credit-suisse Annual Report Part 1

ANNUAL REPORT 1997/1998

Swiss Market IndexCredit Suisse Group

100

150

200

CHF

1993 1994 1995 1996 1997 3/1998

300

250

50

0

SHARE PERFORMANCE

CHF bn

91 92 93 94 95 96 97

60

50

40

30

20

10

0

MARKET CAPITALISATION as at 31 December

90

Financial Calendar

1998 Annual General Meeting Friday 29 May 1998

Financial statements for 1st half 1998 Wednesday 9 September 1998

Media conference for 1998 results Tuesday 16 March 1999

1999 Annual General Meeting Friday 28 May 1999

FINANCIAL HIGHLIGHTS 1997

1997 1996 ChangeConsolidated income statement in CHF m in CHF m +/– %

Revenue 21,024 16,667 26

Net operating profit after minority interests 3,395 2,145 58

Net profit/loss 397 –2,082 –

Cash flow 6,026 4,164 45

ROE (net operating profit after minority interests) in % in %

Credit Suisse Group 14.2 9.8

Banking business 16.2 9.6

Insurance business 10.2 11.0

31 Dec. 1997 31 Dec. 1996 ChangeConsolidated balance sheet in CHF m in CHF m +/– %

Total assets 689,568 624,396 10

Total shareholders’ equity 25,651 22,861 12

– of which minority interests 2,005 1,844 9

BIS ratios in % in % +/- %

BIS tier 1 ratio

Credit Suisse 6.6 n.a.

Credit Suisse First Boston 8.5 n.a.

Credit Suisse Group 10.9 10.4

BIS total capital ratio Credit Suisse Group 16.8 15.1

ChangeHuman resources at year-end 1997 1996 +/– %

Total staff 62,242 60,540 3

– of which in Switzerland banking business 21,442 23,553 –9

insurance business 7,108 6,547 9

– of which outside Switzerland banking business 13,235 11,268 18

insurance business 20,457 19,172 7

1996 figures adjusted for the Winterthur merger

ChangeShare data 1997 1996 +/–%

Number of shares issued at year-end 266,128,097 194,307,590 37

Shares ranking for dividend at year-end 265,750,460 194,186,189 37

Average 262,952,238 190,011,086 38

Market capitalisation (CHF m) at year-end 60,060 26,701 125

Earnings per share, operating result (CHF) 12.9 8.4 64

Earnings per share, reported result (CHF) 1.5 – 8.2 –

Share price (CHF)

at year-end 226 137.5 64

for inclusion in Swiss tax returns 224 135 66

year high 238 139.25 71

year low 133.75 105.75 26

Dividend (CHF) 5* 4 25

* proposal of the Board of Directors to the AGM on 29 May 1998 12

25%

22%

30%

23%

REVENUE COMPOSITION 1997

Balance sheet businessCommissionTrading

Insurance

1

RAINER E. GUT, CHAIRMAN OF THE BOARDOF DIRECTORS, AND LUKAS MÜHLEMANN, CHIEF EXECUTIVEOFFICER

TO OUR SHAREHOLDERS

2

Dear shareholder

In 1997 Credit Suisse Group posted strong operating results. All business areas con-

tributed to this performance. The Group showed a 58% increase in net operating profit

to CHF 3.4 bn. With a 26% rise in revenue compared with 1996 to CHF 21 bn and a

36% increase in gross operating profit to CHF 7.3 bn, Credit Suisse Group once again

proved its strong earnings power.

In 1997 Credit Suisse Group took exceptional items totalling CHF 1.4 bn. These

were taken for the merger with Winterthur, the integration of BZW, the ongoing restruc-

turing of banking operations in Switzerland and for IT restructuring in preparation for the

introduction of the euro and the year 2000. In addition, the Group decided to make a

contribution of CHF 1.6 bn to the reserves for general banking risks. With this action,

Credit Suisse Group is even better positioned to take a possible provision in respect of

Swiss lending without impacting future financial results. After taking into account these

exceptional and precautionary charges, Credit Suisse Group posted consolidated net

profit after tax and minority interests of CHF 397 m.

In view of the very favourable operating results, the Board of Directors proposes

increasing the dividend by 25% from CHF 4 to CHF 5 per share.

The refocusing of Credit Suisse Group initiated in summer 1996 is largely com-

pleted. The four banking units, each geared to specific customer segments and markets,

have been operational since the start of 1997. The advantages of the new organisa-

tional structure – precise focus on client needs, transparent accounting along business

unit lines, exploitation of cost synergies and additional earnings potential – have already

borne fruit. In line with the strategy to concentrate on core business, Credit Suisse

Group also divested its non-banking holdings. Consequently, the sale of Electrowatt

Ltd. was brought to a close and the two IT firms Fides Informatik and Citymax were

sold.

Rainer E. Gut Lukas Mühlemann

Chairman of the Board of Directors Chief Executive Officer

April 1998

An important event in 1997 was the merger between Credit Suisse Group and Winterthur

to create one of the largest global providers of integrated banking and insurance ser-

vices. The programmes aimed at tapping the extensive synergy potential offered by

pooling banking and insurance activities are progressing to plan: for example, products

combining banking and insurance expertise have been launched. In addition, after posi-

tive experience in pilot offices, 80 Credit Suisse branches and Winterthur agencies are

to be co-located over the next few months. A major milestone was reached in April

1998 with the merger of CS Life, Winterthur-Columna and Winterthur Life to form a

new division “Individual and Group Life” at Winterthur. The products of this division will

be distributed through the sales networks, including electronic channels, of Winterthur

and the banking business units of Credit Suisse Group.

In November 1997 Credit Suisse First Boston acquired BZW’s European equity

and investment banking businesses from the British bank Barclays, enabling the firm to

considerably strengthen its position in the UK home market.

1997 saw the launch of a wide range of innovative products. In mid-April Credit

Suisse launched Direct Net, becoming the first Swiss bank to offer Internet banking:

25,000 customers are already using this distribution channel for their banking business.

Meanwhile, Credit Suisse First Boston underwrote the first asset-backed securities to

be listed in Switzerland with a value of CHF 1 bn. Furthermore, for the third year in a

row our investment funds were awarded the title “Best Management Group” in their

category by Standard & Poor’s Micropal.

Credit Suisse Group has had a very good start to 1998. Although the Asian crisis

will continue to have an impact on certain financial markets, the Group is looking for-

ward to a positive business environment in 1998 and continued progress in reaching its

performance targets.

1997 was a demanding year for our staff. We would like to express our gratitude

for their hard work and commitment.

We would also like to thank our shareholders and customers for the trust they

have placed in us.

3

THE STRUCTURE OF CREDIT SUISSE GROUP

Credit Suisse Group is a global financial services company, providing a

comprehensive range of banking and insurance products. Active on every

continent and in all major financial centres, Credit Suisse Group comprises

five business units, each geared to the requirements of specific customer

groups and markets:

Credit Suisse: corporate and individual customers

in Switzerland

Credit Suisse Private Banking: services for private investors in Switzerland

and internationally

Credit Suisse First Boston: global investment banking

Credit Suisse Asset Management: services for institutional investors worldwide

Winterthur: worldwide insurance business

3 locations in Switzerland

56 locations internationally

Subsidiaries

Credit SuisseFinancial Products (80%)



Subsidiaries

BEA Associates

Credit Suisse Trust and Banking


Subsidiaries

Neue Aargauer Bank (98.6%)*

Credit Suisse Leasing

Credit Suisse ImmobilienLeasing



Subsidiaries

Bank Leu*

Affida Bank*

Bank Heusser*

Credit Suisse Fides*

Clariden Bank*

Bank Hofmann*

Bank für Handel & Effekten

Credit Suisse Trust*


present in over 30 countries

Subsidiaries incl.

Winterthur Life

Winterthur-Columna

Winterthur International

DBV-Winterthur Holding

Winterthur Holding Italia

Hispanowin S.A. (Spain)

Winterthur-Europe Assurances

Winterthur (UK) Holdings

Winterthur U.S. Holdings

HIH Winterthur (Australia)

CREDIT SUISSE FIRST BOSTONCREDIT SUISSE WINTERTHUR

* direct holding of Credit Suisse Group

4

THE FIVE BUSINESS UNITS OF CREDIT SUISSE GROUP

CREDIT SUISSE

CREDIT SUISSE ASSET MANAGEMENT

CREDIT SUISSE PRIVATE BANKING

Credit Suisse serves corporate and individual customers in Switzerlandthrough a multichannel strategy and anefficient branch network covering all

major locations. Thanks to an innovativerange of products and services, especiallyin direct and internet banking, it ranksamong the market leaders in its segment.

Credit Suisse Private Banking is one ofthe largest private banking operations inthe world. It has a strong market presencein Switzerland and around the globe and

offers a comprehensive investmentadvisory service and individual financialsolutions geared to the specific needs of private banking clients.

CREDIT SUISSE FIRST BOSTON

Credit Suisse First Boston is a leadingglobal investment banking firm, providingfinancial advisory, capital raising and

financial products for users and suppliersof capital around the world.

Credit Suisse Asset Management is a leading global asset manager focusing on institutional and mutual fund investors,

providing first-class international manage-ment through domestic operations.

WINTERTHUR

Winterthur Group is one of the leadinginsurance companies in Europe and one of the largest internationally activeinsurance companies in the world. It

offers private and corporate customers tailor-made insurance and pension solutions at the local and internationallevel.

5

CREDIT SUISSE GROUP BUSINESS REVIEW AND CONSOLIDATED RESULTS

Credit Suisse Group – including Winterthur, which is shown in the

consolidated results for the first time – announced a 58% increase

in net operating profit after tax and minority interests to CHF 3.4 bn

in 1997. All business units achieved significant improvements in their

performance. The Board of Directors proposes increasing the dividend

by 25% from CHF 4 to CHF 5 per share. After exceptional items of

CHF 1.4 bn (after tax) for covering, among other things, the merger with

Winterthur and the integration of BZW, and a CHF 1.6 bn increase in the

reserves for general banking risks, Credit Suisse Group showed a

consolidated net profit of CHF 397 m. This compares with a technical

loss of CHF 2.1 bn in 1996.

