20-F 1 a120323ar20f.htm 20-F Credit Suisse Group - SEC Report
As filed with the Securities and Exchange Commission on March 23, 2012

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549



Form 20-F



   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934




   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011.




   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934




   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from       to       .



Commission file number: 001-15244
Credit Suisse Group AG

(Exact name of Registrant as specified in its charter)
Canton of Zurich, Switzerland
(Jurisdiction of incorporation or organization)
Paradeplatz 8, CH 8001 Zurich, Switzerland
(Address of principal executive offices)

David R. Mathers
Chief Financial Officer
Paradeplatz 8, CH 8001 Zurich, Switzerland
david.mathers@credit-suisse.com
Telephone: +41 44 333 6607
Fax: +41 44 333 1790
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)



Commission file number: 001-33434
Credit Suisse AG

(Exact name of Registrant as specified in its charter)
Canton of Zurich, Switzerland
(Jurisdiction of incorporation or organization)
Paradeplatz 8, CH 8001 Zurich, Switzerland
(Address of principal executive offices)

David R. Mathers
Chief Financial Officer
Paradeplatz 8, CH 8001 Zurich, Switzerland
david.mathers@credit-suisse.com
Telephone: +41 44 333 6607
Fax: +41 44 333 1790
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)



Title of each class of securities of Credit Suisse Group AG    Name of each exchange on which registered
American Depositary Shares each representing one Share  New York Stock Exchange
Shares par value CHF 0.04*  New York Stock Exchange*
 
Title of each class of securities of Credit Suisse AG 
Fixed to Floating Rate Tier 1 Capital Notes  New York Stock Exchange
Floating Rate Tier 1 Capital Notes  New York Stock Exchange
7.9% Tier 1 Capital Notes  New York Stock Exchange
Buffered Accelerated Return Equity Securities (BARES) due November 6, 2012
   Linked to the Performance of the CS/RT
   Emerging Infrastructure Index Powered by HOLT   


NYSE Amex
Accelerated Return Equity Securities (ARES) due November 6, 2012
   Linked to the Performance of the CS/RT
   Emerging Infrastructure Index Powered by HOLT   


NYSE Amex
ELEMENTS due April 10, 2023
   Linked to the Credit Suisse Global Warming Index, Exchange Series  

NYSE Arca
Exchange Traded Notes due February 19, 2020
   Linked to the Credit Suisse Long/Short Liquid Index (Net)  

NYSE Arca
Exchange Traded Notes due April 20, 2020
   Linked to the Cushing® 30 MLP Index  

NYSE Arca
Exchange Traded Notes due October 6, 2020
   Linked to the Credit Suisse Merger Arbitrage Liquid Index (Net)  

NYSE Arca
Exchange Traded Notes due March 13, 2031
   Linked on a Leveraged Basis to the Credit Suisse Merger
   Arbitrage Liquid Index (Net)   


NYSE Arca
Market Neutral Equity ETN
   Linked to the HS Market Neutral Index Powered by HOLT™ due September 22, 2031  

NYSE Arca
VelocityShares Daily Inverse VIX Short Term ETN
   Linked to the S&P 500 VIX Short-Term Futures™ Index due December 4, 2030  

NYSE Arca
VelocityShares Daily Inverse VIX Medium Term ETN
   Linked to the S&P 500 VIX Mid-Term Futures™ Index due December 4, 2030  

NYSE Arca
VelocityShares VIX Short Term ETN
   Linked to the S&P 500 VIX Short-Term Futures™ Index due December 4, 2030  

NYSE Arca
VelocityShares VIX Medium Term ETN
   Linked to the S&P 500 VIX Mid-Term Futures™ Index due December 4, 2030  

NYSE Arca
VelocityShares Daily 2x VIX Short Term ETN
   Linked to the S&P 500 VIX Short-Term Futures™ Index due December 4, 2030  

NYSE Arca
VelocityShares Daily 2x VIX Medium Term ETN
   Linked to the S&P 500 VIX Mid-Term Futures™ Index due December 4, 2030  

NYSE Arca
Exchange Traded Notes due February 19, 2020
   Linked to the Credit Suisse Long/Short Liquid Index (Net)  

NYSE Arca
VelocitySharesTM 3x Long Gold ETN
   Linked to the S&P GSCI® Gold Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 3x Long Silver ETN
   Linked to the S&P GSCI® Silver Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 2x Long Platinum ETN
   Linked to the S&P GSCI® Platinum Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 2x Long Palladium ETN
   Llinked to the S&P GSCI® Palladium Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 3x Inverse Gold ETN
   Linked to the S&P GSCI® Gold Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 3x Inverse Silver ETN
   Linked to the S&P GSCI® Silver Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 2x Inverse Platinum ETN
   Linked to the S&P GSCI® Platinum Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 2x Inverse Palladium ETN
   Linked to the S&P GSCI® Palladium Index ER due October 14, 2031  

NYSE Arca
VelocitySharesTM 3x Long Brent Crude ETN
   Linked to the S&P GSCI® Brent Crude Index ER due February 9, 2032  

NYSE Arca
VelocitySharesTM 3x Long Crude Oil ETN
   Linked to the S&P GSCI® Crude Oil Index ER due February 9, 2032  

NYSE Arca
VelocitySharesTM 3x Long Natural Gas ETN
   Linked to the S&P GSCI® Natural Gas Index ER due February 9, 2032  

NYSE Arca
VelocitySharesTM 2x Long Copper ETN
   Linked to the S&P GSCI® Copper Index ER due February 9, 2032  

NYSE Arca
VelocitySharesTM 3x Inverse Brent Crude ETN
   Linked to the S&P GSCI® Brent Crude Index ER due February 9, 2032  

NYSE Arca
VelocitySharesTM 3x Inverse Crude Oil ETN
   Linked to the S&P GSCI® Crude Oil Index ER due February 9, 2032  

NYSE Arca
VelocitySharesTM 3x Inverse Natural Gas ETN
   Linked to the S&P GSCI® Natural Gas Index ER due February 9, 2032  

NYSE Arca
VelocitySharesTM 2x Inverse Copper ETN
   Linked to the S&P GSCI® Copper Index ER due February 9, 2032  

NYSE Arca
 
 
 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of
December 31, 2011: 1,220,322,988 shares of Credit Suisse Group AG

Indicate by check mark if the Registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.

   Yes      No   
If this report is an annual or transition report, indicate by check mark if the Registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

   Yes      No   
Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days.

   Yes      No   
Indicate by check mark whether the Registrants are large accelerated filers, accelerated filers, or non-accelerated filers. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

   Large accelerated filers      Accelerated filers      Non-accelerated filers      
Indicate by check mark which basis of accounting the Registrants have used to prepare the financial statements included in this filing:

   U.S. GAAP      International     Other   
         Financial Reporting Standards
         as issued by the
         International Accounting Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.


Item 17    Item 18
If this is an annual report, indicate by check mark whether the Registrants are shell companies
(as defined in Rule 12b-2 of the Exchange Act)


   Yes      No   
* Not for trading, but only in connection with the registration of the American Depositary Shares














Definitions
Sources
Cautionary statement regarding forward-looking information
Part I
Item 1. Identity of directors, senior management and advisers.
Item 2. Offer statistics and expected timetable.
Item 3. Key information.
Item 4. Information on the company.
Item 4A. Unresolved staff comments.
Item 5. Operating and financial review and prospects.
Item 6. Directors, senior management and employees.
Item 7. Major shareholders and related party transactions.
Item 8. Financial information.
Item 9. The offer and listing.
Item 10. Additional information.
Item 11. Quantitative and qualitative disclosures about market risk.
Item 12. Description of securities other than equity securities.
Part II
Item 13. Defaults, dividend arrearages and delinquencies.
Item 14. Material modifications to the rights of security holders and use of proceeds.
Item 15. Controls and procedures.
Item 16A. Audit committee financial expert.
Item 16B. Code of ethics.
Item 16C. Principal accountant fees and services.
Item 16D. Exemptions from the listing standards for audit committee.
Item 16E. Purchases of equity securities by the issuer and affiliated purchasers.
Item 16F. Change in registrants’ certifying accountant.
Item 16G. Corporate governance.
Part III
Item 17. Financial statements.
Item 18. Financial statements.
Item 19. Exhibits.
SIGNATURES
Annual Report 2011
Message from the Chairman and the Chief Executive Officer
Information on the company
An integrated global bank
Strategy
Our businesses
Organizational and regional structure
Regulation and supervision
Operating and financial review
Operating environment
Credit Suisse
Core Results
Key performance indicators
Private Banking
Wealth Management Clients
Corporate & Institutional Clients
Investment Banking
Asset Management
Corporate Center
Results overview
Assets under management
Critical accounting estimates
Treasury, Risk, Balance sheet and Off-balance sheet
Treasury management
Risk management
Balance sheet, off-balance sheet and other contractual obligations
Corporate Governance and Compensation
Corporate Governance
Compensation
Consolidated financial statements – Credit Suisse Group
Report of the Independent Registered Public Accounting Firm
Consolidated financial statements
Notes to the consolidated financial statements
1 Summary of significant accounting policies
2 Recently issued accounting standards
3 Business developments
4 Discontinued operations
5 Segment information
6 Net interest income
7 Commissions and fees
8 Trading revenues
9 Other revenues
10 Provision for credit losses
11 Compensation and benefits
12 General and administrative expenses
13 Earnings per share
14 Securities borrowed, lent and subject to repurchase agreements
15 Trading assets and liabilities
16 Investment securities
17 Other investments
18 Loans, allowance for loan losses and credit quality
19 Premises and equipment
20 Goodwill and other intangible assets
21 Life settlement contracts
22 Other assets and other liabilities
23 Deposits
24 Long-term debt
25 Accumulated other comprehensive income
26 Tax
27 Employee deferred compensation
28 Related parties
29 Pension and other post-retirement benefits
30 Derivatives and hedging activities
31 Guarantees and commitments
32 Transfers of financial assets and variable interest entities
33 Financial instruments
34 Assets pledged or assigned
35 Capital adequacy
36 Assets under management
37 Litigation
38 Significant subsidiaries and equity method investments
39 Subsidiary guarantee information
40 Credit Suisse Group parent company
41 Significant valuation and income recognition differences between US GAAP and Swiss GAAP banking law (true and fair view)
42 Risk assessment
Controls and procedures
Report of the Independent Registered Public Accounting Firm to the General Meeting of
Parent company financial statements – Credit Suisse Group
Report of the Statutory Auditor on the Financial Statements to the General Meeting of
Parent company financial statements
Notes to the financial statements
1 Accounting principles
2 Contingent liabilities
3 Compensation to members of the Executive Board and the Board of Directors
4 Principal participations
5 Own shares held by the company and by group companies
6 Significant shareholders
7 Share capital, conditional and authorized capital of Credit Suisse Group
8 Risk assessment
Proposed appropriation of retained earnings and capital distribution
Confirmation to the Board of Directors relating to the Conditional Increase of Share Capital of
Consolidated financial statements – Credit Suisse (Bank)
Report of the Independent Registered Public Accounting Firm
Consolidated financial statements
Notes to the consolidated financial statements
1 Summary of significant accounting policies
2 Recently issued accounting standards
3 Business developments
4 Discontinued operations
5 Segment information
6 Net interest income
7 Commissions and fees
8 Trading revenues
9 Other revenues
10 Provision for credit losses
11 Compensation and benefits
12 General and administrative expenses
13 Securities borrowed, lent and subject to repurchase agreements
14 Trading assets and liabilities
15 Investment securities
16 Other investments
17 Loans, allowance for loan losses and credit quality
18 Premises and equipment
19 Goodwill and other intangible assets
20 Life settlement contracts
21 Other assets and other liabilities
22 Deposits
23 Long-term debt
24 Accumulated other comprehensive income
25 Tax
26 Employee deferred compensation
27 Related parties
28 Pension and other post-retirement benefits
29 Derivatives and hedging activities
30 Guarantees and commitments
31 Transfers of financial assets and variable interest entities
32 Financial instruments
33 Assets pledged or assigned
34 Capital adequacy
35 Litigation
36 Significant subsidiaries and equity method investments
37 Significant valuation and income recognition differences between US GAAP and Swiss GAAP bank law (true and fair view)
38 Risk assessment
Controls and procedures
Report of the Independent Registered Public Accounting Firm to the General Meeting of
Parent company financial statements – Credit Suisse (Bank)
Report of the Statutory Auditor on the Financial Statements to the General Meeting of
Financial review
Parent company financial statements
Notes to the financial statements
1 Description of business activities
2 Accounting and valuation policies
3 Additional information on the parent company statements of income
4 Pledged assets and assets under reservation of ownership
5 Other assets and other liabilities
6 Securities borrowing and securities lending, repurchase and reverse repurchase agreements
7 Balance sheet items that include issued structured products at fair value
8 Liabilities due to own pension plans
9 Valuation adjustments and provisions
10 Composition of share and participation capital and authorized capital
11 Major shareholders and groups of shareholders
12 Shareholder’s equity
13 Amounts receivable from and payable to affiliated companies and loans to members of the Bank parent company’s governing bodies
14 Significant transactions with related parties
15 Fire insurance value of tangible fixed assets
16 Liabilities for future payments in connection with operating leases
17 Fiduciary transactions
18 Number of employees
19 Foreign currency translation rates
20 Outsourcing of services
21 Risk assessment
Proposed appropriation of retained earnings
Additional information
Statistical information
Other information
Selected five-year information
Risk factors
List of abbreviations
Glossary
Investor information
Financial calendar and contacts




