. So are there questions here in the room? Anybody want to -- any last shot at anything? Okay.

Well, just to summarize very briefly, I appreciate people's time. Obviously, we think that the set of measures that we've taken here allows us to continue to be in a first-mover position in the industry. We think that's actually served us very well over the past three or four years. And we have produced an ROE of 14.9% since the beginning of 2009 in our business, so we think it's actually put us in a good place.

We do think that these measures that we have taken will allow us to continue to drive a business that will produce best-in-class returns, and continue to help us to drive and build our client franchise over time. And, again, the objective here is really delivering consistent, industry leading returns to our shareholders, and ensuring that we continue to be well positioned, both for more difficult market conditions, but also in case there is an improvement in conditions over time.

So, thanks a lot, everybody, for your time, and I appreciate your attention. Thank you.

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.