Credit Suisse Group AG (CS) 2021 Q1 法說會逐字稿

Good morning. This is the conference operator. Welcome, and thank you for joining Credit Suisse Group's First Quarter 2021 Results Media Conference Call. (Operator Instructions) The conference is recorded. (Operator Instructions)

I will now turn the conference over to Christine Graeff, Group Head of Corporate Communications. Please go ahead, Christine.

Thank you, operator. And thank you, everybody, for joining us today. Before we begin, let me remind you of the important cautionary statements on Slides 2 and 3, including in relation to forward-looking statements non-GAAP financial measures and Basel III disclosures.

For a detailed discussion of our results, I refer you to the Credit Suisse First Quarter 2021 earnings release published this morning. Let me remind you that our first quarter 2021 financial report and accompanying financial statements for the period will be published on or around 6th of May.

On the line with me today are Thomas Gottstein, our Group CEO; and David Mathers, our Group CFO. Thomas will give you an overview of our first quarter performance. And after this -- after these remarks, you will have the opportunity to ask questions. And with that, I now hand over to Thomas.

Thank you, Christine, and good morning, everybody. I will lead you through some of the slides from this morning's analyst presentation. And David will also cover 1 or 2 slides from the financial section, and then we are delighted to take your questions.

So let me begin with some comments around the recent events. The significant loss in our Prime Services business relating to the failure of a U.S.-based hedge fund is unacceptable. In combination with the recent issues around the supply chain finance funds, I recognize that these cases have caused significant concern amongst all our stakeholders. Accountability is one of the core pillars of our corporate values. Together with the Board of Directors, we are addressing these situations through a series of decisive actions in the business and through 2 independent investigations, which are already underway. The investigations will not only focus on the direct issues but also broader consequences and lessons learned across the bank. We will work to ensure Credit Suisse emerges stronger.

Today, we successfully placed 2 mandatory convertible notes, and I will go into greater detail shortly. This will enable us to further strengthen our balance sheet and support the momentum of our core franchises. Credit Suisse remains a formidable institution with a rich history. We have thrived for more than 160 years through external crisis and our own challenges. I'm confident for the future. At the heart of this confidence is the earnings power of Credit Suisse and the resilience and dedication of our roughly 49,000 employees around the world.

I would like to take this opportunity to thank all our employees globally for their unwavering commitment to Credit Suisse and to our clients which they have been demonstrating not only over the past few years, but particularly during the last few weeks, which were very challenging. They make me proud every day. In testament to their perseverance and adaptability, our underlying first quarter financial performance across all divisions was not only resilient but also strong. It was supported by solid results here in Switzerland and strong growth in APAC and in investment banking as well as asset management. Net new assets for the group increased strongly in the first quarter and group assets under management grew to CHF 1.6 trillion at the end of the first quarter.

Let me turn to Slide 4, please. We reported a pretax loss of CHF 757 million for the first quarter and the net loss attributable to shareholders of CHF 252 million. This includes a pretax charge of CHF 4.4 billion relating to the U.S. hedge fund matter. As David will highlight in one of his slides, excluding this charge, adjusted pretax income, excluding significant items, was CHF 3.6 billion, reflecting the underlying strength of our business. Our wealth management-related businesses achieved a 59% year-on-year growth rate in pretax income on an adjusted basis, excluding significant items, in this first quarter and the return on the regulatory capital of 29%. This was led by strong growth in Asia Pacific, where we achieved adjusted pretax income growth in U.S. dollars, excluding significant items of 164% year-on-year. This underscores the region's key role in our growth strategy. On the same basis, RoRC in the APAC region was 52% in the first quarter.

Net revenues in our Investment Bank grew 80% in U.S. dollar year-on-year terms in the first quarter. It recorded a pretax loss of USD 2.6 billion, including the U.S. hedge fund with the well-known USD 4.7 billion charge we took in the first quarter. Our CET1 ratio was 12.2% at the end of the first quarter, our Tier 1 leverage ratio was 5.5%, and our CET1 leverage ratio was 3.8%.