Definitions

For the purposes of this Form 20-F and the attached Annual Report 2011, unless the context otherwise requires, the terms “Credit Suisse Group,” “Credit Suisse,” “the Group,” “we,” “us” and “our” mean Credit Suisse Group AG and its consolidated subsidiaries and the term “the Bank” means Credit Suisse AG, the Swiss bank subsidiary of the Group, and its consolidated subsidiaries.

The business of the Bank is substantially similar to the Group and, except where noted or the context otherwise requires, information relating to the Group is also relevant to the Bank.

Abbreviations and selected terms are explained in the List of abbreviations and the Glossary in the back of the Annual Report 2011.




Sources

Throughout this Form 20-F and the attached Annual Report 2011, we describe the position and ranking of our various businesses in certain industry and geographic markets. The sources for such descriptions come from a variety of conventional publications generally accepted as relevant business indicators by members of the financial services industry. These sources include: Standard & Poor’s, Thomson Financial, Dealogic, the Loan Pricing Corporation, Institutional Investor, Lipper, Moody’s Investors Service and Fitch Ratings.




Cautionary statement regarding forward-looking information

For Credit Suisse and the Bank, please see Cautionary statement regarding forward-looking information on the inside page of the back cover of the attached Annual Report 2011.




Part I




Item 1. Identity of directors, senior management and advisers.

Not required because this Form 20-F is filed as an annual report.




Item 2. Offer statistics and expected timetable.

Not required because this Form 20-F is filed as an annual report.




Item 3. Key information.


A – Selected financial data.

For Credit Suisse and the Bank, please see Appendix – Selected five-year information – Group on page A-2 and – Bank on page A-3 of the attached Annual Report 2011. In addition, please see IX – Additional information – Other information – Foreign currency translation rates on page 511 of the attached Annual Report 2011.


B – Capitalization and indebtedness.

Not required because this Form 20-F is filed as an annual report.


C – Reasons for the offer and use of proceeds.

Not required because this Form 20-F is filed as an annual report.


D – Risk factors.

For Credit Suisse and the Bank, please see Appendix – Risk factors on pages A-4 to A-11 of the attached Annual Report 2011.




Item 4. Information on the company.


A – History and development of the company.

For Credit Suisse and the Bank, please see I – Information on the company – An integrated global bank on pages 8 to 9, and IV – Corporate Governance and Compensation – Corporate Governance – Overview – Company on pages 141 to 142 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 3 – Business developments in V – Consolidated financial statements – Credit Suisse Group on page 232 of the attached Annual Report 2011 and, for the Bank, please see Note 3 – Business developments in VII – Consolidated financial statements – Credit Suisse (Bank) on page 390 of the attached Annual Report 2011.


B – Business overview.

For Credit Suisse and the Bank, please see I – Information on the company on pages 8 to 36 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 5 – Segment information in V – Consolidated financial statements – Credit Suisse Group on pages 234 to 236 of the attached Annual Report 2011 and, for the Bank, please see Note 5 – Segment information in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 391 to 392 of the attached Annual Report 2011.


C – Organizational structure.

For Credit Suisse and the Bank, please see I – Information on the company – Organizational and regional structure on pages 25 to 26 and II – Operating and financial review – Credit Suisse – Differences between Group and Bank on page 43 of the attached Annual Report 2011. For a list of Credit Suisse’s significant subsidiaries, please see Note 38 – Significant subsidiaries and equity method investments in V – Consolidated financial statements – Credit Suisse Group on pages 341 to 343 of the attached Annual Report 2011 and, for a list of the Bank’s significant subsidiaries, please see Note 36 – Significant subsidiaries and equity method investments in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 462 to 464 of the attached Annual Report 2011.


D – Property, plant and equipment.

For Credit Suisse and the Bank, please see IX – Additional information – Other information – Property and equipment on page 510 of the attached Annual Report 2011.


Information Required by Industry Guide 3.

For Credit Suisse and the Bank, please see IX – Additional information – Statistical information – Group on pages 486 to 504 of the attached Annual Report 2011. In addition, for both Credit Suisse and the Bank, please see III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management – Credit risk – Loans – Impaired loans on pages 130 to 131 and – Provision for credit losses on page 130 of the attached Annual Report 2011.




Item 4A. Unresolved staff comments.

None.




Item 5. Operating and financial review and prospects.


A – Operating results.

For Credit Suisse and the Bank, please see II – Operating and financial review on pages 38 to 88 of the attached Annual Report 2011. In addition, for both Credit Suisse and the Bank, please see I – Information on the company – Regulation and supervision on pages 27 to 36 of the attached Annual Report 2011 and III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management – Foreign exchange exposure and interest rate management on page 109.


B – Liquidity and capital resources.

For Credit Suisse and the Bank, please see III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management on pages 90 to 109 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 24 – Long-term debt in V – Consolidated financial statements – Credit Suisse Group on pages 257 to 258 and Note 35 – Capital adequacy in V – Consolidated financial statements – Credit Suisse Group on page 331 of the attached Annual Report 2011 and, for the Bank, please see Note 23 – Long-term debt in VII – Consolidated financial statements – Credit Suisse (Bank) on page 410 and Note 34 – Capital adequacy in VII – Consolidated financial statements – Credit Suisse (Bank) on page 461 of the attached Annual Report 2011.


C – Research and development, patents and licenses, etc.

Not applicable.


D – Trend information.

For Credit Suisse and the Bank, please see Item 5.A of this Form 20-F. In addition, for Credit Suisse and the Bank, please see I – Information on the Company – Our business on pages 13 to 24 of the attached Annual Report 2011.


E – Off-balance sheet arrangements.

For Credit Suisse and the Bank, please see III – Treasury, Risk, Balance sheet and Off-balance sheet – Balance sheet, off-balance sheet and other contractual obligations on pages 135 to 138 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 30 – Derivatives and hedging activities, Note 31 – Guarantees and commitments and Note 32 – Transfers of financial assets and variable interest entities in V – Consolidated financial statements – Credit Suisse Group on pages 285 to 310 of the attached Annual Report 2011 and, for the Bank, please see Note 29 – Derivatives and hedging activities, Note 30 – Guarantees and commitments and Note 31 – Transfers of financial assets and variable interest entities in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 431 to 447 of the attached Annual Report 2011.


F – Tabular disclosure of contractual obligations.

For Credit Suisse and the Bank, please see III – Treasury, Risk, Balance sheet and Off-balance sheet – Balance sheet, off-balance sheet and other contractual obligations – Contractual obligations and other commercial commitments on page 138 of the attached Annual Report 2011.




Item 6. Directors, senior management and employees.


A – Directors and senior management.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Corporate Governance – Board of Directors, – Board Committees, – Biographies of the Board Members, – Executive Board and – Biographies of the Executive Board Members on pages 147 to 169 of the attached Annual Report 2011.


B – Compensation.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Compensation on pages 173 to 208 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 11 – Compensation and benefits in V – Consolidated financial statements – Credit Suisse Group on page 238, Note 27 – Employee deferred compensation in V – Consolidated financial statements – Credit Suisse Group on pages 265 to 272 and Note 29 – Pension and other post-retirement benefits in V – Consolidated financial statements – Credit Suisse Group on pages 274 to 285, and Note 3 – Compensation to members of the Executive Board and the Board of Directors in VI – Parent company financial statements – Credit Suisse Group on pages 363 to 372 of the attached Annual Report 2011 and, for the Bank, please see Note 11 – Compensation and benefits in VII – Consolidated financial statements – Credit Suisse (Bank) on page 395, Note 26 – Employee deferred compensation in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 417 to 420 and Note 28 – Pension and other post-retirement benefits in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 423 to 431 of the attached Annual Report 2011.


C – Board practices.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Corporate Governance on pages 140 to 172 of the attached Annual Report 2011.


D – Employees.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Corporate Governance – Overview – Employees on page 142. In addition, for both Credit Suisse and the Bank, please see II – Operating and financial review – Results overview on pages 78 to 79 of the attached Annual Report 2011.


E – Share ownership.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Compensation on pages 173 to 208 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 27 – Employee deferred compensation in V – Consolidated financial statements – Credit Suisse Group on pages 265 to 272, and Note 3 – Compensation to members of the Executive Board and Board of Directors in VI – Parent company financial statements – Credit Suisse Group on pages 363 to 372 of the attached Annual Report 2011. For the Bank, please see Note 26 – Employee deferred compensation in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 417 to 420 of the attached Annual Report 2011.




Item 7. Major shareholders and related party transactions.


A – Major shareholders.

For Credit Suisse, please see IV – Corporate Governance and Compensation – Corporate Governance – Shareholders on pages 143 to 146 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 3 – Business developments in V – Consolidated financial statements – Credit Suisse Group on page 232, Note 5 – Own shares held by the company and by group companies and Note 6 – Significant shareholders in VI – Parent company financial statements – Credit Suisse Group on page 372 of the attached Annual Report 2011. Credit Suisse’s major shareholders do not have different voting rights. The Bank has 43,996,652 shares outstanding and is a wholly-owned subsidiary of Credit Suisse.


B – Related party transactions.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Compensation on pages 173 to 208 of the attached Annual Report 2011. In addition, for Credit Suisse, please see Note 28 – Related parties in V – Consolidated financial statements – Credit Suisse Group on pages 273 to 274 and Note 3 – Compensation to members of the Executive Board and the Board of Directors – Board of Directors loans in VI – Parent company financial statements – Credit Suisse Group on pages 371 to 372 of the attached Annual Report 2011 and, for the Bank, please see Note 27 – Related parties in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 421 to 422 of the attached Annual Report 2011.


C – Interests of experts and counsel.

Not applicable because this Form 20-F is filed as an annual report.




Item 8. Financial information.


A – Consolidated statements and other financial information.

Please see Item 18 of this Form 20-F.

For a description of Credit Suisse’s legal and arbitration proceedings, please see Note 37 – Litigation in V – Consolidated financial statements – Credit Suisse Group on pages 333 to 340 of the attached Annual Report 2011. For a description of the Bank’s legal and arbitration proceedings, please see Note 35 – Litigation in VII – Consolidated financial statements – Credit Suisse (Bank) on page 462 of the attached Annual Report 2011.

