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99.1 Credit Suisse Earnings Release 3Q15

The following excerpt is from the company's SEC filing.

99.1 Credit Suisse Earnings Release 3Q15

Key metrics

in / end of

% change

Credit Suisse (CHF million, except where indicated)

Net income attributable to shareholders

of which from continuing operations

Basic earnings per share from continuing operations (CHF)

Diluted earnings per share from continuing operations (CHF)

Return on equity attributable to shareholders (%)

Effective tax rate (%)

Core Results (CHF million, except where indicated)

Net revenues

19,596

19,439

Provision for credit losses

Total operating expenses

15,360

16,997

Income from continuing operations before taxes

Cost/income ratio (%)

Pre-tax income margin (%)

Strategic results (CHF million, except where indicated)

18,971

19,126

Return on equity – strategic results (%)

Non-strategic results (CHF million)

Income/(loss) from continuing operations before taxes

(3,010)

Assets under management and net new assets (CHF billion)

Assets under management from continuing operations

1,293.9

1,355.7

1,366.1

Net new assets from continuing operations

Balance sheet statistics (CHF million)

Total assets

858,420

879,322

954,362

Net loans

274,825

270,171

265,243

Total shareholders' equity

44,757

42,642

43,864

Tangible shareholders' equity

36,022

34,199

35,178

Basel III regulatory capital and leverage statistics

Risk-weighted assets (CHF million)

290,122

281,886

292,879

CET1 ratio (%)

Look-through CET1 ratio (%)

Look-through CET1 leverage ratio (%)

Look-through Tier 1 leverage ratio (%)

Share information

Shares outstanding (million)

1,633.7

1,632.4

1,600.8

of which common shares issued

1,638.4

1,607.2

of which treasury shares

Book value per share (CHF)

Tangible book value per share (CHF)

Market capitalization (CHF million)

38,371

42,107

42,542

Number of employees (full-time equivalents)

48,100

46,600

45,500

See relevant tables for additional information on these metrics.

Core Results summary

For additional information on financial information presented in this Earnings Release, including references to return on equity and return on regulatory capital, refer to the tabular disclosures in the Appendix and other explanatory disclosures regarding capital and leverage metrics in the section titled “Important information” on page 18.

Core Results highlights

Reported results (CHF million)

Metrics (%)

Return on regulatory capital

Strategic results (CHF million)

14,356

13,689

Net income/(loss) attributable to shareholders

(2,623)

Core Results do not include noncontrolling interests without significant economic interests.

3Q15, net income attributable to shareholders

was CHF 779 million.

Income before taxes

of CHF 861 million decreased 34% compared to 3Q14, primarily reflecting an 8% decrease in net revenues. In the strategic businesses, income before taxes of CHF 826 million decreased 49% compared to 3Q14. Non-strategic businesses reported income before taxes of CHF 35 million in 3Q15 compared to a loss before taxes of CHF 321 million in 3Q14.

of CHF 5,982 million decreased 8% compared to 3Q14. In the strategic businesses, net revenues decreased 11% to CHF 5,623 million, reflecting lower net revenues in Investment Banking and stable net revenues in Private Banking & Wealth Management, partially offset by improved net revenues in Corporate Center. In the non-strategic businesses, net revenues were CHF 359 million in 3Q15 compared to net revenues of CHF 250 million in 3Q14.

was CHF 110 million in 3Q15, with net provisions of CHF 80 million in Private Banking & Wealth Management and CHF 30 million in Investment Banking.

of CHF 5,011 million decreased 3% compared to 3Q14. In the strategic businesses, total operating expenses of CHF 4,706 million increased 2% compared to 3Q14, primarily reflecting a 15% increase in general and administrative expenses, partially offset by a 7% decrease in compensation and benefits. In the non-strategic businesses, total operating expenses of CHF 305 million decreased 46% compared to 3Q14, primarily due to a 42% decrease in general and administrative expenses and a 62% decrease in compensation and benefits. Business realignment costs in 3Q15 were CHF 47 million.