As I mentioned, today, we successfully placed an offering of 2 series of mandatory convertible notes, convertible into 203 million shares, leading to an estimated uplift of around 55 to 60 basis points to the CET1 ratio. We intend to restore capital to achieve an approximately 13% CET1 ratio and a minimum of 4% CET1 leverage ratio. We reduced the proposed dividend for 2020 to CHF 0.10 per registered share. Following the completion of share buybacks in the first quarter of '21, we have suspended the share buyback program. Subject to 2021 financial performance, the Board of Directors would intend to restore the dividend in 2021 before any resumption of share buyback.

We move to the next, Page 5. As we have previously disclosed on March 25, a U.S. hedge fund failed to meet its margin requirements, leading us to issue a default notice. In the first quarter '21, we recorded a charge of CHF 4.4 billion in respect of this matter. We expect to take an additional charge in the second quarter of roughly $600 million. We have exited 97% of our positions relating to the hedge fund.

As you see on the right side, we have reviewed exposures across the entire Prime Services business. Related risk and control governance is already being strengthened and will be further enhanced following first and second line risk management assessments. Our Prime Brokerage and Prime Financing businesses will be resized and derisked with the primary focus on our most important franchise clients. By the end of 2021, we plan to reduce the Investment Bank leverage exposure by at least USD 35 billion and to align the IB risk-weighted assets to no more than the 2020 year-end levels.

Regarding the supply chain finance fund matter, Credit Suisse Asset Management's priority remains the recovery of funds for investors in the 4 supply chain finance funds. To date, total cash collected in the funds amounts to USD 5.4 billion or 54%, more than half of the total AUM at the time that the funds were suspended, of which $4.8 billion has been returned to fund investors in 2 cash distributions. We intend to provide progress updates over the coming months.

CSAM is an active dialogue with the administrators of Greensill and other parties to identify options to facilitate further recovery. We have noted that it is reasonably possible that Credit Suisse will incur a loss in respect of these matters, though it is not yet possible to estimate the size of such reasonably possible loss.

We established Asset Management as a separate division effective 1st of April 2021, emphasizing the strategic importance of the business for the bank and its clients. I also want to be clear that there are no plans to sell the Asset Management business at this point in time.

Next page, please. The Executive Board, together with the Board of Directors, has taken decisive actions in the wake of these events. As you can see from the next 2 slides, we have taken several decisive actions. For one, we implemented management changes in response of recent events. We welcome Ulrich Körner who has been CEO of Asset Management and member of the EXB since April 1, 2021. Christian Meissner, has been appointed CEO of the Investment Bank, a member of the EXB effective this coming 1st of May. Joachim Oechslin has been appointed Interim Chief Risk Officer, a member of the EXB effective April 6. And Thomas Grotzer has been appointed Interim Global Head of Compliance effective 6th of April.

The management team is fully focused on strengthening Prime Services and Asset Management risk controls, including a forensic analysis of the 2 incidents and lessons learned. We are conducting an overall review of risk systems, processes across the bank in close collaboration with the Board of Directors and external advisers. The Board of Directors has launched 2 investigations carried out by external parties. These investigations will be supervised by a special committee of the Board of Directors and will not only focus on the direct issues arising from those matters, but also reflect on the broader consequences and lessons learned. In each instance, we will work closely with the relevant regulators including FINMA, which has opened enforcement proceedings in both cases.

Next page, please. We have also strengthened our capital by issuing 2 series of mandatory convertible notes, convertible into a total of 203 million shares. These are expected to provide net proceeds to Credit Suisse Group of approximately CHF 1.7 billion. You can see the details on this slide, but let me highlight, as I mentioned earlier, that is expected to lead to an improved CET1 ratio with an uplift of roughly 55 to 60 basis points.

On this page, let me now turn to the underlying performance. And on this page, you can see the revenue growth in both divisions -- or in both businesses, rather. In terms of the 3 Wealth Management divisions on the left side, you can see that we delivered strong growth across all 3 divisions and also on the investment banking side on the right side.