For a description of Credit Suisse’s policy on dividend distributions, please see III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management – Dividends and dividend policy on pages 108 to 109 of the attached Annual Report 2011.


B – Significant changes.

None.




Item 9. The offer and listing.


A – Offer and listing details, C – Markets.

For information regarding the price history of Credit Suisse Group shares and the stock exchanges and other regulated markets on which they are listed or traded, please see IX – Additional information – Other information – Listing details on pages 509 to 510 of the attached Annual Report 2011. Shares of the Bank are not listed.


B – Plan of distribution, D – Selling shareholders, E – Dilution, F – Expenses of the issue.

Not required because this Form 20-F is filed as an annual report.




Item 10. Additional information.


A – Share capital.

Not required because this Form 20-F is filed as an annual report.


B – Memorandum and Articles of Association.

For Credit Suisse, please see IV – Corporate Governance and Compensation – Corporate Governance – Overview, – Shareholders and – Board of Directors on pages 140 to 162 and – Additional information – Changes of control and defense measures on page 170 and – Liquidation on page 172 of the attached Annual Report 2011. In addition, for Credit Suisse, please see IX – Additional information – Other information – Exchange controls and – American Depositary Shares on page 506 of the attached Annual Report 2011. Shares of the Bank are not listed.


C – Material contracts.

Neither Credit Suisse nor the Bank has any contract that would constitute a material contract for the two years immediately preceding this Form 20-F.


D – Exchange controls.

For Credit Suisse and the Bank, please see IX – Additional information – Other information – Exchange controls on page 506 of the attached Annual Report 2011.


E – Taxation.

For Credit Suisse, please see IX – Additional information – Other information – Taxation on pages 506 to 509 of the attached Annual Report 2011. The Bank does not have any public shareholders.


F – Dividends and paying agents.

Not required because this Form 20-F is filed as an annual report.


G – Statement by experts.

Not required because this Form 20-F is filed as an annual report.


H – Documents on display.

Credit Suisse and the Bank file periodic reports and other information with the SEC. You may read and copy any document that Credit Suisse or the Bank files with the SEC on the SEC’s website, www.sec.gov, or at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 (in the US) or at +1 202 942 8088 (outside the US) for further information on the operation of its public reference room. You may also inspect Credit Suisse’s and the Bank’s SEC reports and other information at the New York Stock Exchange, 11 Wall Street, New York, NY 10005.

The information Credit Suisse or the Bank files with the SEC may also be found on the Credit Suisse website at www.credit-suisse.com. In addition, our website also contains corporate governance policies and other documents of Credit Suisse and the Bank. Information contained on our website is not incorporated by reference into this Form 20-F.

In addition, Credit Suisse’s parent company financial statements, together with the notes thereto, are set forth on pages 357 to 375 of the attached Annual Report 2011 and incorporated by reference herein. The Bank’s parent company financial statements, together with the notes thereto, are set forth on pages 467 to 483 of the attached Annual Report 2011 and incorporated by reference herein.


I – Subsidiary information.

Not applicable.




Item 11. Quantitative and qualitative disclosures about market risk.

For Credit Suisse and the Bank, please see III – Treasury, Risk, Balance sheet and Off-balance sheet – Risk management on pages 110 to 134 of the attached Annual Report 2011.




Item 12. Description of securities other than equity securities.


A – Debt Securities, B – Warrants and Rights, C – Other Securities.

Not required because this Form 20-F is filed as an annual report.


D – American Depositary Shares.

For Credit Suisse, please see IV – Corporate Governance and Compensation – Corporate Governance – Additional information – American Depositary Share fees on pages 171 to 172 of the attached Annual Report 2011. Shares of the Bank are not listed.




Part II




Item 13. Defaults, dividend arrearages and delinquencies.

None.




Item 14. Material modifications to the rights of security holders and use of proceeds.

None.




Item 15. Controls and procedures.

For Credit Suisse’s management report and the related report from the Group’s independent auditors, please see Controls and procedures and Report of the Independent Registered Public Accounting Firm in V – Consolidated financial statements – Credit Suisse Group on pages 355 to 356 of the attached Annual Report 2011. For the Bank’s management report and the related report from the Bank’s independent auditors, please see Controls and procedures and Report of the Independent Registered Public Accounting Firm in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 465 to 466 of the attached Annual Report 2011.




Item 16A. Audit committee financial expert.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Corporate Governance – Board of Directors – Board committees – Audit Committee on pages 151 to 152 of the attached Annual Report 2011.




Item 16B. Code of ethics.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Corporate Governance – Overview – Corporate governance framework on pages 140 to 141 of the attached Annual Report 2011.




Item 16C. Principal accountant fees and services.

For Credit Suisse and the Bank, please see IV – Corporate Governance and Compensation – Corporate Governance – Additional Information – Internal and external auditors on pages 170 to 171 of the attached Annual Report 2011.




Item 16D. Exemptions from the listing standards for audit committee.

None.




Item 16E. Purchases of equity securities by the issuer and affiliated purchasers.

For Credit Suisse, please see III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management – Share repurchases on page 108 of the attached Annual Report 2011. The Bank does not have any class of equity securities registered pursuant to Section 12 of the Exchange Act.




Item 16F. Change in registrants’ certifying accountant.

None.




Item 16G. Corporate governance.

For Credit Suisse, please see IV – Corporate Governance and Compensation – Corporate Governance – Overview – Complying with rules and regulations on page 140 of the attached Annual Report 2011. Shares of the Bank are not listed.




Part III




Item 17. Financial statements.

Not applicable.




Item 18. Financial statements.

Credit Suisse’s consolidated financial statements, together with the notes thereto and the Report of the Independent Registered Public Accounting Firm thereon, are set forth on pages 209 to 356 of the attached Annual Report 2011 and incorporated by reference herein. The Bank’s consolidated financial statements, together with the notes thereto (and any notes or portions thereof in the consolidated financial statements of Credit Suisse Group referred to therein) and the Report of the Independent Registered Public Accounting Firm thereon, are set forth on pages 377 to 466 of the attached Annual Report 2011 and incorporated by reference herein.




Item 19. Exhibits.

1.1 Articles of association (Statuten) of Credit Suisse Group AG as of February 8, 2012.

1.2 Articles of association (Statuten) of Credit Suisse AG as of May 2, 2011

1.3 Organizational Guidelines and Regulations of Credit Suisse Group AG and Credit Suisse AG as of December 8, 2010 (incorporated by reference to Exhibit 1.3 of Credit Suisse Group AG’s and Credit Suisse AG’s annual report on Form 20-F for the year ended December 31, 2010 (File No. 1-15244) filed on March 25, 2011).

7.1 Computations of ratios of earnings to fixed charges of Credit Suisse and of the Bank are set forth under IX – Additional Information – Statistical information – Ratio of earnings to fixed charges – Group and – Ratio of earnings to fixed charges – Bank on page 511 of the attached Annual Report 2011 and incorporated by reference herein.

8.1 Significant subsidiaries of Credit Suisse are set forth in Note 38 – Significant subsidiaries and equity method investments in V – Consolidated financial statements – Credit Suisse Group on pages 342 to 344, and significant subsidiaries of the Bank are set forth in Note 36 – Significant subsidiaries and equity method investments in VII – Consolidated financial statements – Credit Suisse (Bank) on pages 466 to 468 in the attached Annual Report 2011 and incorporated by reference herein.

9.1 Consent of KPMG AG, Zurich with respect to Credit Suisse Group AG consolidated financial statements.

9.2 Consent of KPMG AG, Zurich with respect to the Credit Suisse AG consolidated financial statements.

12.1 Rule 13a-14(a) certification of the Chief Executive Officer of Credit Suisse Group AG and Credit Suisse AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

12.2 Rule 13a-14(a) certification of the Chief Financial Officer of Credit Suisse Group AG and Credit Suisse AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

13.1 Certifications pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Credit Suisse Group AG and Credit Suisse AG.

101.1 Interactive Data Files (XBRL-Related Documents).




SIGNATURES

Each of the registrants hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.







                           CREDIT SUISSE GROUP AG

                           (Registrant)

                           Date: March 23, 2012



/s/ Brady W. Dougan                           /s/ David R. Mathers

Name: Brady W. Dougan                      Name: David R. Mathers

Title: Chief Executive Officer                 Title: Chief Financial Officer 







                           CREDIT SUISSE AG

                           (Registrant)

                           Date: March 23, 2012



/s/ Brady W. Dougan                           /s/ David R. Mathers

Name: Brady W. Dougan                      Name: David R. Mathers

Title: Chief Executive Officer                 Title: Chief Financial Officer 





Annual Report 2011







Annual Report

The Annual Report is a detailed presentation of the Group’s annual financial statements, company structure, corporate governance and compensation practices, ­treasury and risk management framework and a review of our operating and financial results.
Cover: Members of the Swiss Regulatory Liquidity team, Chief Financial Officer Division in Zurich, Switzerland. Back cover: City view, Zurich, Switzerland.




Company Profile

For insights about the work of each of the Group’s divisions, including Shared Services, and its regions, refer to the Company Profile. For the first time, this is also available as an iPad version, which includes additional photo and video material beyond what appears in the print version. A summary of the Group’s financial performance during the year, the Business Review, is also included in the publication.



Corporate Responsibility Report and Chronicle

For a detailed presentation on how the Group assumes its diverse social and environmental responsibilities when conducting its business activities, refer to the Corporate Responsibility Report, available for the first time as an iPad version. This publication is complemented by our Responsibility Chronicle that adds a multimedia dimension to the publication by providing a selection of reports, videos and picture galleries that focus on our international ­projects and initiatives. www.credit-suisse.com/chronicle



For the purposes of this report, unless the context otherwise requires, the terms “Credit Suisse Group”, “Credit Suisse”, “the Group”, “we”, “us” and “our” mean Credit Suisse Group AG and its consolidated subsidiaries. The business of Credit Suisse AG, the Swiss bank subsidiary of the Group, is substantially similar to the Group, and we use these terms to refer to both when the subject is the same or substantially similar. We use the term “the Bank” when we are referring only to Credit Suisse AG, the Swiss bank subsidiary of the Group, and its consolidated subsidiaries.

Abbreviations and selected >>>terms are explained in the List of abbreviations and the Glossary in the back of this report.

Publications referenced in this report, whether via website links or otherwise, are not incorporated into this report.

In various tables, use of “–” indicates not meaningful or not applicable.