Income tax expense

of CHF 83 million recorded in 3Q15 mainly reflected the impact of the geographical mix of results. Overall, net deferred tax assets increased CHF 331 million to CHF 5,365 million, mainly driven by earnings and foreign exchange movements as of the end of 3Q15 compared to 2Q15. Deferred tax assets on net operating losses increased CHF 288 million to CHF 1,407 million during 3Q15. The Core Results effective tax rate was 9.6% in 3Q15, compared to 35.8% in 2Q15. The 2Q15 effective tax rate was negatively impacted by an additional tax charge of CHF 189 million arising from a change in New York City tax law.

Range of reasonably possible losses related to certain legal proceedings:

The Group’s estimate of the aggregate range of reasonably possible losses that are not covered by existing provisions for certain proceedings for which the Group believes an estimate is possible was zero to CHF 1.9 billion at the end 3Q15.

were CHF 0.45 for 3Q15 compared to CHF 0.55 in 3Q14 and CHF 0.61 in 2Q15.

Benefits of the integrated bank:

In 3Q15, Credit Suisse generated CHF 1.0 billion of collaboration revenues from the integrated bank. This corresponds to 16.6% of Core net revenues in 3Q15.

Strategy announcement:

Credit Suisse is announcing the results of the assessment of its strategy and is providing an update regarding its business plans and organization on October 21, 2015, including amended plans regarding future cost savings.

, Private Banking & Wealth Management reported income before taxes of CHF 647 million and net revenues of CHF 2,935 million. In its

, Private Banking & Wealth Management reported income before taxes of CHF 753 million and net revenues of CHF 2,911 million. Compared to 3Q14, income before taxes decreased reflecting lower recurring commissions and fees, lower transaction- and performance-based revenues, higher provision for credit losses and slightly higher operating expenses, partially offset by higher net interest income. Compared to 2Q15, income before taxes decreased mainly reflecting lower transaction- and performance-based revenues, higher provision for credit losses and slightly lower recurring commissions and fees, partially offset by higher net interest income. In its

, Private Banking & Wealth Management reported a loss before taxes of CHF 106 million. In 3Q15, assets under management for the division were CHF 1,293.9 billion and the division attracted net new assets of CHF 16.4 billion.

Capital and leverage metrics:

At the end of 3Q15, Private Banking & Wealth Management

reported risk-weighted assets of CHF 103.9 billion, an increase of CHF 2.6 billion compared to the end of 2Q15. The increase was mainly driven by foreign exchange movements, model and parameter updates and methodology changes, partially offset by business reductions. Leverage exposure was CHF 369.1 billion, reflecting a decrease of 1.9% compared to the end of 2Q15. At the end of 3Q15, Private Banking & Wealth Management

reported risk-weighted assets of CHF 4.4 billion, stable compared to the end of 2Q15. Leverage exposure was CHF 3.9 billion, stable compared to the end of 2Q15.

Compensation and benefits

Total other operating expenses

Private Banking & Wealth Management’s strategic results comprise businesses from Wealth Management Clients, Corporate & Institutional Clients and Asset Management.

Private Banking & Wealth Management – strategic results

Net interest income

Recurring commissions and fees

Transaction- and performance-based revenues

Other revenues

In 3Q15, the strategic businesses for Private Banking & Wealth Management reported income before taxes of CHF 753 million and net revenues of CHF 2,911 million.

On July 1, 2015, the Group transferred the credit and charge cards issuing business (cards issuing business) to Swisscard AECS GmbH, an entity in which the Group holds a significant equity interest. As a result of the transfer, the cards issuing business was deconsolidated as of July 1, 2015, including the pre-existing noncontrolling interest in the cards issuing business. Consequently, income/revenues and expenses from the cards issuing business are no longer fully reflected in the Group’s consolidated financial statements or in the Wealth Management Clients results within the Private Banking & Wealth Management segment, but the Group’s share of net income from the equity method investment in Swisscard AECS GmbH is recorded within net revenues in all three presentations. At the same time, the Group’s net income attributable to noncontrolling interests is reduced as a result of the deconsolidation. Given that Swisscard AECS GmbH continues to be an equity method investment of the Group, the aggregate impact of the deconsolidation on the Group’s net income/(loss) attributable to shareholders is not material.