Wealth Management-related revenues adjusted, excluding significant items, grew 7% year-on-year in the first quarter. Growth was particularly robust in transaction and performance-based revenues, which grew 18% from 1 year earlier. As you see on the right side of the slide, investment banking revenues grew 80% year-on-year during the first quarter to $3.9 billion. The gain occurred across fixed income sales and trading, equity sales and trading and particularly capital markets and advisory.

Next page, please. Despite recent events, we grew our assets under management and achieved a solid increase in net new assets. Our AUM at the group level increased by 16% year-on-year to CHF 1.6 trillion and grew by 6% since the beginning of the year. Net new asset growth for the last 12 months was 5%, and we posted an annualized NNA growth of 7% in the first quarter, as you can see on the right side of this page, or in absolute terms, CHF 28 billion.

Next page. On this page, we show our client business volume, which is assets under management, assets under custody and loan volume for each of our 3 private banking divisions. We have generated substantial client business volume growth across our Wealth Management businesses, particularly in Asia, which achieved a 41% year-on-year growth in U.S. dollar terms during the first quarter. We have also seen strong client business volume growth in IWM Private Banking and in the Swiss Universal Bank on the private client side.

Likewise, we also saw very strong net new assets across the divisions. As you know, our ambition is to grow annual client business volume by mid-single digits in the Swiss business; mid-to-high single digits in IWM; and double digits in Asia, all of which we have comfortably exceeded in the first quarter.

Next page, please. During the first quarter of this year, our wealth management-related adjusted pretax income, excluding significant items, grew 59% year-on-year to CHF 1.6 billion. On the same basis, RoRC, return on required capital -- on regulatory capital, in our Wealth Management-related businesses grew from 18% in the first quarter of 2020 to 29% in the first quarter of '21.

We grew total client business volume, which are the figures you saw on a divisional basis on the previous page, over all 3 divisions in aggregate by 22% year-on-year. We drove client activation resulting in mandate penetration of 29%. We also experienced continued strong performance in the ultra-high net worth segment with total NNA of CHF 8.3 billion across all 3 businesses.

On the next page, 13, let me cover in more detail our Asset Management business, which is a strategic part of our overall value proposition. Asset Management revenues, excluding significant items, increased 60% year-on-year against what was a difficult first quarter in 2020 with notable improvement in both adjusted pretax income, excluding significant items and in NNA. The rebound in quarterly performance stretched across the business despite the supply chain finance fund situation.

Our strong NNA of CHF 10.3 billion during the first quarter was driven by inflows in traditional investments, investment in partnership and in alternatives at above average gross margins.

Next page, please. Let me turn to our capital markets and advisory franchise, which outperformed most of our peers. Based on Dealogic data, our capital markets and advisory fees grew by 118% year-on-year during the first quarter to USD 1.7 billion. Our share of wallet on the same basis increased across mergers and acquisitions, equity capital markets and debt capital markets.

Next page. We recognize that a strong focus has to lie on sustainability, and this is not only the right thing to do, it is good business and an important part of our growth strategy. With this in mind, last summer, we created SRI, Sustainability, Research and Investment solutions, to infuse environmental, social and governance standards at the heart of research, advisory, Wealth Management, Asset Management and Investment Banking. Almost 9 months after its launch, SRI has made excellent progress executing its strategy and delivering value to clients and stakeholders.

We are doing this by enabling client transitions, driving our own transition and taking a leadership role in standard setting, among other things. On the right side of this page, you see a few highlights. These include CHF 118 billion in assets managed according to sustainability criteria at the end of the first quarter. We priced 25 transactions, including sustainable bonds globally, totaling USD 17.3 billion.

Before I hand over to David, let me briefly touch on the outlook. Overall, we would expect market volumes to return to lower and more normal levels in the coming quarters. We expect a residual impact of approximately USD 600 million from the U.S.-based hedge fund matter in the second quarter as we have now exited over 97% of the related positions.