6

Strong operating performance With a 26% rise in revenue compared with 19961 to

CHF 21 bn (CHF 16.8 bn from banking operations) and a 36% increase in gross oper-

ating profit to CHF 7.3 bn, Credit Suisse Group once again proved its strong earnings

power. The Group recorded a very good net operating profit after tax and minority inter-

ests of CHF 3.4 bn, 58% up on the previous year2. The cost/income ratio3 in banking

operations was improved from 70.8% to 67.8%. On an operating basis, the consoli-

dated ROE increased from 9.8% to 14.2%. This corresponds to a ROE of 16.2% for

banking operations and 10.2% for insurance operations. Assets under management

increased to CHF 863 bn.

In view of the progress made in achieving its performance goals and the good

start to the current financial year, the Board of Directors proposes to the Annual

General Meeting to be held on 29 May 1998 that the dividend be increased by 25%

to CHF 5 per Credit Suisse Group registered share. Operating earnings per share

amounted to CHF 12.91.

Capital optimisation and balance sheet of the Group Capital optimisation was

singled out as a major objective as part of the refocusing of Credit Suisse Group. The

efficient use of capital in meeting customer needs, while at the same time creating

shareholder value, is a primary responsibility of each business unit, overseen by the

Corporate Centre.

1997 showed modest balance sheet growth in banking operations when compared

with the strong growth in revenue. At Credit Suisse the expansion in the commercial

loan book was relatively flat, due primarily to subdued economic conditions in Switzer-

land. At Credit Suisse First Boston overall balance sheet growth was 10%, owing partly

to the Swiss franc/dollar exchange rate. The increase in assets was in the securities

portfolio. At Credit Suisse First Boston significant efforts were undertaken to reposition

the balance sheet to achieve better risk-adjusted returns. An example of this effort was

1 basis for comparison with previous year (in general terms) at Group level: Credit Suisse Group incl. Winterthur2 basis for comparison with previous year of net operating profit at Group level: operating profit after tax and minority

interests (CHF 2.1 bn)3 including depreciation

the securitisation of USD 5 bn of commercial loans; capital was freed up from the

commercial loan book and reallocated to securities operations. At year-end 1997,

Credit Suisse Group’s BIS tier 1 capital is sufficiently strong, at 10.9%, to satisfy the

banking or insurance needs of the largest clients. The BIS total capital ratio stands at

16.8%.

The business unit accounts include the disclosure of allocated capital at 1 January

1998. Capital is allocated on the basis of minimum Swiss regulatory capital require-

ments, including a cushion to provide operating flexibility, while taking into account an

additional amount required to maintain an acceptable credit rating as assigned by major

rating agencies. In the case of private banking and asset management, the allocation

also includes an amount to cover operation risk. The capital allocation is reviewed

quarterly by the Credit Suisse Group Risk Coordination Committee.

All business units improve their operating results The Credit Suisse business

unit increased its revenue by 5% to CHF 2.7 bn and reduced its personnel expenses

by 10% to CHF 1.5 bn, resulting in gross operating profit more than doubling against

the previous year4 to CHF 501 m. The cost/income ratio improved from 103% to 85%.

Provisions for the performing loan portfolio were in line with expectations. In addition,

after a complete review of the problem loan portfolio, Credit Suisse took a further charge

of more than CHF 1.1 bn against previously identified problem loans against the back-

ground of a further deterioration of the Swiss economy in 1997. A release of the

reserves for general banking risks equal to this charge is included under extraordinary

income of Credit Suisse Group. The pre-tax loss5 was reduced by CHF 773 m to

CHF 296 m. The net operating loss after tax and minority interests came to CHF 278 m.

For 1998 we expect a further significant improvement in Credit Suisse’s results, leading

to a break-even result.

Credit Suisse Private Banking increased its revenue by 18% to CHF 3.6 bn in

1997, while assets under management increased by 18% to CHF 384 bn. The

cost/income ratio declined from 54% to 51%. Pre-tax profit rose from CHF 1.3 bn

to CHF 1.7 bn. Net operating profit after tax and minority interests amounted to

CHF 1.3 bn.

Credit Suisse First Boston posted very good results in 1997, with performance

in the second half equalling that of the first half despite the turbulence in the Asian

securities markets. Revenue rose 30% in dollar terms to USD 7.1 bn (CHF 10.3 bn).

The cost/income ratio declined from 69.5% to 68.9%. Total operating expenses

amounted to USD 4.8 bn (CHF 6.9 bn), up 30% in dollar terms. This can be explained

largely by strong business growth and the 31% increase in personnel expenses to

USD 3.5 bn (CHF 5 bn), a reflection of higher performance-related bonuses. Pre-tax

profit increased 29% from USD 1.4 bn to USD 1.8 bn (CHF 1.7 bn to CHF 2.6 bn).

Net operating profit after tax and minority interests amounted to USD 1.1 bn

(CHF 1.6 bn).

4 basis for comparison with previous year at business unit level: pro forma figures (Winterthur: actual figures)5 net of release of reserves for general banking risks

7

8

In respect of the Asian credit exposure of Credit Suisse First Boston, additional precau-

tionary provisions of USD 150 m (CHF 216 m) were taken at year-end 1997. These

are included in the operating results.

Against a background of buoyant financial markets Credit Suisse Asset

Management showed healthy investment performance and strengthened financial

results. Revenue increased by 22% to CHF 788 m. The cost/income ratio decreased

from 69.2% to 66.5%. Total assets under management grew by 21% to CHF 263 bn.

Pre-tax profit increased from CHF 166 m to CHF 264 m. Net operating profit after

tax and minority interests stood at CHF 214 m.

Winterthur (now also including CS Life), which was incorporated in Credit Suisse

Group’s consolidated results for the first time in 1997, put in a very good performance.

This was achieved on the back of favourable conditions in the international insurance

and financial markets. Despite a substantial strengthening of the technical provisions,

which rose from 177% to 182% in relation to net earned non-life premiums,

Winterthur increased its net operating profit after tax and minority interests by 31% to

CHF 674 m. Shareholders’ equity, excluding minority interests, rose by CHF 2.8 bn to

CHF 8 bn.

Exceptional items and increase in the reserves for general banking risks Credit

Suisse Group took exceptional items totalling CHF 1.4 bn after tax in 1997. These

exceptional items comprise CHF 300 m for the merger with Winterthur, CHF 237 m for

the integration of BZW and CHF 401 m for IT restructuring primarily in preparation for

the introduction of the euro and for the year 2000. Credit Suisse Group set aside a

further CHF 430 m for the ongoing restructuring of banking operations, primarily in

Switzerland. These provisions will benefit future earnings.

In addition, Credit Suisse Group has decided to make a contribution of CHF 1.6 bn

to the reserves for general banking risks in the consolidated accounts. With this action,

Credit Suisse Group is even better positioned to weather the possible deterioration in its

operating environment without impacting future financial results.

After taking into account these exceptional and precautionary charges, Credit

Suisse Group posted consolidated net profit after tax and minority interests of

CHF 397 m. This compares with a technical loss of CHF 2.1 bn in 1996.

Refocusing of Credit Suisse Group well advanced The refocusing of Credit

Suisse Group initiated in summer 1996 is moving forward rapidly. As part of this re-

organisation, Credit Suisse Group announced a reduction of 5,000 jobs by the end

of 1998, of which a total of 3,898 – 2,120 in Switzerland and 1,778 abroad – were

realised in 1997. The restructuring was carried out without redundancies in Switzerland.

At the same time, close to 4,000 new jobs were created, particularly outside Switzer-

land but also in growing areas of the Swiss business (e.g. direct banking, pension

business, private banking).

Merger with Winterthur: important objectives achieved The merger between Credit

Suisse Group and Winterthur is moving ahead systematically. The first measures as part

of this project have already been implemented, for example product launches, combining

banking and insurance expertise. In addition, after positive experience in pilot offices, at

least 80 Credit Suisse branches and Winterthur agencies will be brought together in

shared premises over the coming months, offering substantial potential for increased

revenue while also bringing cost savings.

Another important objective was achieved following the approval of a new strategy

for the further expansion of individual and group life operations: effective 1 April 1998,

CS Life (the life insurance company of Credit Suisse Group), Winterthur-Columna (the

joint subsidiary of Winterthur and Credit Suisse operating in group life business) and

Winterthur Life are to be combined to form a joint product centre and integrated into

Winterthur as an additional division “Individual and Group Life”. The newly formed divi-

sion combines assets of CHF 51.6 bn, premiums and contributions of CHF 9.3 bn,

and 300,000 individual and 50,000 corporate and group customers.

Business unit financial statements The business unit financial statements reflect

the organisational structure during 1997 and show the results of all business units as

OVERVIEW OF BUSINESS UNIT RESULTS

Credit Credit Credit AdjustmentsSuisse Suisse Suisse including Credit

1997 Credit Private First Asset Winterthur Winterthur Corporate Suissein CHF m Suisse Banking Boston Management Non-life Life Centre Group

REVENUE 2,730 3,610 10,264 788 3,046 2 1,186 2 –600 21,024

Personnel expenses 1,544 970 5,036 293 1,407 483 168 9,901

Other operating expenses 685 800 1,822 214 735 303 –712 3,847

TOTAL OPERATING EXPENSES 2,229 1,770 6,858 507 2,142 786 –544 13,748

GROSS OPERATING PROFIT 501 1,840 3,406 281 904 400 –56 7,276

Depreciation and write-offs on non-current assets 90 55 213 17 0 1 214 590

Valuation adjustments, provisions and losses1 707 113 562 0 0 0 56 1,438

PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES –296 1,672 2,631 264 904 399 –326 5,248

Extraordinary income1 17 36 51 9 0 24 137

Extraordinary expenses 46 46 114 23 42 3 –25 246

Taxes –48 341 872 36 497 –158 1,540

NET OPERATING PROFIT (before minority interests) –277 1,321 1,696 214 764 –119 3,599

– of which minority interests 1 7 123 0 90 –17 204

NET OPERATING PROFIT (after minority interests) –278 1,314 1,573 214 674 –102 3,395

Allocated equity capital at 1 Jan. 1998 4,150 1,900 9,900 130 7,924

Return on average allocated capital –7% n.a. 18% n.a. 10%1 net of release of reserves for general banking risks 1,108 56 22 1,186

2 defined as premiums earned (net), less claims incurred and actuarial provisions, less commissions (net), plus investment income from insurance business

3 unattributable interest expense

9

10

though they were independent legal entities. Financial data on the Corporate Centre

includes the costs of its own functions, income and expenses for real estate (including

bank premises) in Switzerland as well as all consolidation adjustments. Wherever pos-

sible, costs of the Corporate Centre have been allocated to the operating business units.