Financial highlights
  in / end of % change
2011 2010 2009 11 / 10 10 / 09
Net income (CHF million)  
Net income attributable to shareholders  1,953 5,098 6,724 (62) (24)
   of which from continuing operations  1,953 5,117 6,555 (62) (22)
Earnings per share (CHF)  
Basic earnings per share  1.37 3.91 5.28 (65) (26)
Diluted earnings per share  1.36 3.89 5.14 (65) (24)
Return on equity (%)  
Return on equity attributable to shareholders  6.0 14.4 18.3
Core Results (CHF million)  1
Net revenues  25,429 30,625 33,617 (17) (9)
Provision for credit losses  187 (79) 506
Total operating expenses  22,493 23,904 24,528 (6) (3)
Income from continuing operations before taxes  2,749 6,800 8,583 (60) (21)
Core Results statement of operations metrics (%)  1
Cost/income ratio  88.5 78.1 73.0
Pre-tax income margin  10.8 22.2 25.5
Effective tax rate  24.4 22.8 21.4
Net income margin 2 7.7 16.6 20.0
Assets under management and net new assets (CHF billion)  
Assets under management from continuing operations  1,229.5 1,253.0 1,229.0 (1.9) 2.0
Net new assets  40.9 69.0 44.2 (40.7) 56.1
Balance sheet statistics (CHF million)  
Total assets  1,049,165 1,032,005 1,031,427 2 0
Net loans  233,413 218,842 237,180 7 (8)
Total shareholders' equity  33,674 33,282 37,517 1 (11)
Tangible shareholders' equity 3 24,795 24,385 27,922 2 (13)
Book value per share outstanding (CHF)  
Total book value per share  27.59 28.35 32.09 (3) (12)
Shares outstanding (million)  
Common shares issued  1,224.3 1,186.1 1,185.4 3 0
Treasury shares  (4.0) (12.2) (16.2) (67) (25)
Shares outstanding  1,220.3 1,173.9 1,169.2 4 0
Market capitalization  
Market capitalization (CHF million)  27,021 44,683 60,691 (40) (26)
Market capitalization (USD million)  28,747 47,933 58,273 (40) (18)
BIS statistics (Basel II.5)  4
Risk-weighted assets (CHF million)  241,753 247,702 (2)
Tier 1 ratio (%)  15.2 14.2
Core tier 1 ratio (%)  10.7 9.7
Dividend per share (CHF)  
Dividend per share  0.75 5 1.30 6 2.00
Number of employees (full-time equivalents)  
Number of employees  49,700 50,100 47,600 (1) 5
1    Refer to "Credit Suisse reporting structure" and "Core Results" in II – Operating and financial review for further information on Core Results.   2    Based on amounts attributable to shareholders.   3    Tangible shareholders' equity, a non-GAAP financial measure, is calculated by deducting goodwill and other intangible assets from total shareholders' equity.   4    Under Basel II.5 since December 31, 2011. Previously reported under Basel II. Refer to "Treasury management" in III – Treasury, Risk, Balance sheet and Off-balance sheet for further information.   5    Proposal of the Board of Directors to the Annual General Meeting on April 27, 2012, to be paid out of reserves from capital contributions.   6    Paid out of reserves from capital contributions.



















Brady W. Dougan, Chief Executive Officer (left) and Urs Rohner, Chairman of the Board of Directors.



Message from the Chairman and the Chief Executive Officer


Dear shareholders, clients and colleagues

2011 was another challenging year for the world economy, job growth and the markets. The financial services industry faced not only these issues, but also a set of challenges that were industry specific: the evolving regulatory environment which affected every aspect of our business, the industry-wide steady beat of litigation and regulatory enforcement issues following the market disruption of 2008, the lack of trust by the general public and the continuing controversy over compensation practices. For our clients, shareholders, employees and the general public, it has been very difficult to interpret the impact of these challenges on our business and the industry.


What we achieved - summary

Against this backdrop, we achieved a solid result for the year, reporting net income attributable to shareholders of CHF 2.0 billion, and underlying* net income of CHF 2.4 billion. We produced a return on equity of 6.0% and an underlying* return on equity of 7.3%. We generated strong net new assets of over CHF 41 billion. The Board of Directors will propose a distribution of CHF 0.75 per share for the financial year 2011, which shareholders can elect to receive either in the form of Credit Suisse Group shares or as a cash payment. Perhaps as important, we believe that in 2011 we have taken significant actions which will enable Credit Suisse to excel and thrive in the new environment, allowing us to offer the best service to our clients, attractive returns to our shareholders and provide a great place to work for our employees.


Our aspirations

As managers of a large global financial institution, we are confronted by the consequences of a fast changing industry, which is under close public scrutiny by all of our stakeholders on a daily basis. In this challenging environment, the employees of Credit Suisse come to work every day doing our best to find the optimal way forward for our firm:

one that allows us to provide the very best value-added service to our clients to ensure they can meet their very important financial goals;

one that allows us to maximize the long-term value of our equity for our shareholders, among them many of our employees;

one that makes Credit Suisse a company of which its employees are proud; and

one that is responsible to society and makes Credit Suisse a contributing member of the communities where it operates.

And while every decision that we make and every action that we take do not end up perfectly accomplishing these goals, we can assure you that this is our aspiration. We believe we can make a meaningful difference for our clients, our shareholders, our employees and for the communities in which we operate. We want nothing more than to continue to build on the confidence and pride that our stakeholders have in Credit Suisse.

Achieving this aspiration has been very demanding over the past five years. We think we have done many things right during this challenging period, but certainly not everything. We believe the only way to continue to improve our performance is to evaluate the decisions we have made and draw the necessary lessons. This is another aspect of what we believe is critical for a strong, high performing and responsible firm. We have been greatly aided in the pursuit of our goals by having formed a clear vision early in this five year period, and we have maintained that vision over the entire period.

The events of the financial crisis in 2008 (and many events subsequent to that) demonstrated that the financial system needed to be changed. Reforms needed to be put in place to ensure that such a destabilizing event could not happen again. These changes would include requiring more capital, more stable funding, changes to business models and would require exiting certain businesses we were in. We felt from the outset that these changes were inevitable and would be far reaching, and markets and the opportunities for our business would be more volatile and variable than in the past. Our clients would change their behavior and require different qualities and services from their financial institutions. Companies would have to ensure their businesses would at all times be fully compliant with all the rules and regulations in all countries where they operate globally.

We felt that while these changes represented a challenge – they were necessary – and embracing them represents a real opportunity for Credit Suisse. We have natural advantages in our business portfolio, and if we can move quickly and execute well, we will be able to emerge from this dynamic period stronger than when we went in.


What we have done

Acting consistently on our aspirations over the past years, we took resolute and decisive action with regard to our business.

We have worked towards and maintained one of the highest total capital ratios in the industry at over 20%, demonstrate one of the most secure profiles with a net stable funding ratio of 98% and have an extremely strong asset quality on our balance sheet including, for example, minimal exposure to peripheral EU sovereigns. All of this has been recognized by the rating agencies, who assign us among the highest credit ratings of all global banks.

We have reoriented our business dramatically, focusing on our client businesses and exiting proprietary trading, long-dated derivatives and businesses which under Basel III have a high capital usage. We have worked hard across all of our businesses to foster compliance with the laws of all the countries where we do business. We are also pursuing a cross-border private banking business focused on tax-compliant money. We have worked hard to take a conservative approach to our businesses, reducing market risk, credit risk and operational risk. In addition, we have reduced reputational risk that comes with engaging in certain businesses which, while permitted, are not accepted by our stakeholders.

We have engaged constructively with our regulators around the world and work with them to find the right solutions. We have been among the earliest sponsors of ideas like contingent convertible capital and bail-in capital, and in fact have led the way by structuring three highly successful Buffer Capital Note transactions. We feel this is a much better way to achieve real improvements in the regulatory environment, while ensuring that our business model can continue to serve our clients and provide returns to capital providers. The approach is in stark contrast to many in the industry who believe the best approach is to resist the necessary change.

Against the confusing backdrop of conditions that we listed in the beginning of this letter, it is not always easy to see the benefit of acknowledging that our industry needs to change and acting and shaping the industry when others are reluctant to do so. There is of course discussion, debate and doubt. In most cases, we have taken steps ahead of the rest of the industry; however, we strongly believe these changes will come, and banks will have to materially change their business models to accommodate them. Given our portfolio of businesses in Private Banking, Investment Banking and Asset Management combined with our global presence and a very strong Swiss home market, we are convinced that Credit Suisse will benefit from taking these steps ahead of the competition. While this approach is not without risk, we believe it best positions us to provide consistent service to our clients, attractive returns to our shareholders over time and the best environment for our employees.


The year 2011

2011 was a clear example of all these principles at work. Conditions were challenging, particularly with the issues surrounding the disruption of the eurozone dominating the markets for much of the year. Our business, with its significant footprint in Europe, was clearly affected. Furthermore, the actions we took to accelerate our transition to a business model which will thrive in the new environment were a drag on our results, particularly in the second half of the year.

Throughout 2011, Credit Suisse’s strong capital base and liquidity position proved particularly important. In the second half of the year, our financial strength enabled us to take decisive measures and rapidly evolve our integrated business model and organization to meet the challenges of the changing environment.

The various efficiency-related actions we announced include a 7% headcount reduction. This has been a difficult decision that affects all levels of the company, and we are committed to implementing this process in the most fair and responsible way possible.

Overall, the measures we took to swiftly adapt our business model had a negative pre-tax impact of approximately CHF 1.8 billion on our results in 2011. However, we are convinced that these measures will create stable and high-quality earnings, benefiting our shareholders, clients and other stakeholders in the long term.


Private Banking

In Private Banking, we saw continued low levels of client activity and a low interest rate environment that put our gross margins under increased pressure in 2011. Despite adverse operating conditions, Private Banking generated strong net new assets of CHF 44.5 billion in 2011, with significant contributions from emerging markets, the ultra-high-net-worth individual client segment and the Corporate & Institutional Clients business in Switzerland. Private Banking reported income before taxes of CHF 2,348 million and net revenues of CHF 10,877 million for 2011. While our underlying business remains strong, the adverse impact of the strong Swiss franc on income before taxes and net revenues was CHF 550 million and CHF 844 million, respectively. Our Wealth Management Clients business reported income before taxes of CHF 1,468 million and net revenues of CHF 9,030 million for 2011. Corporate & Institutional Clients produced income before taxes of CHF 880 million and net revenues of CHF 1,847 million.

In response to the challenging market conditions and the ongoing regulatory developments, we launched a series of measures as part of the overall evolution of our business model in the second half of 2011. The measures aim at optimizing our Private Banking business portfolio and improve its profitability. With this initiative, we are targeting incremental pre-tax income of CHF 800 million in Private Banking by 2014. We will continue to invest in faster growing and large markets, while at the same time enhancing the productivity and efficiency of our onshore activities. In view of our integrated business model, the ultra-high-net-worth individual client segment continues to be a key growth opportunity for Credit Suisse, and we therefore strengthened our advisory team in this area in the course of 2011. We believe that the steps we are taking in Private Banking put us in a strong prospective position in a rapidly changing environment.

As reported previously, the US investigations of Swiss banks’ legacy cross-border businesses remain ongoing. Credit Suisse continues to cooperate with the authorities in the US and Switzerland to resolve these investigations consistent with our legal obligations. As to the ongoing governmental discussions, we are strongly supportive of the efforts of the US and Switzerland to reach a resolution acceptable for both countries.


Investment Banking

In Investment Banking, we reported income before taxes of CHF 79 million and net revenues of CHF 11,496 million for 2011. While this result was disappointing, it reflects both the challenging market conditions throughout the year and the impact of the steps we have taken in Investment Banking to evolve our business model.

In mid-2011, we initiated an aggressive plan to reduce risk-weighted assets and accelerated its implementation in the fourth quarter. We expect to reach our year-end 2012 Basel III risk-weighted assets reduction target of CHF 80 billion nine months early, by the end of the first quarter 2012. In addition, we are exiting businesses that will no longer deliver attractive returns or earn the cost of capital under the new regulatory framework. At the same time, we are investing and growing in businesses where we have competitive advantages and synergies with Private Banking and Asset Management.

We believe that this will enable us to run a business that generates solid returns under the Basel III framework, where capital assessed against Investment Banking businesses will have a dramatic effect. With the early steps we have taken, we can avoid the rush to liquidate assets. Instead, we believe that we can consistently serve our clients and provide capital where appropriate.


Asset Management

In Asset Management, we reported income before taxes of CHF 553 million and net revenues of CHF 2,146 million for 2011. Our continued focus on growth in fee-based revenues and on investing in multi-asset class solutions, alternative investments and our Swiss business is proving successful. In 2011, we made solid progress with increased fee-based revenues and a reduction in operating costs, leading to a 10% increase in pre-tax income compared to 2010.