In Wealth Management, we anticipate broadly stable net interest income and improving recurring commissions and fees, benefiting from higher level of AUMs. For the investment bank, we would expect the second quarter to reflect a slowdown in market activity as well as an impact from the resizing of our Prime Services business. Signs of recovery in the global economy could allow us to progressively release part of our allowance for credit losses under the CECL accounting methodology that was built in the early months of the COVID-19 crisis last year.

Additionally, we expect the effective tax rate to remain significantly elevated for the remainder of the year. We intend to achieve a CET1 ratio of approximately 13% and a minimum 4% CET1 leverage ratio.

With this, I would like to hand over to David.

Thank you very much, Thomas. I'm not going to go through the full presentation I gave to the analysts this morning. I'm just going to pick out a couple of slides. What we show on Page 17 is the overall numbers, and we'll take those as read. But I'd like just to focus, please, on Slide 18, if that's possible. Thank you very much.

What we show here is some more details on the underlying performance of the bank in the first quarter. As you can see, in terms of significant items, whilst there was a gain of CHF 144 million in respect of all funds, that was actually less than the CHF 268 million that we took in the first quarter of 2020. I think you should also note that the results are after taking a CHF 63 million charge for restructuring in the first quarter '21. It was a credit a year ago. Two other things just to pick out, it is certainly true. If you look at the CECL numbers, as Thomas has referred to already, whilst there was a CHF 305 million charge in the first quarter of 2020, there was a release of CHF 59 million in the first quarter. But I think for those of you who have looked at the results of our U.S. banks, they've seen much greater releases in terms of this. So this is not disproportionate in any way.

And last but not least, you can see there's been CHF 109 million reduction in our compensation benefits charge, primarily driven by variable compensation accruals. So I think if you just step back, I think it should be clear that excluding the U.S. hedge fund charge, our profit for the first quarter comfortably exceeds CHF 3 billion, regardless of how you actually look at the numbers.

I'd now like to jump to Slide 22, please. and just talk a little bit about the actual capital position of the bank. So what we show here is a walk in terms of the CET1 and the leverage ratio. So as we've announced already, you can see that on the left-hand side, we ended the first quarter with a CET1 ratio of 12.2%. Now if we move from left to right, in terms of the loss of approximately CHF 600 million in regards to the sale of the vast bulk of the remaining assets owned by the U.S. hedge fund, that will reduce our capital position by about 20 basis points in the second quarter.

However, against that, FINMA imposed a buffer in respect of the size of these positions, which is proportionate to that size. So as these are now rolled off and we said 97% have been disposed, that is actually released. So net-net, we should be up about 5 basis points as a consequence of those 2 effects.

Allfunds is actually being IPO-ed today. And we would expect a capital gain for Credit Suisse about 25 basis points from that. And then we'd expect around 55 to 60 basis points, depending on the final pricing today and tomorrow, from 2 mandatories that we've actually issued to certain shareholders this morning. So if you add that up, you can see that on an implied basis, we're standing at around 13% CET1 ratio, which is a level that we intend to hold for the balance of the year.

Just moving on in terms of points to the right-hand side. We will be reducing the amount of common -- RWA in the Investment Bank back to the level that prevailed prior to the end of December 2020. And we are also planning certain other asset sales, which should boost our capital position by about 40 to 50 basis points. But I would note, we're also assuming that we'll have about 30 to 35 basis points debit in respect of operational risk capital primarily related to the RMBS charge.

So I think if you look forward, I think the key point is with the completion of the mandatory deal, we will be at an implied rate of 13% already, which is the target that we've recommended and agreed with the Board of Directors to prevail for the second half or -- for the rest of 2021. And if you look at the leverage ratio, I'm not going to go through all the numbers in such detail, but you can see the same measures increases our leverage to around 4% now, and that's even before we conduct the runoff of about $35 billion of leverage in respect to the Investment Bank's Prime Financing and Prime Service business.