Compared to 3Q14, net revenues were stable reflecting lower recurring commissions and fees, lower transaction- and performance-based revenues and lower other revenues, offset by higher net interest income. Recurring commissions and fees decreased reflecting lower banking services fees due to the deconsolidation of the cards issuing business, lower asset management fees, lower investment product fees and lower security account and custody services fees, partially offset by higher investment advisory fees and higher discretionary mandate management fees. Transaction- and performance-based revenues decreased reflecting lower brokerage and product issuing fees, lower sales and trading revenues and lower corporate advisory fees related to integrated solutions, partially offset by higher performance fees. Lower other revenues reflected investment-related losses partially offset by a gain on a credit risk hedge. Net interest income increased with significantly higher loan margins on higher average loan volumes, partially offset by lower deposit margins on higher average deposit volumes.

Compared to 2Q15, net revenues decreased 6%, driven by lower transaction- and performance-based revenues, slightly lower recurring commissions and fees and lower other revenues, partially offset by higher net interest income. Transaction- and performance-based revenues decreased reflecting lower brokerage and product issuing fees, lower sales and trading revenues and lower performance fees and carried interest, partially offset

by higher corporate advisory fees related to integrated solutions. Recurring commissions and fees decreased slightly, reflecting lower banking services fees due to the deconsolidation of the cards issuing business, lower security account and custody services fees and lower investment product fees, partially offset by higher investment advisory fees and slightly higher asset management fees. Lower other revenues reflected investment-related losses partially offset by a gain on a credit risk hedge. Net interest income increased reflecting slightly higher loan margins and higher deposit margins on stable average loan and deposit volumes.

Provision for credit losses was CHF 76 million, compared to CHF 26 million in 3Q14 and CHF 31 million in 2Q15. The increase in Wealth Management Clients reflected two cases which were offset by a gain on a credit risk hedge recognized in other revenues. The increase in Corporate & Institutional Clients reflected a small number of individual cases.

Total operating expenses were slightly higher compared to 3Q14 and stable compared to 2Q15. Compared to 3Q14, compensation and benefits were slightly higher reflecting higher salary expenses driven by higher headcount and higher deferred compensation expenses from prior-year awards, partially offset by slightly lower discretionary compensation expenses. General and administrative expenses were slightly higher reflecting higher professional services fees and higher litigation provisions partially offset by lower costs related to the deconsolidation of the cards issuing business. Compared to 2Q15, compensation and benefits decreased reflecting lower discretionary compensation expenses and lower social security costs, partially offset by higher salary expenses driven by higher headcount and higher deferred compensation expenses from prior-year awards. General and administrative expenses increased 9% with higher litigation provisions and higher professional services fees, partially offset by lower costs related to the deconsolidation of the cards issuing business.

The cost/income ratio for the strategic results was 72% in 3Q15, up two percentage points compared to 3Q14 and up five percentage points compared to 2Q15.

business in 3Q15 reported income before taxes of CHF 477 million and net revenues of CHF 2,041 million. Net revenues were stable compared to 3Q14, with higher net interest income and higher other revenues offset by lower transaction- and performance-based revenues and lower recurring commissions and fees. Net interest income increased with higher loan margins and higher deposit margins on higher average loan and deposit volumes. Higher other revenues reflected a gain on a credit risk hedge. Lower transaction- and performance-based revenues reflected lower brokerage and product issuing fees, lower equity participations income reflecting a gain related to a more capital-efficient positioning of the liquidity portfolio in 3Q14 and lower corporate advisory fees related to integrated solutions. Recurring commissions and fees decreased mainly reflecting lower banking services fees due to the deconsolidation of the cards issuing business.

Excluding this impact of CHF 59 million, recurring commissions and fees were slightly lower reflecting lower investment product management fees and lower security account and custody services fees, partially offset by higher investment advisory fees and higher discretionary mandate management fees.