Strengthening the financial system

Governments and regulators around the world have been very focused on building a safer and sounder financial system. Credit Suisse has been constructively engaged in supporting to achieve this aspiration. The debate on capital levels and forms of capital, liabilities and liquidity levels, additional taxes which impact the industry (liability taxes and transaction taxes), and various other structural changes to the financial system, for instance, the Dodd-Frank legislation in the US, have been very intense. Switzerland’s regulators moved first in requiring more capital and new forms of capital as well as liquidity to ensure that the system was safer and sounder. Credit Suisse participated in the Expert Commission in Switzerland, which made recommendations to the government, and have supported the changes put in place by the government. We have pioneered the structuring of Buffer Capital Notes, now having put in place close to CHF 8.4 billion of high trigger notes, proving the concept has strong appeal to investors. We have always believed that a level playing field would emerge globally among countries. In fact, that is what we have been seeing with the UK recommending capital requirements much like Switzerland, and with the Bank for International Settlement requiring all large banks globally to hold common equity tier 1 levels of 8.0% to 9.5%, which is not much different from the 10% required in Switzerland. We have been one of the leading proponents of contingent convertible capital and bail-in structures, and we will continue to work as a constructive industry force in establishing the kind of conditions and regulatory requirements necessary to ensure that we have a safer and sounder financial system and achieve a global level playing field.


Going forward

We aspire to be an institution that does a great job for our clients, provides superior returns to our shareholders, is a great place to work for our employees and is a responsible member of society. We will continue to work hard every day to achieve that aspiration.

We believe our vision of the direction of the markets and of our industry is correct. We are convinced that proactively evolving our business model is not only the right thing to do, but is the best way to accomplish our aspiration. The actions we have taken will put us in a very strong position to thrive in the new environment as it develops. We see this as an inherent part of our responsibility as a company and as a reliable partner to our clients, shareholders and employees.

We would like to thank our shareholders and clients for the trust they have placed in Credit Suisse and our employees worldwide for their commitment and their contribution to the success of our business.



Yours sincerely

Urs Rohner            Brady W. Dougan
Chairman of the     Chief Executive Officer
Board of Directors

March 2012


* Underlying results are non-GAAP financial measures. Underlying return on equity and underlying net income for 2011 exclude fair value gains on own debt and stand-alone derivatives of CHF 919 million (CHF 616 million after tax), litigation provisions of CHF 478 million for the US and the German tax matters (CHF 428 million after tax) and expenses in connection with cost-efficiency initiatives of CHF 847 million (CHF 641 million after tax).









Information on the company

An integrated global bank

Strategy

Our businesses

Organizational and regional structure

Regulation and supervision







An integrated global bank


We believe that our ability to serve clients globally with solutions tailored to their needs gives us a strong advantage in today’s rapidly changing and highly competitive marketplace.


We operate as an integrated bank, combining our strengths and expertise in our three global divisions, Private Banking, Investment Banking and Asset Management, to offer our clients advisory services and customized products. Our divisions are supported by our Shared Services functions, which provide corporate services and business solutions while ensuring a strong compliance culture.


Our global structure comprises four regions: Switzerland, Europe, Middle East and Africa, Americas and Asia Pacific. With our local presence and global approach, we are well positioned to respond to changing client needs and our operating environment.





Divisions


Private Banking

In Private Banking, we offer comprehensive advice and a broad range of financial solutions to private, corporate and institutional clients. Private Banking comprises the Wealth Management Clients and Corporate & Institutional Clients businesses. In Wealth Management Clients, we serve more than two million clients, including ultra-high-net-worth and high-net-worth individuals around the globe and private clients in Switzerland, making us one of the largest global players. Our network comprises 360 office locations in 46 countries. Our Corporate & Institutional Clients business serves the needs of over 100,000 corporations and institutions, mainly in Switzerland, and is an important provider of financial products and services.




Investment Banking

Investment Banking provides a broad range of financial products and services, with a focus on businesses that are client-driven, flow-based and capital-efficient. Our products and services include global securities sales, trading and execution, prime brokerage, capital raising and advisory services, as well as comprehensive investment research. Our clients include corporations, governments, pension funds and institutions around the world. We deliver our global investment banking capabilities via regional and local teams based in all major developed and emerging market centers. Our integrated business model enables us to gain a deeper understanding of our clients and deliver creative, high-value, customized solutions based on expertise from across Credit Suisse.




Asset Management

Asset Management offers products across a wide range of asset classes, including alternative investments such as hedge funds, private equity, real estate and credit, and multi-asset class solutions, which includes equities and fixed income products. The division manages portfolios, mutual funds and other investment vehicles for governments, institutions, corporations and private clients worldwide. With offices in 19 countries, we collaborate with clients to develop and deliver innovative investment products and solutions to meet their specific needs. Asset Management operates as a global integrated network in close collaboration with Private Banking and Investment Banking.




Shared Services

Shared Services provides centralized corporate services and business support for Private Banking, Investment Banking and Asset Management, with services in the following areas: finance, legal and compliance, risk management, information technology, talent, corporate communications, corporate branding, corporate development and public policy. Shared Services acts as an independent control function and provides services and support from a handful of regional hubs.


Regions


Switzerland

In our home market, we are a leading bank for private, corporate and institutional clients. Around 2,000 relationship managers at more than 200 branches offer clients a full range of private banking services. Investment Banking provides a broad range of financial services to its Swiss client base, while Asset Management offers traditional and alternative investment products and multi-asset class solutions.




Europe, Middle East and Africa

Credit Suisse is active in 31 countries across the EMEA region with offices in 74 cities. Our regional headquarters are in the UK, but we have an onshore presence in every major country in EMEA. The region encompasses both developed markets such as France, Germany, Italy, Spain and the UK, as well as fast growing markets including Russia, Poland, Turkey, South Africa and the Middle East.




Americas

The Americas region comprises our operations in the US, Canada, the Caribbean and Latin America. With offices in 46 cities spanning 14 countries, we offer clients local market expertise and access to our full range of global resources across our three core businesses and as an integrated bank. In 2011 we continued to build our investment banking platform in Canada, maintained or improved market share in most major product areas in the US, and expanded our private banking and asset management capabilities across the region.




Asia Pacific

The Asia Pacific region comprises 18 offices in 12 markets. Our integrated banking platform has a strong presence in the region’s largest markets, such as Australia, China, Hong Kong, Korea and Japan, complemented by long-standing leadership in Southeast Asia and a rapidly growing franchise in India. In these markets we are committed to building one of the leading client franchises in the industry by delivering the integrated bank to corporate, institutional and high-net-worth clients.








Strategy


Industry trends and competition

In 2011, the financial services industry experienced a volatile market environment and continued uncertainties regarding regulatory developments and proposals, including capital, leverage and liquidity requirements, changes in compensation practices and systemic risk.

> Refer to “Treasury management” in III – Treasury, Risk, Balance sheet and Off-balance sheet for information regarding our current regulatory framework and expected changes to this framework affecting capital and liquidity standards.
> Refer to “Regulation and supervision” for further information on regulatory developments and proposals.

We hope that these regulatory changes will be implemented by national regulators in a way that contributes to a more level playing field and a stronger and more sustainable global banking system over time.

As many financial institutions weathered the turbulence of the financial crisis and returned to growth, 2011 was also characterized by increased competitive pressure. With established markets in the US and Europe affected by ongoing sovereign debt concerns and a slow economic recovery, we expect economies in Asia and Latin America to be important growth drivers for the banking industry in the near term. In response to regulatory trends, banks are expected to shift away from proprietary trading towards client-facing business models which will increase competition in client flows. We believe, however, that strongly capitalized banks with a clear and demonstrated client focus will have a competitive advantage.


Group priorities

We are confident that our strong capital position and our ability to provide clients globally with best-in-class integrated banking services provide a strong value proposition for our clients and shareholders.


Evolution of our strategy

In light of increasing regulatory and capital requirements and continued challenging market and economic conditions, we announced in November 2011 that we are adapting our client-focused, capital-efficient strategy to optimize our use of capital and improve our cost structure in order to deliver attractive returns for our shareholders.

In Private Banking, we remain committed to a long-term international growth strategy, focusing on onshore, faster growing and large markets and the >>>ultra-high-net-worth individual client segment as key growth areas and continuing to build on our strong position in the Swiss market while enhancing our efficiency. We are rationalizing our operating model for Western European markets and will serve smaller markets opportunistically. With these combined measures, we are targeting incremental pre-tax income of CHF 800 million by 2014, based on the assumption of unchanged market conditions. In November 2011, we began the full integration of Clariden Leu into the Group, a process which we expect to complete by the end of 2012.

In Investment Banking, we are redeploying capital in order to invest and grow businesses and significantly reduce >>>risk-weighted assets and our cost base. We are investing and growing in businesses where we have competitive advantages and synergies with Private Banking and Asset Management, including foreign exchange, electronic trading, emerging markets, prime services and equity capital markets. At the time, we announced a 50% reduction in >>>Basel III risk-weighted assets in our fixed income business from 55% of Group risk-weighted assets to 39% by the end of 2014.

As the Basel Committee on Banking Supervision (BCBS) Basel III framework (Basel III) will not be implemented before January 1, 2013, we have calculated our Basel III risk-weighted assets for purposes of this report in accordance with the currently proposed requirements and our current interpretation of such requirements, including relevant assumptions. Changes in the actual implementation of Basel III would result in different numbers from those shown in this report.

Since November 2011, we have accelerated our risk-weighted assets reduction plan in Investment Banking and expect to exceed our previously announced year-end 2012 Basel III risk-weighted assets target of USD 229 billion by the end of the first quarter of 2012. In addition, we have revised our Basel III risk-weighted assets target to USD 190 billion for both year-end 2012 and 2014 from USD 229 billion for year-end 2012 and USD 201 billion for year-end 2014. We are significantly reducing our cost base, including through improved client coverage efficiency and reduced country, industry and product coverage overlaps.

In Asset Management, we are expanding the range of alternative products in collaboration with Private Banking and Investment Banking, growing our fee-based revenues and driving further cost reductions through platform optimization and outsourcing.

The Group is allocating additional resources across our businesses to fast growing markets, especially Brazil, Southeast Asia, Greater China and Russia, to increase the revenue contribution from 15% of revenues in 2010 to 25% by 2014.

In the second quarter 2011, we began implementing a number of cost-efficiency initiatives, which we expect to achieve CHF 1.2 billion in cost savings and resulting reductions in the annualized first half 2011 expense run rate during 2012 (excluding the impact from the expense in the first quarter 2012 for the 2011 Partner Asset Facility). We subsequently began implementing additional cost-efficiency measures to target an additional CHF 0.8 billion of cost savings by the end of 2013. We expect these total cost savings of CHF 2.0 billion to involve headcount reductions of approximately 7% across the Group, maximizing deployment opportunities by rationalizing our existing business footprint, more fully integrating our operating model and continuing to centralize our infrastructure and streamlining of operational and support functions (including a new European business operating model and additional European and Swiss platform efficiencies). We also announced the integration of our Private Banking and Investment Banking operations into a single function within Shared Services. We have accelerated the implementation of these cost-efficiency measures and recognized costs of CHF 847 million in 2011 in the Corporate Center, mostly severance and other compensation expense. Given these implementation costs, we expect to realize the benefits of these cost-efficiency initiatives during 2012. We estimate further implementation costs in 2012 of approximately CHF 350 – 400 million.

> Refer to “Our businesses” for further information on the refinement of our strategy.
> Refer to “Capital management” in III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management for further information on the reduction of risk-weighted assets.

Our client-focused and capital-efficient integrated business model with its balanced portfolio of businesses has proven resilient and we have continued to gain market share across our businesses. We expect our client-focused, capital-efficient strategy to benefit from a more constructive market environment while limiting our risk exposure in down markets. We believe that our strategy is consistent with both emerging client needs and regulatory trends. We have increased clarity on our future regulatory environment, and we are well advanced on implementation.

We target an annual after-tax return on equity (ROE) of greater than 15% over the next three to five years. Building on the momentum we have established, we aim to further grow our client business with gains in market share and a strengthened geographic footprint. To achieve our goals, we are focused on the following priorities.