So I think, again, that supports our goal of having a leverage ratio, which exceeds 4% in CET1 terms. So I think on that point, I think we probably should move to questions. Christine?

Yes. We will now -- thank you, David, and we will now begin with the question-and-answer part of the conference. So operator, let's open the line, please.

(Operator Instructions) And the first question comes from the line of Owen Walker at Financial Times.

Could you comment on the Wall Street Journal story last night about the $20 billion of exposure to stocks related to Archegos? Is that actual $20 billion of stocks or does that include the leverage as well? And could you talk a little bit -- I know you mentioned earlier about the sell-off since then. But I don't know if there's anything more you can add in terms of whether these sales were or publicly disclosed or whether any private deals took place as well?

Yes. We are not confirming exact numbers. But as you saw in the -- in various comments that we were probably 1 of the top 3 brokers for Archegos. So based on the numbers that others have provided, and that usually includes both long and short positions. And it is a fact that we have reduced more than 97%, our exposure from there, we are down to a couple of positions. We did that through block trades in orderly fashion. We decided to do this in an orderly fashion rather than in a onetime reduction. And we did this at prices very similar to others who did it on 1 or 2 days, a few days ago. So our approach was to do this in an orderly fashion, and we are at these levels now. But the exposures that have been portrayed in the media always include both long and short positions.

Okay. Great. And just in terms of the -- whether they were private deals at all, the sales?

As I said, we did it through a combination of blocks and orderly market sell downs.

And your next question comes from the line of Margot Patrick at the Wall Street Journal.

I wanted to ask about exposure level. It seems from what Thomas and David, you guys had both said this morning, that it wasn't the question of selling at bad prices out of Archegos, it was about -- it sounds like it was about your absolute exposure level. I mean can you confirm that? Because otherwise, it's hard obviously for people to understand how you could have lost so much more than others.

And just related to that, can you give us a sense of where the problems were? Was it in the system? Was it in the risk systems? Was it in people overriding decisions? Was it -- both of these things? I mean just to understand a little bit better because, obviously people want to be clear it's not going to happen again.

And sorry to keep going, but I wanted to also just have a second question on how long you expect your capital plan to hold since there's so much consideration around strategy and potential disposals and so forth. And I guess related to that would be how long can the management team hold?

Look, we are still analyzing the exact details of the loss. But what we can certainly say as we are looking at the absolute exposures, we are looking at the relative margin exposure, we are looking at the Delta 1 correlation between the long and the shorts. We are looking at the underlying concentration of the individual positions, both on the long and the short side. And we cannot comment on the others what was different, both at the time when we served our margin call nor a few days earlier nor a few weeks earlier.

What is very clear, this was an idiosyncratic situation with an underlying exposure that had explosive growth over the few months that led up to this incident, and we are now reviewing this, together with our Board, to clearly take the right lessons from that. But we cannot really comment on others. But it's clearly unacceptable that we even got into this position, and that's why we also took our consequences from it in terms of personnel changes. And we are going now through the entire portfolio, which we have done already and will continue to do in all detail.

We will reduce our risk exposures, as we mentioned, by roughly $35 billion by the end of the year, which is roughly 1/3 of our Prime Services business. And we'll take then the right lessons learned from it. We are working very closely with risk and control staff, both in the first line and second line of defense.

In terms of capital plan, as David said, we want to operate at a 13% CET1 ratio and 4% leverage ratio going forward, which is actually higher than where we were at the end of last year. We want to really take the whole capital debate off the table, which is also why we did proactively the the 2 mandatory convertible notes. I want to also make clear this was something that both David and I came to a view is the right thing to do. We made that recommendation to the Board. So this was not as a reaction to any request by FINMA or any other regulator.

It was our proactive view that together with the Board, we decided to issue these 2 mandatories, and that will really help us also against any possible market weakness over the coming months. The volatility is still there, and it's very unpredictable. as we move into an environment with higher GDP growth and potential inflation risks in the mid- to long term. So it's important that we have that capital cushion. And at the same time, it helps us to grow our private banking lending volumes.