At year-end 1996, business unit financial data was prepared in order to give an

estimate of the general level of business unit profitability. As previously disclosed, the

indicative figures for 1996 were only best estimates for the year as records were not

kept along business unit lines in 1996. Subsequent to the presentation of the data, a

variety of decisions have been made with respect to the operations for 1997 regarding

the allocation of clients to business units, the discontinuation of certain business prac-

tices conducted in 1996 and a reallocation of capital among the business units. There-

fore, we have adjusted the business unit 1996 financial results to provide for a better

comparison of activities between 1997 and 1996.

Business unit financial results include operating financial information only. They

are commented upon in the relevant sections.

BUSINESS UNIT ACCOUNTING PRINCIPLES

The same accounting policies as used by the Group in its financial accounts were

adopted, unless explicitly stated otherwise.

INCOME STATEMENT

General To reconcile business unit accounts with legal entity accounts certain adjust-

ments were made in the Corporate Centre (included in the column “Adjustments includ-

ing Corporate Centre”).

Extraordinary expenses exclude exceptional items and the increase of the re-

serves for general banking risks, including their tax effects. Extraordinary income and

valuation adjustments, provisions and losses are shown net of release of reserves for

general banking risks.

For Credit Suisse Asset Management, the income statement was adjusted to take

into account the different closing dates/accounting periods of consolidated companies.

The difference is included in the column “Adjustments including Corporate Centre”.

Revenue For Credit Suisse First Boston, the business unit income statement differs

from the Group’s legal accounts because brokerage, execution and clearing expenses

are included within operating expenses (as is common with US competitors), rather

than netted against revenues.

Inter-business unit revenue splits Responsibility for each of our products is allocated

to one of the business units. When business units contribute to the success of another,

revenue allocations have been established to compensate such efforts. Revenue alloca-

tions are shown in the relevant income statement line.

Inter-business unit cost allocations Certain administration and IT tasks (“services”)

are concentrated in one business unit, which acts as a provider for the other business

units. Such services are compensated on the basis of service level agreements, and

transfer payments (which include personnel and other operating expenses) are reflected

in the income statement line “Other operating expenses”.

Real estate used by the bank All real estate in Switzerland, including bank premises,

is managed centrally. The costs, which are charged by applying market rent information

and an additonal charge if actual cost should exceed “market rent”, are included in

“Other operating expenses”.

11

12

Provisions for credit risk Business unit credit provisions that exceed the actuarial

credit provision were reversed against the reserves for general banking risks on a

Group level and netted in the business unit income statement line “Valuation adjust-

ments, provision and losses”.

Taxes Taxes are calculated for individual business units based on average tax rates

reflecting their geographical diversity. The difference between these and actual tax

expenses have been adjusted in the Corporate Centre’s account. For Credit Suisse,

tax credits on net loss and exceptional items are recognised.

BALANCE SHEET

General The business unit balance sheets include the appropriate proportion of real

estate occupied in Switzerland that is managed centrally.

RATIOS/KEY PERFORMANCE INDICATORS

Ratios per head have not been calculated as some Group-wide activities are providedcentrally by one of the business units and required staffing for services received is notreflected in the recipient business unit’s headcount.

We have performed certain procedures enumerated below in relation to the 1997 busi-

ness unit financial statements of Credit Suisse Group and its subsidiary undertakings

(“the business unit financial statements”) for which the Directors of Credit Suisse Group

are solely responsible. The business unit financial statements, which have been

prepared for illustrative purposes only, are set out on pages 9 to 29 of the annual

accounts.

We have performed limited review procedures with regard to the business unit financial

statements as follows:

– Reviewed the methodology for preparation of the business unit financial statements

as described therein and their proper application;

– Given the methodology for preparation, reviewed the consistent application of the

accounting policies; and

– Reviewed the reconciliation between the business unit financial statements and the

consolidated Group results presented in the audited financial statements for the

year.

Nothing has come to our attention as a result of the foregoing limited review proce-

dures that would lead us to believe that the business unit financial statements have not

been properly compiled on the basis of the preparation set out therein or are materially

misstated.

KPMG Klynveld Peat Marwick Goerdeler SA

Brendan Nelson Bruce A. Mathers

Chartered Accountant Chartered Accountant

Auditors in Charge

Zurich, 16 March 1998

REPORT OF THE GROUP’S AUDITORS ON THE BUSINESS UNIT FINANCIAL STATEMENTS

13

CORPORATE AND INDIVIDUAL CUSTOMERS IN SWITZERLAND

Credit Suisse posted total revenue of CHF 2.7 bn for the 1997 business

year, up 5% compared with 1996. The business unit consolidated its

strong market position and extended its lead in the Swiss direct banking

market. Staff costs were reduced as planned. As a result of the difficult

economic environment, credit provisions remained high due to additional

provisions for pre-existing non-performing loans. The net loss for the

year before extraordinary items and tax was reduced by CHF 773 m to

CHF 296 m.

14

The restructuring of Credit Suisse initiated in summer 1996 was largely accomplished

by the end of 1997. The streamlining of the branch network is also essentially complete,

with – as planned – 244 offices at the end of 1997, complemented by more than 550

Cash Service ATMs. With effect from 1 January 1998, the corporate and individual

customer business of Bank Leu, comprising around 100,000 customer relationships,

was transferred to Credit Suisse. The majority of initiatives designed to optimise credit

and risk management and adapt the IT infrastructure to the needs of the individual

business areas are under way.

In parallel with the restructuring process, a number of projects have been

launched with a view to focusing more closely on the needs of the customer. These

include the ongoing development of product strategies, closer collaboration with

Winterthur Group and the expansion of the range of services available as part of the

multichannel strategy. As a result, customers are able to carry out their banking

business in the manner they find most convenient: through the branch network, via

ATM, or by means of telephone or the Internet.


Allocated equity capital CHF m (1 Jan. 1998) 4,150

Cost/income ratio 85%

Return on average allocated capital –7%

Number of employees (31 Dec. 1997) 12,540

Pre-tax margin –12%

Personnel expenses/total operating expenses 69.3%

Personnel expenses/revenue 56.6%

Number of branches 244

Net interest margin 1.95%

Loan growth –0.18%

Deposit/loan ratio 94%

Assets under management CHF bn 111

Customer use of direct banking channels – telephone and Internet – again increased

substantially in 1997, with the telephone banking team alone dealing with some

420,000 enquiries. With the launch of DIRECT NET, Credit Suisse became the first

Swiss bank to offer a comprehensive range of Internet banking services. Since May

1997, around 1.5 m transactions have been carried out through this product and the

trend is sharply upward. Another new product that was very well received by customers

was BONVIVA, which was launched in May: around 80,000 customers signed up for

this package of services. In 1997 Credit Suisse also brought out a special service for

small and medium-sized businesses (SMBs) called START-UP, which provides support

in the establishment and restructuring of companies, including, in particular, manage-

ment coaching. In addition, through the creation of the SMB Service specialist unit, a

professional advisory service is now available for both companies and clubs and

associations. These moves were taken as SMBs are of particular importance for Credit

Suisse, reflected in the fact that 94% of loans in the corporate client segment were

made to these businesses.

INCOME STATEMENTPro forma

1997 1996 Changein CHF m in CHF m in %

Net interest income 1,875 1,870 0

Net commission and service fee income 609 522 17

Net trading income 188 120 57

Other ordinary income 58 77 –25

REVENUE 2,730 2,589 5

Personnel expenses 1,544 1,718 –10

Other operating expenses 685 662 3

TOTAL OPERATING EXPENSES 2,229 2,380 –6

GROSS OPERATING PROFIT 501 209 140

Depreciation and write-offs on non-current assets 90 286 –69

Valuation adjustments, provisions and losses* 707 992 –29

LOSS BEFORE EXTRAORDINARY ITEMS AND TAXES 296 1,069 –72

Extraordinary income* 17

Extraordinary expenses 46

Taxes –48

NET OPERATING LOSS (before minority interests) 277

– of which minority interests 1

NET OPERATING LOSS (after minority interests) 278

* net of CHF 1,108 m release of reserves for general banking risks

15

16

1997 results At CHF 96.4 bn, Credit Suisse’s total assets remain virtually unchanged

compared with 1996. The reduction in funds due from customers and in mortgage

lendings to CHF 22.9 bn and CHF 54.6 bn respectively is almost exclusively the result

of valuation adjustments.

Customer deposits increased by CHF 2.1 bn to CHF 60.3 bn. The contraction in

medium-term notes was more than compensated for by the shift into securities and

investment funds.

Both staff costs and other operating expenses developed as planned. The

cost/income ratio improved from 103% to 85%. As a result, gross operating profit

more than doubled, rising by CHF 292 m to CHF 501 m.

By drawing on the reserves set aside for repossessed property in 1996, Credit

Suisse was able to significantly reduce depreciation and write-offs on non-current

assets. Valuation adjustments, provisions and losses posted in 1997 include CHF 673 m

in respect of the statistically calculated risk cost of the credit portfolio (annual credit

provision) and CHF 34 m in respect of other losses. Additional write-downs for existing

non-performing loans totalling CHF 1.1 bn are netted against the release of reserves

for general banking risks for business unit presentation purposes. For 1998 an annual

credit provision of CHF 650 m has been budgeted consistent with the credit risk mana-

gement framework introduced in 1997.