Client focus

We put our clients’ needs first. We aspire to be a consistent, reliable, flexible and long-term partner focused on clients with complex and multi-product needs, such as >>>ultra-high-net-worth individuals, large and mid-sized companies, entrepreneurs, institutional clients and hedge funds. By listening attentively to their needs and offering them superior solutions, we empower them to make better financial decisions. Against the backdrop of significant changes within our industry, we strive to ensure that we consistently help our clients realize their goals and thrive. We continue to strengthen the coverage of our key clients by dedicated teams of senior executives who can deliver our integrated business model. We have a strong capital position and high levels of client satisfaction and brand recognition, and our strong client momentum is well recognized. We were named “Best Wealth Management House” and, for the fifth time in a row, “Best Bank in Switzerland” in Euromoney’s Awards for Excellence in 2011. We were also named “Bank of the Year” in Switzerland by The Banker. In addition, we advanced to the top five globally and increased our market share in global equity capital markets for 2011 according to Dealogic.


Employees

We continue to undertake efforts to attract, develop and retain top talent in order to deliver an outstanding integrated value proposition to our clients. Our candidates go through a rigorous interview process, where we not only look for technical and intellectual proficiency, but for people who can thrive in and contribute to our culture. Credit Suisse is above the external benchmark for employee engagement in the financial services industry. We review our talent and identify the right developmental opportunities based on individual and organizational needs. We increasingly promote cross-divisional and cross-regional development, as well as lateral recruiting and mobility. Valuing different perspectives, creating an inclusive environment and showing cross-cultural sensitivity are key to Credit Suisse’s workplace culture. We have expanded our organizational understanding beyond traditional diversity and inclusion to leverage our differences to fully engage the workforce. Through our business school, we train our leaders, specialists and client advisors in a wide range of subjects to ensure that the knowledge and competence of our employees supports the needs of our clients and our strategy. We take a prudent and constructive approach to compensation, designed to reflect the performance of individuals and the firm and closely align the interests of employees with those of shareholders.


Collaboration

We help our clients thrive by delivering the best of our products and services across our organization and divisions. We have established a dedicated governance structure in order to drive, measure and manage collaboration between our divisions. We are targeting collaboration revenues of 18% to 20% of net revenues, and in 2011 we recorded collaboration revenues of CHF 4.3 billion, representing 16.8% of net revenues. Since the inception of our collaboration program in 2006, we have built a strong track record of delivering customized value propositions. We believe this is a significant differentiator for Credit Suisse. We have observed increasing momentum in collaboration initiatives, including tailored solutions for wealthy private clients by Investment Banking and managed investment products developed by Asset Management for Private Banking. Benefitting from our programs for cross-divisional management development and lateral recruiting, we believe collaboration revenues, including cross-selling and client referrals, to be a resilient source of both revenues and assets.


Capital and risk management

While the prudent taking of risk in line with our strategic priorities is fundamental to our business as a leading global bank, we maintain a conservative framework to manage liquidity and capital. As of the end of 2011, our tier 1 ratio under >>>Basel II.5 stood at 15.2%, up from 14.2% the year before. Our tier 1 ratio under >>>Basel II stood at 18.1%, up from 17.2% the year before. Consistent with the Swiss Expert Commission’s recommendations on >>>“Too Big to Fail” issues, we took action to raise tier 1 and tier 2 contingent buffer capital in February 2011. We have revised our liquidity risk management, which is in line with the BCBS Basel III liquidity framework and the liquidity principles of the Swiss Financial Market Supervisory Authority (FINMA). We continue to deploy capital in a disciplined manner based on our economic capital model, assessing our aggregated risk taking in relation to our client needs and our financial resources.

> Refer to “Treasury management” in III – Treasury, Risk, Balance sheet and Off-balance sheet for further information.


Efficiency

We continue to strive for top-quartile efficiency levels, while being careful not to compromise on growth or reputation. We target a pre-tax income margin above 28%. In line with the announced evolution of our strategy, efficiency measures implemented with strong involvement of senior management are generating cost savings while helping to build an efficiency culture. We have five Centers of Excellence (CoE) in Pune (India), Raleigh Durham (US), Singapore, Wroclaw (Poland) and Mumbai (India), in which we have deployed more than 12,000 roles, improving productivity. We continue to focus on our Operational Excellence program, which has strengthened our culture of continuous improvement and client focus.

To track our progress and benchmark our performance, we have defined a set of key performance indicators for growth, efficiency and performance, and capital to be achieved across market cycles.

> Refer to “Key performance indicators” in II – Operating and financial review for a more detailed description of our businesses and our performance in 2011 against the defined targets.


Corporate responsibility and Code of Conduct

At Credit Suisse, we firmly believe that corporate responsibility plays a crucial role in our long-term success as a business. We therefore strive to incorporate our approach to corporate responsibility into every aspect of our work. This approach is founded on a broad understanding of our commitments in banking, society and the environment, our role as an employer and our dialogue with our stakeholders.

Our Code of Conduct defines the ethical values and professional standards that the Board of Directors and all employees are required to follow, including an emphasis on adhering to all relevant laws, regulations and policies in order to maintain and strengthen our reputation for integrity, fair dealing and measured risk taking. Our Code of Conduct is available on our website at www.credit-suisse.com/code in nine languages.

To ensure that we supply the full breadth of information required by our stakeholders, we publish a Corporate Responsibility Report and additional information, which can be found at www.credit-suisse.com/responsibility.




Our businesses


Private Banking


Business profile

In Private Banking we offer comprehensive advice and a broad range of financial solutions to private, corporate and institutional clients. Private Banking comprises the Wealth Management Clients and Corporate & Institutional Clients businesses, and had total assets under management of CHF 927.9 billion as of the end of 2011. In Wealth Management Clients, we serve more than two million clients, including ultra-high-net-worth and >>>high-net-worth individual clients around the globe and private clients in Switzerland. Our Corporate & Institutional Clients business is an important provider of financial products and services, serving the needs of over 100,000 corporations and institutions, mainly in Switzerland.

Our Wealth Management Clients business is one of the largest in the wealth management industry globally. We offer our clients a distinct value proposition, combining a global reach with a structured advisory process and access to a broad range of sophisticated products and services. We deliver innovative and integrated solutions in close collaboration with Investment Banking and Asset Management. As of the end of 2011, our Wealth Management Clients business had CHF 791.5 billion of assets under management. Our global network comprises 46 countries with 360 offices, more than 120 outside Switzerland. Wealth Management Clients has 4,040 relationship managers and 22 >>>booking centers, reflecting our multi-shore strategy.

Our Corporate & Institutional Clients business provides premium advice and solutions across a broad range of banking services, including lending, cash and liquidity management, trade finance, ship and aviation finance, corporate finance, investment solutions, global custody and asset and liability management. Clients include small and medium-sized enterprises, global corporations and commodity traders, banks, insurance companies and Swiss pension funds. As of the end of 2011, the business volume of our Corporate & Institutional Clients business was CHF 250.6 billion, with CHF 194.1 billion of client assets and CHF 56.5 billion of net loans. In Switzerland, we cover large corporations out of four locations and we serve small and medium-sized enterprises through relationship managers based in 36 branches.

Key data - Private Banking
  in / end of
2011 2010 2009
Key data  
Net revenues (CHF million)  10,877 11,631 11,662
Income before taxes (CHF million)  2,348 3,426 3,651
Assets under management (CHF billion)  927.9 932.9 914.9
Number of employees  25,200 25,600 24,300




Strategy

Industry trends and competition
We believe the wealth management industry continues to have good long-term growth prospects. Assets of high-net-worth individuals globally are projected to grow approximately 8% per annum over the next five years.

Structurally the industry is experiencing significant changes. From a regional perspective, wealth creation continues to shift towards emerging markets, with higher growth rates fueled by entrepreneurial activity and relatively strong economic development. Mature markets, with around two thirds of the world’s wealth located in the US, Japan and Western Europe, are expected to see continued but relatively lower growth, driven by further wealth accumulation and a generational transfer of wealth. New and evolving international treaties and regulation will lead to increased regulation of cross-border banking for clients domiciled in selected countries. Switzerland – which combines political and economic stability with a heritage in wealth management – is well positioned as a financial center to continue to succeed in this evolving environment.

At the same time, the strong Swiss franc weighs on the profitability of the export-oriented Swiss economy, including wealth managers. For our Private Banking business, the adverse foreign exchange impact on net revenues and income before taxes in 2011 amounted to CHF 844 million and CHF 550 million, respectively. Currently gross margins are under pressure due to continued low interest rates and cautious investor behavior resulting from the sovereign debt crisis and economic uncertainty, and we expect this environment to last for some time. Finally, regulatory requirements for investment advisory services are increasing, including in the areas of suitability and appropriateness of advice, client information and documentation. Competition in the industry remains intense, in particular as many competitors strive to counter profitability pressure by increasing scale. Attracting and retaining the best talent continues to be a key factor to success. As a result of the structural industry trends, we expect industry consolidation to continue.

The Swiss market for Corporate & Institutional Clients continues to offer long-term growth prospects. Swiss corporations performed relatively well over recent years due to solid business models and conservative financing, but are facing new challenges with respect to the strengthening Swiss franc. A growing number of Swiss companies have to address succession planning, a trend which increasingly creates business opportunities in this market, particularly for banks that can offer a tailored combination of private and investment banking services. Furthermore, in light of volatile exchange rates and commodity prices, we expect ongoing demand for hedging solutions.

Evolution of our strategy
Our aspiration is to become the most admired bank for Wealth Management Clients globally and for Corporate & Institutional Clients in Switzerland. We want to be an industry leader in terms of client satisfaction, employee engagement, profitability and growth. In light of the challenging environment we reviewed and reconfirmed our long-term strategy and in November 2011 announced a refocusing of key elements of the strategy. We remain committed to a long-term international growth strategy, focusing on faster growing and large markets, further development of our onshore booking centers and the >>>ultra-high-net-worth individual client segment as key growth areas. We continue to build on our strength as an integrated bank, in particular in the ultra-high-net-worth individual client segment, and our strong position in the Swiss market while enhancing our efficiency through strict cost management. We are rationalizing our operating model for Western European markets, focusing our cross-border business in markets with sound economics and sufficient scale and are implementing a focused service model and offering for the >>>affluent client segment. In November 2011, we began the full integration of Clariden Leu into the Group to further increase the profitability and efficiency of our business, a process which we expect to complete by the end of 2012.

With these combined measures, we are targeting incremental pre-tax income of CHF 800 million by 2014, based on the assumption of unchanged market conditions.

With these adaptations we continue to pursue our long-term strategy combining:

International growth

Market share gains in Switzerland

Client centricity

Integrating the banking business

Best people

Productivity and financial performance

International growth: We will continue to hire and develop experienced relationship managers, expand our solutions offerings on international platforms and further build and optimize our domestic presence in select markets, thus accelerating profitability and capturing growth. As part of this focus we recently signed an agreement to acquire HSBC’s private banking business in Japan. We offer both onshore and offshore services in compliance with local laws, rules and regulations, with investments focused on regions with faster growth and the ultra-high-net-worth segment. In our cross-border business we expect an increased focus on markets with a minimum scale and a cost-effective offering for affluent clients that will allow us to realize efficiencies.

Market share gains in Switzerland: In our home market, we aim to grow by gaining market share. In the private client segment, we expect to accomplish this by increasing our interactions with clients and improving our advisory quality. In the wealth management business, we provide superior needs-oriented services to ultra-high-net-worth and high-net-worth individual clients by leveraging our competence in advice, in-depth investment expertise and our capabilities as an integrated bank. The targeted growth segments in the Swiss corporate and institutional business include large corporations, institutional investors, financial institutions and small and medium-sized enterprises with an international focus. Regular client surveys confirm a high degree of client satisfaction, which we believe is reflected in significant net new asset inflows in Switzerland.

