Credit Suisse Records Healthy First-Half Results

by Phillip Morton, Investors Offshore.com

07 August 2006

Strong investment and private banking results have helped Credit Suisse Group record is substantial increase in net earnings in first half results for 2006 compared with the same period last year, the bank reported last week.

The group's net income for the first six months of 2006 totalled CHF4.76 billion (US$695 million) which compares to CHF2.83 billion for the first half of 2005. Net income for the second quarter of 2006 was CHF2.16 billion, compared to net income of CHF919 million in the second quarter of 2005.

Net new assets totaled CHF30.1 billion for the second quarter of 2006. The Group recorded a return on equity of 21.6% for the quarter, with a return on equity of 23.4% in the banking business.

"We achieved a strong result in a market that experienced higher volatility and increasing investor caution," noted Oswald J. Grübel, CEO of Credit Suisse Group.

"This shows that our efforts to build a powerful integrated organization are gaining momentum, while our business has proved its resilience in the face of a demanding environment," he added.

Grübel commented that the long-term growth prospects for the bank are "excellent," but he stated that effective risk control and strict cost management must remain "a priority."

The Group's Investment Banking segment recorded income from continuing operations before taxes of CHF1.29 billion in the second quarter of 2006, compared to a loss from continuing operations before taxes of CHF558 million in the second quarter of 2005.

The result for the second quarter of 2006 included credits from insurance settlements for litigation and related costs of CHF474 million, while the result for the second quarter of 2005 included a charge of CHF960 million to increase the reserve for certain private litigation matters.

Net revenues grew by 30% compared to the second quarter of 2005 and were at the second highest level ever, reflecting increased revenues in all key business areas and robust deal activity.

The Private Banking segment, which comprises the Wealth Management and Corporate & Retail Banking businesses, reported income from continuing operations before taxes of CHF1.1 billion in the second quarter of 2006, an increase of 21% compared to the second quarter of 2005. Net revenues grew by 15% to CHF2.9 billion in the second quarter of 2006, primarily reflecting higher commission and fee income. Compared to the second quarter of 2005, total operating expenses rose 11%, primarily reflecting ongoing strategic growth initiatives in international markets.

Private Banking reported a pre-tax income margin of 38.6% for the second quarter of 2006, an improvement of 1.8 percentage points from the same period of 2005.

The Wealth Management business reported income from continuing operations before taxes of CHF779 million in the second quarter of 2006, an increase of 31% compared to the second quarter of 2005, reflecting strong net revenue growth. The pre-tax income margin was 38.3% for the second quarter of 2006, an improvement of 3.1 percentage points compared to the same period of 2005. Net new assets amounted to CHF16.5 billion, representing a strong annualized growth rate of 9.0%.

The Asset Management segment posted income from continuing operations before taxes of CHF27 million in the second quarter of 2006, down 92% compared to the second quarter of 2005. This decrease primarily reflected costs of CHF152 million associated with the realignment of the Asset Management business, particularly in the US. Net revenues declined 14% to CHF675 million compared to the second quarter of 2005, mainly due to lower investment-related gains.

The Wealth Management business recorded CHF16.5 billion of net new assets in the second quarter of 2006, representing a strong annualized growth rate of 9.0%. This strong asset generation reflects inflows across a broad client base, particularly in Europe and the US. The Asset Management business delivered CHF15.5 billion of net new assets, driven mainly by inflows in the US. Overall, Credit Suisse Group recorded CHF30.1 billion of net new assets in the second quarter of 2006. The Group's total assets under management were CHF1,370.9 billion as of June 30, 2006, a decrease of 1.8% from March 31, 2006, reflecting adverse market and foreign exchange-related movements, offset in part by net new assets.

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