The annual loss before extraordinary items and tax was reduced by CHF 773 m

to CHF 296 m. The loss for the first half of the year was CHF 177 m, while the loss

for the second half of the year was reduced by CHF 58 m to CHF 119 m. A break-even

result is anticipated for 1998.

BALANCE SHEETPro forma

31 Dec. 1997 1 Jan. 1997 Changein CHF m in CHF m in %

Cash and other liquid assets 993 1,363 –27

Money market claims 7,116 4,087 74

Due from banks 309 3,247 –90

Due from other business units 3,139 12 –

Due from customers 22,855 24,323 –6

Mortgages 54,631 55,889 –2

Securities and precious metals trading portfolio 100 119 –16

Financial investments 2,364 2,613 –10

Participations 51 76 –33

Tangible fixed assets 2,377 2,322 2

Accrued income and prepaid expenses 476 167 185

Other assets 1,986 2,079 –4

TOTAL ASSETS 96,397 96,297 0

Money market liabilities 0 33 –100

Due to banks 586 1,190 –51

Due to other business units 16,971 14,482 17

Due to customers in savings and investment accounts 37,149 36,367 2

Due to customers, other 23,117 21,797 6

Medium-term notes 6,708 8,045 –17

Bonds and mortgage-backed bonds 5,595 5,891 –5

Accrued expenses and deferred income 820 652 26

Other liabilities 1,046 2,704 –61

Valuation adjustments and provisions 354 496 –29

Equity capital 4,051 4,640 –13

– of which minority interests 10 8 25

TOTAL LIABILITIES 96,397 96,297 0

17

1997 was a successful initial year for Credit Suisse Private Banking.

Profit before extraordinary items and tax rose by 24% to CHF 1,672 m.

The new organisational structure has proved successful. Assets under

management increased by 18% to CHF 384 bn.

SERVICES FOR PRIVATE INVESTORS IN SWITZERLAND AND INTERNATIONALLY

18

In 1997 Credit Suisse Private Banking reorganised its structure in line with the re-

focusing of Credit Suisse Group. The restructuring of the sales network has been com-

pleted. Credit Suisse Private Banking is now represented in 50 locations in Switzerland

and 50 outside Switzerland.

Both asset management and investment advisory products and services have

been optimised, as have the regional marketing strategies.

In offshore business, new financial advisory products for the Trust Services

business area have been developed. Lending operations have been reorganised.

In addition to mortgage-backed loans, lending covered by marketable collateral was

especially important. Credit Suisse Private Banking also reinforced its international

activities in 1997. In early September the business unit acquired a 70% stake in the

Parisian private bank Banque Hottinguer, substantially strengthening its position in the

French market.



Cost/income ratio 50.6%


Pre-tax margin 46%



Fee income/revenue 64.5%

Fee income/total operating expenses 131.5%

Assets under management CHF bn 384

1997 results Credit Suisse Private Banking put in a very good performance, posting

profit growth of 24% before extraordinary items and tax and an 18% increase in assets

under management. This increase in assets was due to market performance (14%) and

net new business (4%).

Operating expenses increased at a lower rate than revenue, rising by 10% to

CHF 1,770 m. Expenses rose more sharply during the second half of the year com-

pared with the first half as a result of accelerated front-office expansion and investment

in IT projects to support product development. Nevertheless, the cost/income ratio im-

proved from 54% to 51%. Increased risks in business in Asia (CHF 42 m) and the

reorganisation of Bank Leu’s lending portfolio resulted in higher credit provisions. These

provisions were offset by the release of reserves for general banking risks.

BALANCE SHEET INFORMATION31 Dec. 1997

in CHF m

Total assets 81,349

Due from customers 25,406

– of which secured by mortgages 9,815

– of which secured by other collateral 12,187

INCOME STATEMENT1997 1996 Change

in CHF m in CHF m in %

Net interest income 792 759 4

Net commission and service fee income 2,328 1,937 20

Net trading income 389 303 28

Other ordinary income 101 72 40

REVENUE 3,610 3,071 18

Personnel expenses 970 807 20


TOTAL OPERATING EXPENSES 1,770 1,609 10

GROSS OPERATING PROFIT 1,840 1,462 26

Depreciation and write-offs on non-current assets 55 55 0

Valuation adjustments, provisions and losses* 113 58 95

PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 1,672 1,349 24

Extraordinary income* 36


Taxes 341

NET OPERATING PROFIT (before minority interests) 1,321


NET OPERATING PROFIT (after minority interests) 1,314

* net of CHF 56 m release of reserves for general banking risks

Pro forma

19

GLOBAL INVESTMENT BANKING

In 1997 Credit Suisse First Boston increased its revenue by 30% to

USD 7.1 bn, posting net operating profit before exceptional items and

minority interests of USD 1.2 bn. Through targeted investment

programmes and acquisitions, the firm significantly strengthened its

position as one of the world’s leading investment banks.

20

The year began with the firm’s major reorganisation as part of Credit Suisse Group’s

restructuring. This has been successfully completed.

In November, Credit Suisse First Boston announced agreement to purchase the

UK and Continental European equities, equity capital markets, and corporate finance

advisory businesses of BZW. The acquisition significantly expands the firm’s position in

Europe while adding the UK as an important third home market. This was followed,

in early 1998, by the acquisition of certain of BZW’s equity and investment banking

businesses in Asia and the agreement to acquire 100% of First Pacific, one of Australia’s

leading equity firms. These moves accelerate and complement the firm’s expansion plans

in the Asia/Pacific region.

As important as these structural changes was the adoption of major organic

investment programmes to strengthen the firm and position it to tap future growth

opportunities and control them profitably. Credit Suisse First Boston’s customer busi-

nesses in investment banking, sales and research are being particularly expanded, while

in the support departments major programmes are also under way to address industry

issues such as the year 2000 and the euro, while rejuvenating the infrastructure and

the control environment to raise productivity and cope with the pace of change. Strate-

gically, the cumulative effect of these moves is to further strengthen Credit Suisse First

Boston’s position among the industry leaders.



BIS tier 1 ratio* 8.5%


Return on average allocated capital 18%


Pre-tax margin 25%



* applies to the Credit Suisse First Boston legal entity

1997 results Credit Suisse First Boston recorded revenue of USD 7.1 bn

(CHF 10.3 bn), an organic growth rate of 30% in USD, or 53% in CHF, which is

greater than any other leading global investment bank. A strong focus on profitability

produced very good net operating profit of USD 1.2 bn (CHF 1.7 bn), before minority

interests and exceptional items, and ROE increased to 18%. Key cost ratios, partic-

ularly relating to pre-tax profit margins and personnel expenses/revenue, remained in

line with other leading investment banks. The BIS tier I ratio was maintained at 8.5%.

Credit Suisse First Boston’s balance sheet (in dollar terms) was virtually unchanged

against the pro forma figures at 1 January 1997. This was due to conservative balance

sheet management, aimed at keeping the relationship of equity to assets (net and

gross of reverse repos) relatively constant on an equity base growing slowly (in dollar

terms), held back by a depreciating Swiss franc (over 70% of the equity is held in Swiss

francs) and extraordinary charges.

The goal for the year was to make more profit from the same asset base. This

was achieved by starting to shift from loans to securities holdings (up over USD 10 bn),

shifting from low-margin corporate loans to higher-margin trading-oriented loans (real-

estate-related and high-yield) and increasing asset turnover. The USD 10 bn decline in

securities lending/reverse repos was a temporary move, unreflective of underlying activity.

INCOME STATEMENTPro forma Pro forma

1997 1996 Change 1997 1996 Changein CHF m in CHF m in % in USD m in USD m in %

Fixed Income 4,866 2,874 70 3,379 2,356 43

Equity 1,745 1,017 71 1,212 834 45

Credit Suisse Financial Products 1,680 1,160 45 1,167 950 23

Corporate and Investment Banking 2,130 1,669 27 1,479 1,368 8

Private Equity and other –157 –18 – –109 –15 –

REVENUE 10,264 6,702 53 7,128 5,493 30

Personnel expenses 5,036 3,265 54 3,497 2,676 31

Other operating expenses 1,822 1,218 50 1,265 999 27

TOTAL OPERATING EXPENSES 6,858 4,483 53 4,762 3,675 30

GROSS OPERATING PROFIT 3,406 2,219 53 2,366 1,818 30

Depreciation and write-offs on non-current assets 213 175 22 148 143 3

Valuation adjustments, provisions and losses* 562 314 79 390 258 51

PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 2,631 1,730 52 1,828 1,417 29

Extraordinary income* 51 35

Extraordinary expenses 114 79

Taxes 872 606

NET OPERATING PROFIT (before minority interests) 1,696 1,178

– of which minority interests 123 85

NET OPERATING PROFIT (after minority interests) 1,573 1,093

* net of CHF 22 m release of reserves for general banking risks

21

22

The USD 10 bn rise in funding from bonds and mortgage bonds reflected the

USD 5 bn Triangle loan securitisation, which in accounting terms stayed on balance

sheet, and a number of innovative Upper Tier II debt issues during 1997, which

strengthened Credit Suisse First Boston’s total capital ratio significantly.

Revenue percentages in the comments on the divisional results below refer to the

underlying dollar-based growth.

Corporate and Investment Banking Division (CIBD) Investment banking revenues

increased by 8%. These increases were driven by improved results across the board.

The increases in investment banking revenues were offset, in part, by declines in

revenues from corporate lending activities. These declines reflected CSFB’s strategy,

initiated in 1997, to reallocate capital resources from corporate lending to other busi-

nesses. The strong focus on client relationships was demonstrated through successful

delivery of many landmark transactions, as recognised by numerous Deal-of-the-Year

and other awards from financial publications around the world. The ROE was poor

primarily due to lower returns from the lending business. In addition USD 150 m

(CHF 216 m) was provided at year-end for Asian-related credit exposure.