Client centricity: We offer a unique value proposition combining a wealth management heritage spanning over 150 years, comprehensive advice based on a structured advisory process, focused coverage of heterogeneous client segments, a global reach via 22 booking centers and 360 offices and integrated bank capabilities providing access to a broad range of services and needs-based solutions. We continue to develop our range of solutions based on client needs and in-depth monitoring of investment opportunities by our skilled research and investment professionals. The selection of either internal or third-party solutions is based on comprehensive due diligence with regards to appropriateness to the client or client group and applicable rules and regulations.

Integrating the banking business: Close collaboration with Investment Banking and Asset Management enables us to offer customized and innovative solutions to our clients, especially to ultra-high-net-worth individual clients, our fastest growing and most profitable segment. Through a dedicated coverage and close collaboration across the integrated bank and a comprehensive solution offering and networking platform, we plan to increase pre-tax income by 50% in the ultra-high-net-worth individual client segment by 2014. In cooperation with Asset Management, we offer a range of client-focused discretionary mandates and access to hedge funds and private equity solutions.

Best people: As people are the most critical factor for success in delivering our value proposition, we systematically develop our employees, with a special focus on our client-facing staff, through training and certification programs. We strive to be an employer of choice, and as part of our growth strategy, we continue to invest in our relationship managers as a driver of net new assets.

Productivity and financial performance: We are driving efficiency and productivity, building on our programs for efficiency management and our CoE, and through the current integration of Clariden Leu.

Achievements
Key achievements and measures of our progress in 2011 include:

International growth: In 2011, we generated CHF 31.7 billion of net new assets in our international businesses, representing 84% of total Wealth Management Clients net new assets, comprising CHF 13.7 billion from EMEA, CHF 7.6 billion from the Americas and CHF 10.4 billion from Asia Pacific. As part of our international growth strategy, we are reviewing and selectively adapting our global network of onshore booking centers.

Market share gains in Switzerland: With CHF 12.8 billion of net new assets, we continued to grow our Swiss business across most client segments through focused growth measures in 2011. In addition, we generated significant internal referral volumes within Private Banking and between divisions through our integrated bank model. With CHF 880 million of pre-tax income, Corporate & Institutional Clients continued its strong contribution to the Private Banking pre-tax income.

Client centricity: We have continued to implement our ultra-high-net-worth individual clients strategy, generating CHF 23 billion of net new assets from ultra-high-net-worth individual clients across all regions, representing a 61% share of total net new assets in Wealth Management Clients. This client segment contributed 36% of total assets under management in Wealth Management Clients at the end of 2011. We have expanded our coverage of ultra-high-net-worth individual clients across regions, serving them in close collaboration with Investment Banking and Asset Management, and further developed our service offering in the areas of prime services, lending facilities and private label funds supported by dedicated specialists. In addition, we further enhanced our advisory approach, including the rollout of a global Investment Suitability Framework in Switzerland. Client satisfaction remained high globally.

Integrating the banking businesses: In 2011, we increased the number of integrated solutions transactions by 30%, and respective revenues by 15%, primarily in cooperation with Investment Banking, especially in the ultra-high-net-worth client segment, and expanded our collaboration with Asset Management as we expanded our range of products. Overall, Private Banking was involved in more than 90% of the Group’s total collaboration revenues of CHF 4.3 billion.

Best people: International hiring reflected our continued investment in international growth. In 2011, we continued to hire relationship managers, 59% of which were senior hires, representing an upgrade in talent even while at the same time our overall headcount decreased slightly in connection with our efficiency initiatives. Additionally, we continued to roll out an enhanced and recognized global training and certification program for all client-facing staff.

Productivity and financial performance: We achieved a gross margin of 114 basis points in Wealth Management Clients in a market environment characterized by declining margins. We had a resilient Private Banking pre-tax income margin of 25.5% excluding litigation provisions of CHF 478 million in connection with German and US tax matters and a gain from the sale of real estate of CHF 72 million, with results significantly impacted by the appreciation of the Swiss franc against major currencies. Responding to the profitability pressure, we are implementing efficiency initiatives aligned with the announced Group-wide efforts to reduce our cost base. We now have more than 2,180 roles located in our CoE.

Awards
We received numerous industry awards in 2011, including:

“Best Private Bank Globally” for the third consecutive year in Euromoney’s Private Banking Survey 2012;

“Best Private Bank in Western Europe”, “Best Private Bank in Central and Eastern Europe” as well as “Best Private Bank” in Australia, the Bahamas, Guernsey, Italy, Russia, Singapore, Switzerland, the United Arab Emirates and the United Kingdom by Euromoney’s Private Banking Survey 2012;

“Best Wealth Management House” and, for the fifth time in a row, “Best Bank in Switzerland” in Euromoney’s Awards for Excellence Survey;

“Best Private Banking Service in the Middle East” by Banker Middle East magazine;

“Best Private Bank” in Southeast Asia, Singapore and Indonesia for the second time by The Asset in its Triple A Investment Awards;

“Best Swiss Global Custodian 2011” by R&M Surveys; and

“Outstanding Private Bank” by Private Banker International for the second consecutive year.


Products and services

Wealth Management Clients
In Wealth Management Clients, our service offering is based on our Structured Advisory Process, client segment specific value propositions, comprehensive investment services and our multi-shore platform:

Structured Advisory Process: We apply a structured approach based on a thorough understanding of our clients’ needs and a comprehensive analysis of their financial situation to assess client product knowledge and experience and to define individual client risk profiles. On this basis we define together with our clients an individual investment strategy. This strategy is implemented ensuring that portfolio quality standards are adhered to and that all investment instruments are compliant with suitability and appropriateness standards. Responsible for the implementation are either the portfolio managers, in the case of discretionary mandates, or our relationship managers working together with their clients, in the case of advisory mandates.

Client segment specific value propositions: We offer a range of wealth management solutions tailored to specific client segments. The global market segments we serve are ultra-high-net-worth and high-net-worth clients, and, in Switzerland, private clients. Ultra-high-net-worth and high-net-worth individual clients contributed 36% and 48% of assets under management in Wealth Management Clients at the end of 2011, respectively. For entrepreneurs, we offer solutions for a range of private and corporate wealth management needs, including succession planning, tax advisory, financial planning and investment banking services. Our entrepreneur clients benefit from the advice of Credit Suisse’s experienced corporate finance advisors, immediate access to a network of international investors and the preparation and coordination of financial transactions. A specialized team, Solutions Partners, offers holistic and tailor-made business and private financial solutions to our ultra-high-net-worth individual clients.

Comprehensive investment services: We offer a comprehensive range of investment advice and discretionary asset management services based on the outcome of our structured advisory process, the guidelines of the Credit Suisse Investment Committee and the analysis and recommendations of our global research team, which provides a wide range of global research including macroeconomic, equity, bond and foreign-exchange analysis, as well as research on the Swiss economy. Our investment advice covers a range of services from portfolio consulting to advising on individual investments. We offer clients effective portfolio and risk management solutions, including managed investment products. These are products actively managed and structured by our specialists or third parties, providing private investors with access to investment opportunities that otherwise would not be available to them. For clients with more complex requirements, we provide investment portfolio structuring and the implementation of individual strategies, including a wide range of structured products and alternative investments. Discretionary asset management services are available to clients who wish to delegate the responsibility for investment decisions to Credit Suisse. In close collaboration with Investment Banking and Asset Management, we also provide innovative alternative investments with limited correlation to equities and bonds, such as hedge funds, private equity, commodities and real estate.

Multi-shore platform: With global operations comprising 21 international booking centers in addition to our operations in Switzerland, we are able to offer our clients booking capabilities locally as well as through our international hubs. Our multi-shore offering is designed to serve clients who are focused on geographical risk diversification, have multiple domiciles, seek access to global execution services or are interested in a wider range of products than are available to them locally. Of the CHF 37.8 billion in Wealth Management Clients net new assets recorded in 2011, 70% were booked outside Switzerland. We expect international clients will continue to drive our growth in assets under management.

We also offer a broad range of financing products, such as construction loans, fixed and variable rate mortgages, consumer and car loans, different types of leasing arrangements and various credit cards provided by Swisscard, a joint venture between Credit Suisse and American Express. Additionally, we provide flexible financial solutions for every stage of a private client’s life, including private accounts, payment transactions, foreign exchange services, pension products and life insurance. The range of savings products available to private clients includes savings accounts, savings plan funds and insurance solutions. Our core banking product, Bonviva, combines accounts, payment services and credit cards, simplifying day-to-day banking with a fixed package price.

Corporate & Institutional Clients
In Corporate & Institutional Clients, we supply a comprehensive range of financial solutions including cash management and payment transactions, all forms of traditional and structured lending, capital goods and real estate leasing, investment solutions and specialized services such as corporate finance, trade finance, ship and aviation financing, global custody and asset and liability management. Furthermore, clients can benefit from tailor-made financial solutions and advice. In addition, we offer specialized products and services, such as multi-currency foreign exchange trading and various straight-through-processing solutions, such as brokerage and execution services.


Investment Banking


Business profile

Investment Banking provides a broad range of financial products and services, with a focus on businesses that are client-driven, >>>flow-based and capital-efficient. Our suite of products and services includes global securities sales, trading and execution, prime brokerage and capital raising and advisory services as well as comprehensive investment research. Our clients include corporations, governments, pension funds and institutions around the world. We deliver our global investment banking capabilities via regional and local teams based in major developed and emerging market centers. Our integrated business model enables us to gain a deeper understanding of our clients and deliver creative, high-value, customized solutions based on expertise from across Credit Suisse.

Key data - Investment Banking
  in / end of
2011 2010 2009
Key data  
Net revenues (CHF million)  11,496 16,214 20,537
Income/(loss) before taxes (CHF million)  79 3,531 6,845
Number of employees  20,900 20,700 19,400




Strategy

Industry trends and competition
2011 was a challenging year marked by market turmoil amid concerns from the European sovereign debt crisis and global economic slowdown. Investment Banking, in particular, was negatively impacted by a high degree of macroeconomic uncertainties, political tensions and continuing regulatory developments. Similar to many of our global competitors, Credit Suisse’s Investment Banking business was affected by subdued corporate and institutional risk appetite, a sharp decline in client activity levels across businesses and high market volatility during the year. In addition to macroeconomic challenges, financial institutions across the globe were under significant pressure to adapt their business models as legislative and regulatory measures governing the industry became increasingly stringent. The continuous evolution of the regulatory framework and the significant regulatory developments in 2010 and 2011 have fundamentally changed the business and competitive landscape of the industry. One example of significant change affecting the industry is the gradual phasing-in of higher minimum capital requirements under >>>Basel III scheduled to begin in 2013. Banks deemed systemically important will be required to hold additional capital by the beginning of 2019, as part of efforts to prevent another financial crisis. While many of these regulatory measures require further detailed rule-making and will be implemented over several years, we expect increased capital requirements and regulation of >>>derivatives to result in reduced risk taking and increased transparency in the industry.

Evolution of Investment Banking strategy to adapt to industry challenges and environment
Since 2008, Credit Suisse has proactively pursued a client-focused, capital-efficient business model. This strategy, coupled with our conservative funding and liquidity position and strong capitalization, has served us well during a period of unprecedented market volatility and industry change. In light of the persistent headwinds that the industry has been facing, we announced a refinement to our strategy in November 2011 that aims to further adapt our businesses to the new market and regulatory environment. Our evolved strategy includes plans to significantly reduce Basel III >>>risk-weighted assets (RWA) in fixed income, achieve greater financial flexibility by reducing our cost base, and optimize our portfolio towards synergies with Private Banking and Asset Management and where we have competitive advantages to deliver sustainable, attractive returns.