Sorry, I don't think you answered about how long the management team could hold together. But I guess what I really want to know is you said that the underlying exposure wasn't acceptable. But like how did that happen then? I mean it was unacceptable that you even got into the position is what you said, so where did it break down? Was it -- how did that -- how did risk limits get blown through or how did this happen?

As I said, Margot, we are -- I gave you my early indications, but we are now reviewing that in detail. I'm sure we will get some more clarity over time also through the interaction with the regulators about the disclosure issues. It's clear that a family office like that did not disclose the positions like a normal hedge fund would do. And we will also learn from the regulators how other firms had managed their position. So this is really all we can say at this point, Margot. And once we have reviewed and finalized our review, we will come back to you.

And your next question comes from the line of Jack Ewing at New York Times.

I would like to ask 2 things. One, the FINMA press release today made reference to information sharing with the U.K. and U.S. regulators. I wonder if you could give us some detail on what types of questioning you're getting from those regulators and from which agencies, and how big of a problem do you think that might be? And then secondly, I wonder if you could talk about how this will affect your U.S. investment banking business? Whether you expect big reductions in personnel, in your presence in the U.S.? How it looks going forward?

Yes. Look, the Archegos situation happened in the U.S. in New York, and the SEC and other regulators are having discussions with all the prime brokers of Archegos. Switzerland is our home regulator. And the swap books were primarily in the U.K. That's why those are the 3 regulators that are involved in the review of the Archegos situation. It's absolutely normal that the 3 are working together on a situation like that, and we are working constructively and in a transparent way with all 3 regulators on that.

And as far as our investment banking platform is concerned, you saw our first quarter numbers We were up 80%, outperformed most of our competitors. So we have a very strong business in all the other areas. We clearly are going to downsize our Prime Services business. But that's really all I can say to that question.

And your next question comes from the line of André Müller at NZZ.

Okay. First question concerning net new money. You have mentioned CHF 28 billion inflows in Q1. Could you be a bit more precise when during Q1 have those inflows occurred? Especially the number in March and maybe now April, looking forward, would be interesting because there we can go out a bit at the effect of -- especially of the Greensill case, whether that had an effect or not on net new money?

And maybe second question concerning variable compensation. You mentioned this has been reduced now in -- during Q1, around CHF 100 million. Could you also be a bit more precise here where exactly have those cuts been made? Are Wealth Management and especially Investment Bank in general here in focus? Or was this especially in the Prime Services division where this -- where those cuts have been made?

Yes. We show the NNA numbers on, I think, it was Page 11, if we can go back to that, where you see the client business volumes. And there you see the net new assets in Switzerland, CHF 2.2 billion; IWM, CHF 7.2 billion; APAC, CHF 5.4 billion. So that's roughly half of the CHF 28 billion. The other half is in institutional asset management. From divisional perspective and from a timing perspective, they came through in a pretty steady way through all 3 months in the first quarter. The 4 -- April is not even concluded, and it's too early to say. But we have not seen any significant flows in either direction. So there has been a very strong client engagement, continues to be very strong client engagement and very positive flows both in terms of divisional perspective as well as from a regional perspective.

In terms of variable compensation, as you probably know, the largest division in terms of our variable compensation pool is the investment bank, followed by IWM and APAC and then Switzerland. But the corporate functions and the reductions were broad-based. Clearly it -- particularly hard hit was the Investment Bank due to the loss. But this is just 1 quarter out of 4 quarters, and we obviously have to take the right hard look at variable compensation given the loss we had. But at the same time, we also have to pay for performance. A lot of businesses have performed extremely well, as you saw from the numbers, and we need to find the right balance.

Just to clarify it, I think I can confirm that we had positive net new assets in each of our 3 Wealth Management divisions in March.

And your next question comes from the line of Jakob Blume at Handelsblatt.

Might be a bit off question. But I was wondering what's the status of the Senate discussion. You were meant to send a letter to the U.S. Senate on Archegos. Have you answered that? And what did you answer? And are you concerned that maybe more regulatory questions from U.S. politicians would come? Or how would you react to that? Yes, that's my question.