Fixed Income Revenues for the Fixed Income Division increased 43% in 1997, with

ROE exceeding 30% due to significantly improved results across most major product

lines. Particularly good performance was posted in the real estate activities of the

Principal Transactions Group (PTG) and the Emerging Markets Group (EMG). Fixed

income revenues also increased from improved results in high-yield corporate securities,

global foreign exchange and money markets, offset, in part, by declines in trading

governments and Swiss fixed-income securities.

Equity Revenues for the Equity Division increased 45% in 1997, with ROE exceeding

30% primarily as a result of significantly improved results in customer-driven businesses

complemented by strong trading results. Revenues were particularly strong in the

eastern European business, in Swiss activities and in the US-listed and OTC busi-

nesses. Results also improved substantially in the convertibles and risk arbitrage activi-

ties. Gross equity-related revenues, including those reported in CIBD and Credit Suisse

Financial Products, amounted to USD 1.55 bn (CHF 2 bn).

Credit Suisse Financial Products (CSFP) Revenues increased 23% in 1997, with

ROE exceeding 30%. This was primarily due to improved results in the swaps and

options, commodities, asset trading and credit derivatives businesses, offset, in part, by

declines in OTC equity derivatives and foreign exchange derivatives; however, both

of these businesses produced positive revenues in 1997.

Private Equity 1997 was a build year for this Division, still showing a slight loss,

successfully hiring key people and closing a large international fund.

BALANCE SHEETPro forma

31 Dec. 1997 1 Jan. 1997 Changein CHF m in CHF m in %

Cash and other liquid assets 2,021 1,533 32

Money market claims 16,119 14,690 10

Due from banks 138,351 128,567 8

– of which securities lending and reverse repurchase agreements 103,288 81,508 27

Due from other business units 5,933 0

Due from customers 103,993 125,310 –17

– of which securities lending and reverse repurchase agreements 62,030 85,745 –28

Mortgages 7,157 5,569 29

Securities and precious metals trading portfolio 102,385 81,527 26

Financial investments 9,343 6,066 54

Participations 262 283 –7

Tangible fixed assets 1,837 1,460 26

Accrued income and prepaid expenses 5,817 4,389 33

Other assets 53,690 38,428 40

– of which replacement value of derivatives 50,934

TOTAL ASSETS 446,908 407,822 10

Liabilities in respect of money market paper 17,719 11,169 59

Due to banks 183,043 215,403 –15

– of which securities borrowing and repurchase agreements 84,817 89,637 –5

Due to other business units 39,677 14,533 173

Due to customers, in savingsand investment deposits 463 400 16

Due to customers, other 97,374 95,458 2

– of which securities borrowing and repurchase agreements 56,797 51,525 10

Bonds and mortgage-backed bonds 33,551 17,156 96

Accrued expenses and deferred income 8,025 6,724 19

Other liabilities 53,875 36,139 49

– of which replacement value of derivatives 50,635

Valuation adjustments and provisions 2,706 2,062 31

Equity capital 10,475 8,778 19

– of which minority interests 1,201 880 36


23

SERVICES FOR INSTITUTIONAL INVESTORS WORLDWIDE

During 1997 substantial progress was made towards creating an

integrated business. It was a year of strong investment performance,

strong asset growth and strengthened financial results. Assets under

management rose by 21% to CHF 263 bn.

24

Credit Suisse Asset Management’s business in Switzerland maintained its leading

position in 1997 and enjoyed strong growth in discretionary and advisory assets. The

London-based operation continued its strong performance in Global Fixed Income and

European Equities. The rapidly growing UK unit trust group exceeded GBP 1 bn

(CHF 2.4 bn). The unit’s US business received several large prestigious fixed-income

and high-yield mandates and was awarded the highest ranking in the Frank Russell

Universe for fixed income. Japan, one of the most important growth markets

for the business unit, has experienced another year of strong expansion (44%), ending

the year at over JPY 1,400 bn (CHF 15.5 bn). In Australia, assets under management

grew 57% to AUD 4.8 bn (CHF 4.5 bn). Credit Suisse Asset Management’s mutual

funds business was awarded “Best Management Group” in its category by Standard &

Poor’s Micropal for the third year in a row.


Allocated equity capital CHF m (1 Jan. 1998) 130


After-tax profit/average AUM 8.9 bp


Pre-tax margin 32%



Total assets under management CHF bn 263

Total discretionary funds CHF bn 186

– of which total mutual funds distributed CHF bn 60

Total advisory assets CHF bn 77

Growth in assets under management 21.1%

Growth in discretionary assets under management 17.5%

– of which is volume 6%

– of which is performance 11.5%

1997 results Discretionary assets under management grew 18% in 1997, 12% due to

market appreciation and foreign exchange movements and 6% stemming from net

new business. Net profit before extraordinary items and taxes increased 59% in 1997,

resulting from a 22% increase in revenue against an increase of 17% in total operating

expenses.

The growth in personnel expenses was offset by significant reductions in other oper-

ating expenses and in the cost for services from other business units of Credit Suisse

Group. The adjusted pre-tax gross margin improved from 26% in 1996 to 32%, while

after-tax profit to average assets under management improved from 7.8 basis points to

8.9 basis points.

INCOME STATEMENT Pro forma1997 1996 Change


Management and advisory fees 481 375 28

Net mutual fund fees 265 247 7

Other revenues 42 24 75

REVENUE 788 646 22

Personnel expenses 293 223 31


TOTAL OPERATING EXPENSES 507 434 17

GROSS OPERATING PROFIT 281 212 33

Depreciation and write-offs on non-current assets 17 13 31

Valuation adjustments, provisions and losses 0 33

PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 264 166 59

Extraordinary income 9


Taxes 36

NET OPERATING PROFIT (before minority interests) 214


NET OPERATING PROFIT (after minority interests) 214

25

INSURANCE FOR PRIVATE AND CORPORATE CUSTOMERS WORLDWIDE

Winterthur Group recorded very good results in 1997, a year which also

saw some fundamental decisions for the future. The insurance areas of

Credit Suisse Group were included in Winterthur’s consolidated results

for the first time. Despite an increase in provisions, net operating profit

after minority interests rose by 31% to CHF 674 m. After taking into

account exceptional items totalling CHF 356 m, Winterthur posted an

annual profit of CHF 318 m. Shareholders’ equity excluding minority

interests grew by 53% to CHF 8 bn. The exploitation of potential in the

field of bancassurance ranks among the major challenges and

opportunities both for 1998 and in the years ahead.

26

Structure strengthened and management rejuvenated At the start of 1998

Winterthur Group revised its organisational structure and realigned its Executive Board.

A Corporate Centre was formed with responsibility for Group activities. The operational

divisions were regrouped in line with the strategic priorities.

In addition, effective 1 April 1998 a product centre for individual and group life

business was created, the result of the implementation of Credit Suisse Group’s

bancassurance strategy. The new division unites the relevant business activities of

Winterthur Life, Winterthur-Columna and CS Life. Its products will be distributed via

Winterthur’s sales network and those of the banking units of Credit Suisse Group. The

new division will rank among the leading providers of individual and group life insurance

solutions in Switzerland. The expansion of its operations into the international markets is

planned.

Merger moving ahead systematically The merger between Credit Suisse Group

and Winterthur in line with the bancassurance strategy is proceeding systematically and

successfully. The first measures have already been implemented, for example product

launches, combining banking and insurance expertise. In addition, after positive experi-

ence in pilot offices, at least 80 Credit Suisse branches and Winterthur agencies will

be brought together in shared premises over the next few months, offering substantial

potential for increased revenue while also bringing cost savings.

Very good year for operational business Aided by favourable conditions in the

international insurance and financial markets, the majority of Winterthur operating units

succeeded in improving their results and competitive position. In Switzerland, the

merger of non-life and life distribution strengthened the market position considerably

and boosted cross-selling. Moreover, Winterthur’s leading position in the Swiss market

was reinforced thanks to the establishment of Winterthur-Columna, the joint life and

pension company of Winterthur and Credit Suisse, and collaboration with the Swiss

post office.

At DBV-Winterthur in Germany, the participation portfolio was streamlined and business

geared more closely to market and customer needs. Co-operation with Commerzbank

is continuing to move forward successfully. In Italy and Spain the restructuring

measures, which were rapidly implemented, bore fruit, while, in Belgium, the purchase

of Josi in 1996 saw the start of a business refocusing. In eastern Europe, Winterthur is

active in the Czech Republic, Hungary and, since 1997, also in Poland. The main

features of 1997 in the South-East Asia/Pacific region were the successful business

performance in Hong Kong and the launch of operations in China. Winterthur Interna-

tional elaborated a more aggressive strategy, strengthening its structures and extending

its range of products and services to multinationals.

1997 results All figures cover the accounts of both Winterthur and CS Life. Net

operating profit after minority interests rose by 31% to CHF 674 m. After taking into

account exceptional items totalling CHF 356 m after tax for one-time costs in connec-

tion with the merger with Credit Suisse Group (CHF 300 m) and for IT restructuring in

preparation for the year 2000 and for the introduction of the euro (CHF 56 m),

Winterthur recorded an annual profit of CHF 318 m.

Gross premiums advanced by approximately 3% to CHF 28 bn. Recording 6%

growth, life operations showed substantially greater expansion than non-life business

(up 0.2%). Investments, which account for roughly 90% of total assets, increased by

13% to CHF 102 bn. The structure of the investment portfolio also changed, with the

stock allocation rising from 17% to some 23%. The real estate and mortgage portfolios

decreased slightly in proportion. The sharp rise in shareholders’ equity (excluding minority

interests) by 53% to CHF 8 bn reflects the excellent performance of the investment

portfolio, the profit for the year and the conversion of a convertible bond issue. The

technical provisions rose by 9% to CHF 91 bn.

KEY FIGURES 1997 1996 Changein CHF m in CHF m in %

Gross premiums 27,608 26,874 3

Net investment income 7,395 5,890 26

Net operating profit (after minority interests) 674 515 31

Annual profit 318 515 –38

Investments 102,119 90,401 13

Technical provisions 91,228 83,850 9

Debentures outstanding 922 1,451 –36

Shareholders’ equity (excl. minority interests) 7,924 5,172 53

Change1997 1996 in %

Number of employees (31 Dec.) 27,565 25,719 7

27

28

Annual comparisons by line of business limited As a result of the merger of

Neuchatel with the Winterthur companies in the 1997 financial year, annual comparisons

of accounts by line of business are limited.