Compared to 2Q15, net revenues decreased 7%, driven by lower transaction- and performance-based revenues and lower recurring commissions and fees partially offset by higher other revenues and slightly higher net interest income. Transaction- and performance-based revenues decreased with lower brokerage and product issuing fees, lower sales and trading revenues and lower equity participations income reflecting dividends from an ownership interest in SIX Group AG in 2Q15, partially offset by higher corporate advisory fees related to integrated solutions. Recurring commissions and fees decreased mainly reflecting lower banking services fees due to the deconsolidation of the cards issuing business. Excluding this impact of CHF 59 million, recurring commissions and fees were slightly higher reflecting higher investment advisory fees and higher revenues from wealth structuring solutions partially offset by lower security account and custody services fees and lower fees from lending activities. Higher other revenues reflected a gain on a credit risk hedge. Net interest income was slightly higher with stable loan margins and slightly higher deposit margins on slightly higher average loan and deposit volumes.

In 3Q15, the gross margin was 100 basis points, three basis points higher compared to 3Q14, mainly reflecting higher net interest income and a 3.4% decrease in average assets under management, partially offset by lower transaction- and performance-based revenues and lower recurring commissions and fees. Compared to 2Q15, the gross margin was down two basis points, reflecting lower transaction- and performance-based revenues and lower recurring commissions and fees, partially offset by a 4.8% decrease in average assets under management. The decrease in average assets under management mainly reflected the implementation of an updated assets under management policy in 3Q15.

Wealth Management Clients net margin was 23 basis points in 3Q15, two basis points lower compared to 3Q14, reflecting lower transaction- and performance-based revenues, lower recurring commissions and fees and slightly higher operating expenses, partially offset by higher net interest income and a 3.4% decrease in average assets under management. Compared to 2Q15, the net margin was down eight basis points, reflecting lower transaction- and performance-based revenues, the increased litigation provisions and lower recurring commissions and fees, partially offset by a 4.8% decrease in average assets under management and slightly higher net interest income.

business in 3Q15 reported income before taxes of CHF 210 million and net revenues of CHF 510 million. Net revenues were 5% higher compared to 3Q14, reflecting higher net interest income and higher recurring commissions and fees, partially offset by lower transaction- and performance-based revenues and lower other revenues. Net interest income was higher with significantly higher loan margins on slightly higher average loan volumes partially offset by significantly lower deposit margins on stable average deposit

volumes. Recurring commissions and fees were higher mainly reflecting increased fees from lending activities partially offset by lower revenues from wealth structuring solutions. Transaction- and performance-based revenues decreased reflecting lower sales and trading revenues and lower brokerage and product issuing fees, partially offset by higher corporate advisory fees related to integrated solutions. Lower other revenues reflected a higher fair value loss on the Clock Finance transaction.

Compared to 2Q15, net revenues were stable, with higher net interest income and slightly higher recurring commissions and fees offset by lower transaction- and performance-based revenues and lower other revenues. Higher net interest income reflected higher loan margins on stable average loan volumes and higher deposit margins on lower average deposit volumes. Recurring commissions and fees increased slightly with higher fees from lending activities partially offset by lower security account and custody services fees. Transaction- and performance-based revenues decreased mainly reflecting lower sales and trading revenues and lower brokerage and product issuing fees, partially offset by higher corporate advisory fees related to integrated solutions. Lower other revenues reflected a higher fair value loss on the Clock Finance transaction.

of which fee-based revenues

Asset Management

business reported income before taxes of CHF 66 million in 3Q15, with net revenues of CHF 360 million. Net revenues decreased 12% compared to 3Q14, mainly driven by investment-related losses in 3Q15 compared to gains in 3Q14 and slightly lower fee-based revenues. Investment-related losses primarily reflected losses in hedge fund investments and from the real estate sector. Fee-based revenues decreased slightly reflecting lower asset management fees and lower placement fees, partially offset by higher equity participations income and higher performance fees. The decrease in asset management fees reflected the absence of asset management fees from Hedging-Griffo following the change in fund management from Hedging-Griffo to a new venture in Brazil, Verde Asset Management, in which Credit Suisse has a significant investment.

Net revenues decreased 7% compared to 2Q15, primarily due to investment-related losses in 3Q15 compared to gains in 2Q15 partially offset by slightly higher fee-based revenues. Investment-related losses primarily reflected losses in hedge fund investments and from the real estate sector. Fee-based revenues increased slightly reflecting higher equity participations income and slightly higher asset management fees, partially offset by lower carried interest and lower performance fees.

The fee-based margin was 39 basis...


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