Yes. The response to the Senate is something that we have just completed, and it's not really appropriate to discuss here in this forum. But we are obviously going to -- and we are welcoming, actually, that interaction not only with U.S. politicians, which I am sure will also speak to other involved parties around Archegos. But secondly, also here in Switzerland, where we will have a discussion with [VAC] here with the parliamentary houses, and we are welcoming actually this discussion because we can provide them with full transparency on the facts in both cases.

And your next question comes from the line of Thomas Paul at AWP.

I just have 2 questions. Just a bit astonished still that you don't mention anything about the Greensill provisions. I mean it's quite clear that you -- there will be at least a lot of litigation going on in the coming months or years. Why haven't you included that in your calculations? And the second would be, if you could elaborate a bit on the future of the asset management, how you see that, how you will change things there.

Yes. Look, on Greensill, we are not at the end of the road. We are -- our focus is on getting the money back for our investors. That's our fiduciary duty. We have so far collected $5.4 billion of cash, of which $4.8 million was paid out. We have very good visibility to about 3/4 of the portfolio. And then we have 3 idiosyncratic situations around 3 names that represent roughly 23% of the portfolio.

In each of them, we have very strong legal positions, we -- there is substance behind each of them, and we are working with all parties involved to collect that cash. And we have very constructive discussions with our clients. They understand that, they are giving us the time. Rightly so, we are helping them if they have any cash needs, which is usually not the case.

And from that perspective, that's a very constructive discussion, and we are not planning to -- from a bank perspective to do any form of cash payments because our role in Credit Suisse Asset Management is to collect that cash. And we've had, obviously, discussions with the various parties involved, and they are constructive. So this is now something which will take several months. We will continue to inform our investors about the progress we are making. And it's too premature to talk about any potential legal provisions or other provisions.

On asset management, as I said, asset management was always strategically important for us. And this is also why I moved it out of IWM into a separate division now on the leadership of Ulrich Körner. It is a business that has done very well over the years. Clearly, Greensill was a setback and was a disappointment. But at the same time, we can learn from that to make the business stronger. You can also see in the first quarter that they had a very good development. And this is now something that we want to make sure that the due diligence that we are doing in asset management is best-in-class, and we have to improve that, both in the first line and the second line of defense, take the right lessons learned from this case. And that's really all I can say to asset management. It's a very good business.

And you see it well positioned as it is. In principal, you don't need to just -- yes.

Like every year, we will have also this year a strategic review of all our businesses. We have a new Chairman joining us on the 1st of May, and that will certainly be a very interesting and active discussion with him, the Board of Directors and the rest of the Executive Board. And I don't want to -- whether it's about asset management, about investment banking, about Asia, about the Swiss business. So this will continue to be our annual strategic discussion, and that will also include asset management, it will include all the other businesses.

And your next question comes from the line of [Holger Eric] at [Ti Media].

Yes. I'd like to come back to Archegos once again and the question from the colleague from Financial Times. You said that you did make a big mistake when you were selling the shares that were the collateral. So if that wasn't the problem, the selling of the shares then the source of the loss must be that you had higher leverage than your competitors, right?

Can I actually answer? I think a similar question was asked by one of the sell-side analysts this morning, so let me just summarize the answer, which I gave this morning.

What I said is that we conducted an orderly and reasonable rundown of the positions of this U.S. hedge fund in a responsible matter. When we looked at the prices that we achieved in that orderly rundown, they were very close to those achieved by the 2 houses that conducted their sales in the first couple of days. However -- so I think therefore, the question should -- would Credit Suisse be better off by having executed all these sales in the first 2 days? The answer is no.

And frankly, if we basically tried to sell at the same time as the other brokers were selling, I think it's questionable as to what the market price would have been in that particular circumstance. However, you can't deduce much more beyond that because I don't know what size our positions were compared to those of the other apparently 7 prime brokers that this hedge fund actually had. And we may have had more -- a greater position in stocks that fell more, and they may have had positions in stocks that fell less. So there's a number of factors here that needs to be looked at, and that will be something as part of the Board of Directors' view.