1997 results in non-life business The key performance benchmark, the combined

ratio (the sum total of claims ratio, expense ratio and dividends to policyholders in-

curred) again fell slightly from 107.7% to 107.5%. However, in this respect it should

be noted that major allocations were made to the technical provisions, which can be

seen from the improvement in the insurance reserve ratio (ratio of technical provisions

to net earned premiums) from 177% to 182%. Net investment income increased by

33% on the previous year. Overall, the profit in non-life business (before extraordinary

items, taxes and minority interests) amounted to CHF 904 m.

BALANCE SHEET 31 Dec. 1997 31 Dec. 1996 Changein CHF m in CHF m in %

Investments 102,119 90,401 13

– non-life 28,122 25,687 9

– life 73,997 64,714 14

Policy loans 902 710 27

Deposits with reinsured companies 337 486 –31

Cash at banks and in hand 770 707 9

Receivables from insurance companies 833 681 22

Receivables from agents and policyholders 2,775 2,456 13

Sundry debtors 1,514 1,690 –10

Accrued income and prepaid expenses 2,314 2,166 7

Office and EDP equipment 345 329 5

Other assets 1,178 1,076 9

TOTAL ASSETS 113,087 100,702 12


– non-life 24,205 23,079 5

– life 67,023 60,771 10

Deposits received from reinsurance ceded 750 691 9

Convertible bond and warrant issues 922 1,451 –36

Payables to insurance companies 707 975 –27

Payables to agents and policyholders 2,280 1,658 38

Sundry creditors 2,319 1,787 30

Accrued expenses and deferred income 1,771 948 87

Other liabilities 3,623 2,907 25

Shareholders’ equity 9,487 6,435 47

Minority interests 1,563 1,263 24

Shareholders’ equity after minority interests 7,924 5,172 53


1997 results in life business Gross premiums rose by 6% to CHF 12.1 bn. The

expense ratio remained virtually unchanged at 10.4% (1996: 10.5%). Claims incurred

and the change in the actuarial provision rose more sharply than premiums, although

this could be more than compensated for by the outstanding financial results. Net

investment income rose by 23%. The profit in life business (before extraordinary items,

taxes and minority interests) amounted to CHF 399 m.

INCOME STATEMENT LIFE OPERATIONS1997 1996 Change



Net premiums 12,072 11,279 7

Premiums earned, net 11,961 11,236 6

Claims incurred, net –6,151 –5,558 11

Change in actuarial provision, net –7,305 –6,582 11

Allocation to participation, net –1,628 –1,532 6

Operating expenses, net (including commissions paid) –1,251 –1,187 5


Interest on deposits and bank accounts 118 109 8

Interest on bonuses credited to policyholders –124 –159 –22

Other interest paid –189 –151 25

Other income and expenses (including exchange rate differences) –61 120 –151

PROFIT (before extraordinary items, tax, minority interests) 399 375 6

Investments 73,997 64,714 14


INCOME STATEMENT NON-LIFE OPERATIONS1997 1996 Change



Net premiums 13,694 13,414 2

Premiums earned, net 13,297 13,071 2

Claims incurred, net –10,154 –9,787 4

Dividends to policyholders incurred, net –295 –389 –24

Operating expenses, net (including commissions paid) –3,955 –3,998 –1

UNDERWRITING RESULT, NET –1,107 –1,103 0


Interest on deposits and bank accounts 128 129 –1

Other interest paid –71 –64 11

Other income and expenses(including exchange rate differences) –190 42 –551

PROFIT (before extraordinary items, tax, minority interests) 904 618 46

Investments 28,122 25,687 9


29

Credit Suisse Group throughout its various business units pursues a

balanced and effective risk management policy framework with clear

goals of capital preservation and capital optimisation. The Group’s risk

management approach is aimed at meeting the challenges of a rapidly

changing market environment and at maximising the potential for the

most efficient allocation and management of economic capital

throughout the entire Group to the benefit of shareholders and other

stakeholders.

CREDIT SUISSE GROUP RISK MANAGEMENT

Overview of risk management Taking financial risks and proactively managing

these risks is the Group’s prime business. Credit Suisse Group perceives risk

management as an ongoing process. It starts with the definition of business policies

and strategies and proceeds with the identification, assessment, management and

control of all risks associated with the Group’s activities. The cycle closes with the

reaffirmation and validation of objectives and strategies.

The primary objectives of Credit Suisse Group’s proactive approach to risk man-

agement are to preserve the Group’s capital base and to optimise the allocation of

regulatory and economic capital to the individual business units. Credit Suisse Group

seeks to manage risks on a prudent basis. Strategic plans have been adopted to

enhance risk management capabilities to a “best practice” level throughout the Group

with the goal of staying at the forefront of the industry.

The Board of Directors is responsible for the determination of the general risk

policy and the strategic risk management organisation. Certain risk management and

control responsibilities have been delegated to the Group Chief Risk Officer and the

Group Risk Coordination Committee (GRCC). The GRCC defines overall Group risk

policies and approves general instructions and standards concerning risk management

at the business unit level. It also reviews Credit Suisse Group’s capital management

process. Group Risk Management works closely with both the GRCC and the individual

business units to ensure an effective and coherent implementation of the Group’s risk

management strategy.

Economic capitalEconomic capital at Credit SuisseGroup Risk Management is de-fined as an equity reserve or cushion for unexpected losses. It ensures that Credit SuisseGroup – even under extremeconditions – remains solvent andstays in business. It is importantto recognise that economic capital is distinct from regulatorycapital, which focuses on marketand credit risk. Conceptually,economic capital is comprehen-sive and covers all significantrisks.

30

As the main operating units, the business units of Credit Suisse Group are responsible

for the implementation of the Group’s risk management strategy. Each business unit

has a risk management structure in place – including the appropriate tools, systems,

procedures and controls – that is ideally suited to managing the risks taken in that

particular business unit. The key to successful risk management at the business unit

level has been the design of a complementary “top-down strategic” and “bottom-up

tactical” risk management approach with formal policies and procedures addressing all

areas of significant risk. This in turn has fostered a risk management culture – which is

an important part of Credit Suisse Group’s overall corporate culture – and the setting up

of a corresponding organisational and operational structure. The structure is robust and

flexible enough to cope with changes in the business environment and allows for the

global integration of the various risks that can affect the Group’s portfolio. The Group

also leverages the vast experience and know-how of Credit Suisse Financial Products,

a subsidiary of Credit Suisse First Boston, which is an acknowledged market leader in

risk management, particularly of complex transactions.

In the normal course of its banking and insurance activities, Credit Suisse Group

engages in transactions that give rise to various types of risks, including market risk

and credit risk, operational risk and insurance risk. These risks vary as to relevance

between the various business units. Group Risk Management attempts to harmonise

the risk management approach of the different risk types.

Market risk Market risk is the risk of loss arising from changes in the values of

financial instruments resulting from the movement of market rates, prices and volatili-

ties. The majority of Credit Suisse Group’s market risk is concentrated in the Credit

Suisse First Boston business unit, the Group’s globally active trader and provider of

corporate and investment banking services. Credit Suisse First Boston devotes con-

siderable resources to ensure that market risk is comprehensively captured and under-

stood, accurately modelled and effectively managed. Credit Suisse First Boston’s in-

dependent Market Risk Management (MRM) department consolidates exposures arising

from all trading portfolios and geographical centres and evaluates the firm’s aggregate

Value at Risk (VaR) on a daily basis. In addition, MRM undertakes regular scenario

analysis of all major portfolios.

20%

2%

59%

1%

1997 AVERAGE MARKET RISKS OF CSFB1

Total interest ratesTotal foreign exchangeTotal equity

Total commoditiesTotal cross risk

18%

1 excluding correlation effects between the risk factors

31

These measurement techniques can be summarised as follows:

– The Value at Risk method (VaR method) estimates the potential loss arising from the

portfolio for a predetermined probability and holding period, using market movements

determined from historical data.

– The Scenario Analysis method estimates the potential loss after stressing market

parameters. These market parameter movements are derived from past extreme

events and hypothetical scenarios.

Credit Suisse First Boston has used a VaR methodology to model market risk since

1995, Credit Suisse Financial Products since the business was established in 1990.

Credit Suisse First Boston’s VaR is defined as the 99th percentile greatest loss that

may be expected on the portfolio over a ten-day holding period. Two years of underlying

data are used to derive the market movements used for this calculation. During 1997

Credit Suisse First Boston began migrating from a variance-covariance methodology to

a historical simulation approach for its derivatives trading subsidiary Credit Suisse

Financial Products.

Market risk limits are structured at multiple levels – from trading desks up to the

business unit level – and can be regarded as risk flags which are used to identify

potential risk concentrations. Limits also assist in allocating risk clusters, e.g. to indivi-

dual business units or regions and trading desks.

The chart shows the relationship between daily trading revenue and one-day VaR

over the course of 1997. This type of comparison between daily revenue and the VaR

(“backtesting”) is the method proposed by the Basle Committee on Banking Super-

vision for the measurement of the accuracy of the VaR model.

Variance-covariance versus historical simulationVariance-covariancemethods are based oncalculating volatilities ofthe variables under con-sideration (e.g. equityindices, FX rates), andcorrelation matrices forchanges in these vari-ables. They assume thatthe changes in thesevariables are normally orlognormally distributed.

Historical simulationuses actual historicalchanges in these vari-ables over the observationperiod, and so avoids assumptions about theirdistribution. Historicalsimulation implicitly allowsfor correlations withouthaving to rely on a corre-lation matrix.

RELATIONSHIP BETWEEN DAILY REVENUE AND VaR ESTIMATE FOR CREDIT SUISSE FIRST BOSTON

Daily revenue

1st quarter 1997

CHF m

250

200

150

100

50

–

–50

–100

–150

–200

–250

–300

One-day VaR

2nd quarter 1997 3rd quarter 1997 4th quarter 1997

32

The VaR measure is intended to be larger than all but a certain fraction – determined by

the confidence level – of trading outcomes. The backtesting analysis shows less than

the model’s expected number of exceptions (none in 1997). This suggests that Credit

Suisse First Boston’s VaR model is sound and meets regulatory standards. The average

one-day VaR estimate was CHF 201.9 m, and the minimum and maximum levels were

CHF 139.2 m and CHF 257.7 m respectively.

The average daily trading revenue was CHF 25.1 m, and the minimum and

maximum levels were CHF –102.6 m and CHF 120.0 m respectively. Credit Suisse

First Boston’s frequency distribution of daily trading revenue for 1997 is illustrated on

the right.

The Basle Committee on Banking Supervision published the “Amendment to the

Capital Accord to Incorporate Market Risks” in January 1996. Following a review and

confirmation of compliance with the Swiss equivalent of the BIS guidelines by Credit

Suisse First Boston’s Banking Law Auditors, the Federal Banking Commission has

allowed Credit Suisse First Boston to commence using its internal VaR models to

calculate market risk capital with effect from 1 January 1998. The BIS ratios at

31 December 1997 (see Financial Highlights 1997 on page 1) have been calculated

under the old regulatory framework for market risk. The capital ratios for Credit Suisse

Group under the new regulatory framework are 10.3% (old: 10.9%) for the BIS tier 1

ratio and 15.8% (old: 16.8%) for the BIS total capital ratio.

Scenario analysis is an essential component of Credit Suisse First Boston’s mar-

ket risk measurement framework. Using this technique, market risk is measured by

dynamically revaluing each portfolio after stressing the market data parameters. The

market data is changed according to a predefined set of scenarios. Scenario analysis

supplements the VaR approach as it allows risk to be viewed in cases where, for

example, market conditions are disrupted. Many of the scenarios are based on extreme

macroeconomic events from the past, e.g. the 1987 stock market crash and the 1991

Gulf war. Scenarios also exist that can assess the impact of events that could occur in

the near future, e.g. postponement of European Monetary Union.

In the disrupted equity market conditions that began in the last quarter of 1997,

scenario results for emerging market difficulties were particularly useful. In addition,

a scenario which quantified the impact on projected losses of partially re-hedging

portfolios as markets fell and a scenario that measured the impact of a stock market

bounce back also provided management with useful information for managing the

business during the Asian crisis.

DISTRIBUTION OF CSFB’S DAILY TRADING REVENUE 1997

Frequency of trading revenue

0

0

50 100–50–100

5

10

15

20

25

30

35

40

45

No. of days

CHF m

33

Credit risk Credit risk is the risk that a borrower (or counterparty) is unable to meet

its financial obligations. In the event of a default, a bank generally incurs a loss equal to

the amount owed by the borrower less a recovery amount resulting from foreclosure,

liquidation or restructuring of the company. The majority of Credit Suisse Group’s credit

risk is concentrated in the Credit Suisse and Credit Suisse First Boston business units.

Over the past three years, Credit Suisse Group has been engaged in a review of

best practice in the area of credit risk management. This effort has culminated in a new

Credit Risk Management Framework for the Group. We believe that this new approach

to assessing and managing credit risk is at the cutting edge of current thinking in risk

management and will help drive the Group’s profitability over the coming years. Credit

Suisse Group has implemented the Credit Risk Management Framework for MIS pur-

poses in December 1996. The framework is continually being refined.

Credit Suisse Group’s Credit Risk Management Framework comprises four core

components: (i) an individual credit limit system, (ii) country and regional concentration

limits, (iii) a credit risk provisioning methodology and (iv) a portfolio optimisation and

pricing methodology.

A system of individual credit limits (i) is the traditional means of managing credit

risk. Credit Suisse Group’s limit system also aims at optimising portfolio diversification.

A comprehensive set of country and regional limits (ii) is in place to address concentra-

tion issues in the portfolio. The third aspect of the Credit Risk Management Framework

is an appropriate credit risk provisioning methodology (iii). Annual credit provisions

(ACP) equal expected credit losses (derived from historical actual losses averaged over

many years). The annual expected loss of the performing portfolio is a predictable risk,

which is essentially a cost of doing credit-related business. Actual losses which occur

in any one year may be higher or lower than this amount, depending on the economic

environment, interest rates, etc. In addition to the expected loss, an indicative worst

case loss is also calculated, which is called the incremental credit reserve (ICR). The

ICR is calculated over a one-year time horizon based on the 99th percentile of the cre-

dit default loss distribution and historical recovery rates. The difference between the

ICR and the ACP reflects the unexpected loss level. As this framework is used for

management information purposes only, the ICR is not shown as a separate position

on the legal financial statement. The fourth aspect of the Credit Risk Management

Framework is the pricing and optimisation of the portfolio and the consideration of risk

and reward (iv).

Credit Suisse Group’s Credit Risk Management Framework is a vital tool to man-

age the Group’s credit risk on an ongoing basis and provide shareholders with a more

transparent picture of the economies of credit risk borne by the Group. The framework

allows transactions involving credit risk to be more correctly priced by performing the

risk/return calculation to ensure that an adequate return is being achieved for the level

of risk taken, including the diversification impact on the portfolio.

Credit Suisse: funded loans (incl. mortgages)

AAA AA A BBB BB B <B

30

25

20

15

10

5

0

Credit Suisse First Boston: funded loans and related exposures

R1 R2 R3 R4 R5 R6 R7

Internal ratings R1-R7 are approximately equivalent to the respective external ratings

CREDIT EXPOSURE OF THE PERFORMING PORTFOLIO BY INTERNAL RATING as at 31 December 1997

% of performing

portfolio

Credit Suisse First Boston: funded and unfunded committed and funded uncommitted, loans and related exposures, mark-to-market receivables to counterparties.

AAA AA A BBB BB B/ CCC

<CC

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0 N1 N2 N3 N4 N5 N6 N7

Internal ratings N1-N7 are approximately equivalent to the respective external ratings

CSFB COUNTRY EXPOSURE BY INTERNAL RATING as at 31 December 1997

CHF m

34

The current implementation of the Credit Risk Management Framework covers substan-

tial parts of the credit exposures of Credit Suisse, Credit Suisse Private Banking and

Credit Suisse First Boston’s global non-bank on-balance sheet credit exposure.

Based on these exposures, the two charts to the right show the relationship between

the ACP budget 1997, actual credit losses 1997 and the ACP budget 1998, as

well as the change in the ICR between the end of 1996 and the end of 1997. Credit

Suisse Financial Products has fully implemented the Group’s Credit Risk Management

Framework.

CREDITRISK + – a state-of-the-art credit risk measurement and management tool

developed by Credit Suisse Financial Products – is a core component of this new

framework. CREDITRISK + was made available to the public in 1997.

Operational risk Operational risk is mitigated through effective and comprehensive

policies, procedures and a system of internal controls. These include risk management

information systems, computer systems, communication networks, fraud detection and

segregation of duties. Trading units, for example, are kept strictly separate from back-

office operations, with each area reporting to a different line of management. Indepen-

dent pricing controls are in place and technical and organisational control mechanisms

ensure that transactions carried out by traders are processed promptly, correctly and

without omission.

Settlement risk All business units engaging in trading activities monitor settlement

risk for its credit components. Late receipts of funds are monitored with the aim of

detecting possible default patterns in the making. To reduce settlement amounts, pay-

ment netting is extended to a wider number of counterparties. Netting, where legally

enforceable, has been named a priority for all business units. Operationally, settlement

risk is reduced by Credit Suisse Group’s new structure, resulting in fewer and more

specialised entities. In addition, the number of bank group limits of Credit Suisse Group

was reduced from more than 2,500 to less than 1,800 by the end of 1997.

Legal risk Credit Suisse Group’s business units are reducing and minimising legal risk

by using appropriate documentation – standard master agreements and individual trade

confirmations – and by continuous consultation with internal and external counsel to

analyse legal risk, improve documentation and strengthen transaction structures.

ACP budget 1997

CS

1,000

800

600�

400�

200

0

Actual credit losses 1997

PERFORMING PORTFOLIO: ACP BUDGET 1997, ACTUAL CREDIT LOSSES 1997 AND ACP BUDGET 1998

CHF m

ACP budget 1998

CSGCSPB CSFBBU BU BU

ICR 31 Dec. 1996

CS

2,000

1,500

1,000�

500

0

ICR 31 Dec. 1997

INCREMENTAL CREDIT RESERVE (ICR) AT THE END OF 1996 AND 1997

CHF m

CSGCSPB CSFBBU BU BU

In 1996 the ICR for CS and CSPB was calculated jointly and therefore a separate ICR is not shown for CSPB. The calculation of the ICR was refined during 1997.

35

36

Asset and liability management The balance sheet interest rate risk is monitored

and managed by the individual business units within specifically designated centres of

competence; responsibility lies with the respective Asset and Liability Management

Committees. The management of interest rate risk is primarily based on mark-to-

market methods. Swaps, FRAs and options are used as hedging instruments.

With regard to structural balance sheet risk, Credit Suisse and Credit Suisse

Private Banking use market risk measurement methodologies. For asset and liability

management purposes, VaR is calculated based on the 95% confidence level and a

twenty-day holding period. Two years of underlying data are used to derive the market

movements used for this calculation.

Large portions of the retail portfolios of Credit Suisse and Credit Suisse Private

Banking consist of non-maturing accounts (e.g. variable-rate mortgages and savings

products). Their factor sensitivities are modelled with replicating portfolios based on the

effective repricing behaviour of non-maturing accounts.

Winterthur Group As part of the ongoing integration process of Winterthur into

Credit Suisse Group, Group Risk Management is ensuring that Winterthur Group’s

risk management approach fits into the overall risk management structure of Credit

Suisse Group.

Winterthur Group’s risk management goals – capital preservation and capital

optimisation – are fully compatible with those of Credit Suisse Group. The overall risk

management policy framework focuses on identification, assessment, management

and control of all the risks associated with Winterthur Group’s activities.