Clearly, we'll look at margining, we'll look at collateral, but we also have to look at concentration risk around these positions, too. But there's a number of factors that actually drives this result, including the balance of long-term shorts.

Okay. And secondly, Mr. Gottstein, in a nutshell, you said in the analyst call, in our media call, that besides these incidents that your strategy is sound, that you don't see much need for real uptake or changes in the structure of the bank. Don't you think that you might there get into conflict with the new Chairman who's coming in because he is under tremendous pressure to derisk the bank because I think shareholders don't want to see that again. And once again, the 2/3 of your operating profit came from the Investment Bank, which is the most riskiest part of the business. So don't you think that the Chairman will push for more risk reduction in the Investment Bank? And if he will, will you do that? Or don't you buy then such a strategy?

Look, as the operational numbers showed, in all 4 divisions, we had excellent results. That doesn't mean that we should not have a strategic discussion about individual divisions, businesses, regions, configuration of certain sub-businesses, growth strategies, capital allocation. All these discussions will be part of our strategic review with the Board, with the new Chairman, with my colleagues on the EXB, and we will look at all businesses.

And as I said, there are no sacred cows. But at the same time, the fact is that the first quarter actually demonstrated that the strategy per se -- the underlying results show that the strategy per se was working. So I would not say that there is a need now because we have 2 very disappointing incidents to throw the whole strategy overboard. And I definitely don't think that that's the right conclusion to take. But we have to be always self-critical about sub-strategies or group strategies or any other strategies. But this is not the moment now to discuss this. We have a new Chairman who starts on the 1st of May, and then we will sit down together and have these discussions.

And your next question comes from the line of [Monica Heglin] at [Finance And First Shift].

Hello. Do you hear me?

Yes, we can hear you, yes.

Okay. Okay. I have a question on the importance of prime brokerage. It has been clearly a core business of Credit Suisse. And even after the reduction of $70 billion in leverage exposure, it will be a core business. Am I right? Especially as you want to focus on continuing to serve the most important franchise clients, which are those who made the biggest headaches in the past? And the second question is, how do I calculate the cost of the mandatory convertible correctly?

Okay. So the prime business is now being strategically reviewed by Christian Meissner and the rest of the team, both on the IB and on the Executive Board, together also with the Board of Directors. But we clearly have now, in the first instance, risk and control focus; secondly, we -- on the risk reduction focus. We definitely want to reduce not only the overall exposure in terms of leverage and RWA, but also a number of clients and the quality of clients. The $35 billion we mentioned as a reduction is a minimum number. And we can -- we will develop that further over the next few weeks. It is definitely not a business per se that we ever felt was extremely high-returning business, but actually in the past, didn't yield any bigger risk situations before this incident happened.

But it's something that we will probably, in the future, more use as a supporting business for our overall equity business, whether it's equity trading, sales, research equity capital markets, where the equities business, which has a very strong link to the private bank. If you look at our private banking clients, the majority of the liquid assets are in equities. And it's important that we can serve them with best execution. And -- but the Prime Services per se business will probably more see as a supporting business for the overall equity franchise.

And the demand to convertible will be -- in terms of the pricing will be priced at a 5% discount to the volume-weighted average price today and tomorrow. And there is a coupon of 3% annualized. So 1.5% for the 6 months, because the mandatory will convert in 6 months.

The second tranche is open for our shareholders because it's based on authorized capital where we do not exclude subscription rights. So there, our existing shareholders during the next 2 weeks can subscribe to the mandatory, whereas the first tranche, which was roughly the same size, was based on conditional capital, which doesn't include any subscription rights.

We are out of time, and I think we'll have to leave it here. Thank you all for your time today and for joining us. And if you have any follow-up questions, please do contact the media relations team in the usual way.

Thank you very much.

Thank you.