Winterthur Group makes use of diversification effects and reinsurance – classic

reinsurance as well as alternative risk transfer products – to optimise its risk profile.

Product design is also used to manage Winterthur Group’s risk. Limit systems – in

addition to comprehensive internal investment policies and restrictions issued by

national or local insurance regulators – are used to control market risk and credit risk.

Certain financial risks are quantified with simulation models and scenario analysis.

This approach allows comparison and aggregation of different risk types – including

insurance risk – at the level of Credit Suisse Group.

Winterthur Group utilises derivative products for hedging purposes only, mostly in

connection with insurance products, investment transactions and bond issues.

Outlook It is part of Credit Suisse Group’s strategy to be a leader in the management

of market risk, credit risk, operational risk and insurance risk. Significant personnel and

technological resources are focused on ensuring that Credit Suisse Group continues to

enhance its risk management capabilities and thereby remains at the forefront of the

industry. To achieve this goal, Credit Suisse Group has developed an integrated frame-

work of best practice risk management, risk policies, methodologies and infrastructure.

Credit Suisse Group also intends to link together risk management, performance mea-

surement and capital allocation using a risk and economic capital management frame-

work, with economic capital usage as a common denominator for all risks. Together

with the proactive risk management culture and the appropriate quantitative tools, the

economic capital management framework will support the decision-making process of

Credit Suisse Group’s Executive Board, thus linking risk management to the Group’s

shareholder value strategy.

37

The historical investigation into the conduct of the Swiss banks during

the Second World War is of the utmost importance to Credit Suisse

Group, to the Swiss financial centre and ultimately to Switzerland as a

whole. The way we tackle the unresolved issues and problems now will

have a decisive impact on our future. Significant progress has already

been made: the Swiss banks have published the names of the holders of

dormant accounts worldwide, and the first payments have been made

from the humanitarian fund set up by the major banks for needy victims

of the Holocaust. The big banks involved in the US class actions have

expressed their willingness to enter into negotiations for a settlement.

THE ROLE OF THE SWISS FINANCIAL SERVICES INDUSTRY IN THE SECOND WORLD WAR

38

Historical investigations Since the spring of 1997, the discussion about the con-

duct of the Swiss banks during the Second World War, which originally focused on

moral issues, has gradually become less emotive. Over the last few months, the investi-

gations and other measures initiated by the banks, the Swiss business community and

the authorities have helped to foster an increasingly objective approach. In the long run,

these measures will be seen as the best response to questions about Switzerland’s

conduct in general and its handling of dormant accounts in particular.

Credit Suisse Group is determined to do whatever it can to aid the enquiries by

the experts of the Bergier Commission and Volcker Committee. In this spirit the bank

has restructured and expanded its archive, checked a huge number of documents and

made its files available for examination. Alongside these efforts, which have employed

up to 140 people at peak times, Credit Suisse Group’s own experts are working to give

the bank an overview of the most important historical facts.

Dormant accounts With hindsight it has to be conceded that for a long time the

Swiss banks devoted too little attention to the issue of dormant accounts, and that they

were often too inflexible and dogmatic, especially considering the highly sensitive back-

ground of the Second World War. In mid-1997 Credit Suisse Group established a spe-

cial subdivision for the investigation into dormant accounts. After the historical enquiries

have been concluded, this department’s main task will be to prevent accounts becom-

ing dormant in future and to minimise their number. Credit Suisse Group supports

efforts to create legislation which would allow the banks to hand over responsibility for

dormant assets to the authorities after a given period.

On 23 July 1997 the Swiss Bankers Association took the unprecedented step of

publishing worldwide a list of some 1,900 foreign holders of dormant accounts dating

from the Second World War era. On 31 October 1997 the names of more than 10,000

Swiss holders and 3,700 foreign holders of dormant accounts and savings books were

published. By December 1997 the first of the 6,000 claims submitted to the contact

offices had already been settled.

The banks’ investigation into dormant assets is being supervised by the Volcker Com-

mittee. The Swiss banks are determined that the historical investigation continues as

planned and that it can be concluded within a reasonable period of time.

Class actions in the USA The class actions against the three Swiss big banks have

not yet been accepted by the presiding judge. These actions have been accompanied

by threats of sanctions in a number of US states and cities. With the mediation of US

Undersecretary of State Stuart Eizenstat, talks with the plaintiffs and the World Jewish

Congress have begun. At the end of March 1998 the big banks expressed their willing-

ness to reach a fair settlement. They are negotiating exclusively on their behalf and only

in respect of the issues which concern themselves.

First payments out of the humanitarian fund The purpose of the humanitarian

fund for needy victims of the Holocaust – with resources at present of CHF 275 m

donated by the major Swiss banks, Swiss business and private individuals – is to pro-

vide rapid assistance to needy survivors of the Holocaust. Payments are initially being

concentrated in eastern Europe. On 18 November 1997 the first payments were made

through the World Jewish Restitution Organization to 80 Jewish victims of the Shoa

living in Riga, Latvia. In the meantime, further payments have also been made.

Important events and measures

February 1997 The three major Swiss banks launch the humanitarian fund

for needy victims of the Holocaust with a deposit of

CHF 100 m.

March 1997 The Swiss Federal Council proposes the creation of a

Solidarity Fund.

May 1997 The Eizenstat report is published. It deals with the

USA’s role in the handling of Nazi assets and on the

policy of the other Allies and neutrals in the Second

World War. Switzerland is examined in particular detail.

July 1997 A list of the names of 1,900 foreign holders of dormant

accounts is published around the world by the Swiss Bankers

Association.

October 1997 The Swiss Bankers Association publishes a second list

containing the names of more than 10,000 Swiss holders and

3,700 foreign holders of dormant accounts and savings books.

November 1997 First payments from the humanitarian fund for needy

victims of the Holocaust.

December 1997 Representatives of forty countries attend an international

conference on Nazi gold in London.

March/April 1998 Threats by US states and cities to impose sanctions on the

Swiss banks are put on hold. The big Swiss banks express

their willingness to enter into talks with class action lawyers

and the World Jewish Congress.

39

CREDIT SUISSE GROUP AND THE COMMUNITY

As an internationally active organisation, Credit Suisse Group operates

within a wide range of social and economic frameworks and is well

aware of its responsibilities towards the wider community. Switzerland

is of particular importance to Credit Suisse Group: with its nationwide

presence and 28,550 employees, it is one of the largest employers in the

country.

40

An attractive employer Credit Suisse Group aims to be an attractive employer for its

62,242 staff worldwide, offering stimulating employment and career opportunities in

banking and insurance. The merger with Winterthur has opened up new horizons for

Credit Suisse Group staff in the field of bancassurance. The Group places a great deal

of emphasis on training. In 1997 alone it took on around 400 new trainees and 200

graduate trainees in Switzerland. Credit Suisse Group places particular importance on

the promotion of equal opportunities in the workplace.

Commitment to the environment Credit Suisse Group has been actively committed

to environmental protection for over 20 years, incorporating ecological factors into its

operations. Particular attention is paid to reducing energy consumption and analysing

both credit and liability insurance applications for any potential environmental risks. In

1997 Credit Suisse Group became the first major bank in the world to be awarded an

environmental certificate, verifying that all its offices in Switzerland conform to the stan-

dards of ISO 14001.

Financial support – the Anniversary Foundation In 1997 Credit Suisse Group

supported a range of organisations and institutions dedicated to social, charitable,

humanitarian and cultural causes, with over 1,000 beneficiaries receiving a total of

around CHF 15 m. The Anniversary Foundation promoted numerous community

projects in different social and cultural fields.

Sponsorship and social commitment Thanks to the sponsorship activities of Credit

Suisse, some 28,000 people were able to attend over 200 sporting and cultural events

throughout Switzerland in 1997. In addition to its extensive involvement in gymnastics,

handball and classical music, Winterthur joined Credit Suisse as a sponsor of the Tour de

Suisse and the Swiss national football teams. It also held its traditional “WinConference”,

with members of the business community and the world of politics coming together to

discuss “Revolution-Resurgence”. Credit Suisse Private Banking focused on selected

cultural and sporting events in the fields of golf, equestrianism, the visual arts and clas-

sical music, while Credit Suisse First Boston supported more than 500 organisations.

Numerous members of staff also gave their time to charitable causes, non-profit

organisations and neighbourhood centres.

CREDIT SUISSE GROUP PROJECTS

Credit Suisse Group focused on three major projects in 1997: the

implementation of the restructuring of banking operations launched

the previous year, preparation for the introduction of the euro, and

the adjustments associated with the advent of the new millennium.

Refocusing of banking operations The strategic refocusing of Credit Suisse Group

into four business units geared to the needs of specific customer segments and mar-

kets was rapidly and successfully implemented, with most of the associated measures

completed by the end of 1997. In 1998 work will be carried out particularly on projects in

the field of processing and information technology.

The strategies developed in collaboration with the social partners in respect of job

reductions to be implemented in Switzerland by the end of 1998 are working extremely

well. At year-end 1997, the planned loss of 2,100 jobs in Switzerland and 1,800 abroad

was more or less compensated for by new positions created as a result primarily of new

acquisitions and an increase in business volume.

The euro Preparation for the introduction of the euro has been fully under way for

some time now. This preparatory work is focusing on the adaptation of EDP systems,

the euro-compatibility of products and payment options, the restructuring of forex trad-

ing and securities processing, the expansion of distribution channels within the EMU

member states and the reappraisal of investment and risk policies.

Ready for the year 2000 The IT adjustment work begun as early as 1996 in advance

of the change-over to the year 2000 is proceeding to plan, with Group-wide evalua-

tions, code analyses, corrections and tests carried out in the course of 1997. Numerous

programs have already been released for operational use. The Group will be able to

complete the necessary work on schedule.

Credit Suisse Group took an exceptional charge in its 1997 accounts for IT restructuring

in preparation for the introduction of the euro and for the year 2000 of CHF 401 m.

41

Economy & Finance

credit-suisse Annual Report Part 1