Without proactive measures, the onset of regulatory changes arising from Basel III would result in a substantial increase in RWA for Investment Banking, with the vast majority impacting the fixed income business. Our plan to reduce RWA will be accomplished by our accelerated exit from low-rated assets in securitized products and long-dated unsecured counterparty trades in global rates, and the continuation of our wind-down program. We believe the adjustments to the portfolio will allow us to generate attractive returns under Basel III and support the overall Group ROE target of 15% or greater. We believe we will benefit from an early mover advantage by adapting to the changes ahead of our peers. At the time, we announced a 50% reduction in RWA in our fixed income business from 55% of Group RWA to 39% by the end of 2014.

> Refer to “Regulatory capital developments and proposals” in III – Treasury, Risk, Balance Sheet and Off-balance sheet – Treasury management – Capital management for further information.

Another component of our evolved strategy is our focus on cost initiatives, which have been ongoing since the second quarter. The Group announced a total of CHF 1.2 billion of targeted cost savings from our first half 2011 expense run-rate to be achieved from January 2012, primarily in Investment Banking. In November, the Group also announced further targeted cost efficiencies of CHF 800 million to be achieved by the end of 2013, with half of these additional targeted cost efficiencies in Investment Banking. Through these initiatives, we are creating significant flexibility in our Investment Banking cost structure to adapt to the challenging market environment but also allowing us to take advantage of favorable market opportunities as they arise.

We believe our refined strategy will deliver a focused, return-driven Investment Banking model evolved for the new Basel III environment. Our focus will be on key client franchises where we have competitive advantages and synergies with Private Banking and Asset Management, including foreign exchange, electronic trading, emerging markets, prime services and equity capital markets. We will have a narrowed client base and evolved client interface to help us deliver best-in-class services. The strong and resilient platform with significantly improved cost flexibility will help us maintain the strong momentum of our client franchise and achieve best-in-class returns.

Our business portfolio will evolve as shown in the chart entitled, “Refinement of the Investment Banking strategy” as we redeploy capital and resources in line with our strategy.


Progress to date on strategy implementation
To date, we have made significant progress in executing our refined strategy announced in November 2011:

We completed the exit of >>>commercial mortgage-backed securities (CMBS) origination and are reducing long-dated trades in global rates. In addition, we made significant progress in winding down the credit correlation book and hard currency trading business in emerging markets.

We accelerated our RWA reduction plan and expect to exceed our previously announced year-end 2012 Basel III RWA target of USD 229 billion by end of the first quarter 2012. In addition, we have revised our Basel III RWA target to USD 190 billion for both year-end 2012 and 2014 from USD 229 billion for year-end 2012 and USD 201 billion for year-end 2014.

We implemented significant cost saving initiatives to achieve our targeted goals. The cost reductions and the increased compensation cost flexibility, with substantially lower costs from deferred compensation to be expensed in 2012 and beyond, are expected to improve both the financial performance and operating efficiency of Investment Banking.

Ongoing business initiatives
In addition to the refined strategy, we outlined in November 2011, we executed several key initiatives in 2011 to further our client-focused, capital-efficient strategy, and we continue to have a significant opportunity to extend market share gains across our businesses as we build our distribution platform and enhance our electronic capabilities for clients. Key initiatives in 2011 included:

Accelerated our client-focused, capital-efficient strategy by aligning resources to our leading fixed income franchises, such as high yield credit, securitized products and key onshore emerging markets, including Brazil and Korea, and continued growth into areas with diversification benefits in global rates, foreign exchange, commodities, and onshore emerging markets in Russia, India, China and Mexico.

Built on a strong record of innovation by delivering new electronic platforms and functionality in fixed income and increased our portfolio and liquidity on those platforms in response to client demands that included the addition of Canadian futures, extension of Onyx to European trading hours, and enablement of >>>credit default swaps (CDS) pricing and execution on MarketAxess and TradeWeb with enhanced straight-through processing (STP) capabilities. The continued, concentrated effort on eCommerce within our fixed income franchise further strengthened our market footprint, with electronic volume in fixed income growing 40% during the year.

Continued momentum in prime services through our market-leading platform and diversified client and product mix, maintained leading market position in cash equities through technology and product innovation, and continued measured investment in equity derivatives.

Reoriented our regional strategy to reflect existing and future market opportunities while continuing to strengthen our underwriting and advisory franchises by making key strategic hires and shifting focus to a more large cap-oriented strategy in developed markets.

Significant transactions and achievements
We expanded our ability to serve certain geographic and product markets.

We commenced securities brokerage operations in the Philippines following the acquisition of a securities broker-dealer license from the Philippines Stock Exchange, strengthening our equities business and complementing our leading financial advisory franchise in the Philippines.

On April 30, 2011, Credit Suisse completed the acquisition of ABN AMRO Bank’s (formerly Fortis Bank Nederland) hedge fund administration business, a global leader in hedge fund administration services.

We executed a number of noteworthy transactions in 2011, reflecting the breadth and diversity of our investment banking franchise:

Debt capital markets: We arranged key financings for a diverse set of clients, including Kabel BW (German cable operator), Reynolds Group (global packaging company), Wells Fargo (US-based global diversified financial services company), PPL (US electricity and natural gas supplier) and the split-off and debt exchange of Cargill Incorporated’s (multinational corporation) stake in The Mosaic Company (global phosphate and potash producer). We also executed two contingent capital transactions for Credit Suisse: a forward private placement of tier 1 buffer capital notes (BCNs) in an exchange for existing Credit Suisse hybrid tier 1 capital notes issued by the Bank in 2008 and an issuance of tier 2 BCNs.

Equity capital markets: We executed initial public offerings (IPOs) for Vallares (acquisition company within the oil and gas sector), Glencore International (international producer and marketer of commodities), Tudou (Chinese online video platform), Groupon (eCommerce operator) and a follow-on offering and block trade for Annaly Capital Management (largest publicly-traded mortgage Real Estate Investment Trust).

Mergers and acquisitions: We advised on a number of key transactions throughout the year, including the sale of Deutsche Telekom’s (European telecommunications company) US subsidiary, T-Mobile USA, to AT&T (US telecommunications company), the acquisition of Graham Packaging Company (global packaging manufacturer) by Reynolds Group (global packaging manufacturer and supplier), the sale of Synthes (global manufacturer of orthopedic devices) to Johnson & Johnson (leading manufacturer of health care products), the acquisition of Medco Health Solutions (US pharmacy benefit manager) by Express Scripts (leading pharmacy benefit manager in the US), the acquisition of Southern Union Company (US natural gas company) by Energy Transfer Equity, L.P. (US diversified energy operator) and the sale of John Wood’s (diversified manufacturing company) well-support assets to General Electric (global infrastructure, finance and media company).

Market share momentum:
We were recognized for our leading equities program trading and electronic trading capabilities by US and European institutions in recent surveys conducted by Greenwich Associates.

In the 2011 fixed income trading survey for North America by Greenwich Associates, we increased or maintained market share in all key businesses, and significantly improved our market share in investment grade cash trading.

We were ranked fourth by Dealogic in global announced mergers & acquisitions (M&A) market share for 2011, in line with 2010.

We advanced to the top five globally and increased our market share to 7.1% in global equity capital markets for 2011, compared to sixth with 5.7% market share in 2010, according to Dealogic.

We improved our share of wallet according to Dealogic in Asia Pacific (ex-Japan) to first in 2011 with 8.5% market share, up from second in 2010 with 7.2% market share. In EMEA, we maintained our #4 ranking and increased our share of wallet to 6.3% in 2011 from 5.7% in 2010.


Products and services

Our comprehensive portfolio of products and services is aimed at the needs of the most sophisticated clients, and we increasingly use integrated platforms to ensure efficiency and transparency. Our activities are organized around two broad functional areas: investment banking and global securities. In investment banking, we work in industry, product and country groups. The industry groups include energy, financial institutions, financial sponsors, industrial and services, healthcare, media and telecom, real estate and technology. The product groups include M&A and financing products. In global securities, we engage in a broad range of activities across fixed income, currencies, commodities, derivatives and cash equities markets, including sales, structuring, trading, financing, prime brokerage, syndication and origination, with a focus on client-based and flow-based businesses, in line with growing client demand for less complex and more liquid products and structures.

Investment banking
Equity and debt underwriting
Equity capital markets originates, syndicates and underwrites equity in IPOs, common and convertible stock issues, acquisition financing and other equity issues. Debt capital markets originates, syndicates and underwrites corporate and sovereign debt.

Advisory services
Advisory services advises clients on all aspects of M&A, corporate sales and restructurings, divestitures and takeover defense strategies. The fund-linked products group is responsible for the structuring, risk management and distribution of structured mutual fund and alternative investment products and develops innovative products to meet the needs of its clients through specially tailored solutions.

Global securities
Global securities provides access to a wide range of debt and equity securities, derivative products and financing opportunities across the capital spectrum to corporate, sovereign and institutional clients. Global securities is structured into the following areas:


Fixed income
Rates: Global rates products is a global market maker in cash and derivatives markets and a primary dealer in multiple jurisdictions including the US, Europe and Japan. This covers a full spectrum of government bonds, interest rate swaps and options, as well as providing liability and liquidity management solutions.

Foreign exchange: Foreign exchange provides market making in products such as spot and options for currencies in developed markets. The foreign exchange product suite also includes proprietary market leading technology to provide clients with electronic trading solutions.

Credit: Credit products offers a full range of fixed income products and instruments to clients across investment grade and high yield credits, ranging from standard debt issues and credit research to fund-linked products, derivatives instruments and structured solutions that address specific client needs. We are a leading dealer in flow trading of single-name CDS on individual credits, credit-linked notes and index swaps. Investment grade trades domestic corporate and sovereign debt, non-convertible preferred stock and short-term securities such as floating rate notes and >>>commercial paper. Leveraged finance provides capital raising and advisory services and core leveraged credit products such as bank loans, bridge loans and high yield debt for non-investment grade corporate and financial sponsor-backed companies.

Securitized products: Securitized products trades, securitizes, syndicates, underwrites and provides research for various forms of securities, primarily >>>residential mortgage-backed securities and asset-backed securities. Both the mortgage- and asset-backed securities are based on underlying pools of assets, and include both government- and agency-backed, as well as private label loans.

Emerging markets: Emerging markets offers a full range of fixed income products and instruments, including sovereign and corporate securities, local currency derivative instruments and tailored emerging market investment products.

Commodities: Commodities trades oil, gas and other energy products as well as base, precious and minor metals. The Commodities product suite also includes benchmark indices developed by Credit Suisse Commodities.

Equity
Equity sales uses research, offerings and other products and services to meet the needs of clients including mutual funds, investment advisors, banks, pension funds, hedge funds, insurance companies and other global financial institutions.

Sales trading links sales and position trading teams. Sales traders are responsible for managing the order flow between our client and the marketplace and provide clients with research, trading ideas and capital commitments and identify trends in the marketplace in order to obtain the best and most effective execution.

Trading executes client and proprietary orders and makes markets in listed and >>>over-the-counter (OTC) cash securities, exchange-traded funds and programs, providing liquidity to the market through both capital commitments and risk management.

Equity derivatives provides a full range of equity-related products, investment options and financing solutions, as well as sophisticated hedging and risk management expertise and comprehensive execution capabilities to financial institutions, hedge funds, asset managers and corporations.

Convertibles trading involves both secondary trading and market making and the trading of credit default and asset swaps and distributing market information and research.

Prime services provides a wide range of services to hedge funds and institutional clients, including prime brokerage, start-up services, capital introductions, securities lending, synthetics and innovative financing solutions.

>>>Advanced execution services (AES®) is a sophisticated suite of algorithmic trading strategies, tools and analytics operated by Credit Suisse to facilitate global equity trading. By employing algorithms to execute client orders and limit volatility, AES® helps institutions and hedge funds reduce market impact. AES® is a recognized leader in its field and provides access to exchanges in more than 35 countries worldwide via more than 45 leading trading platforms.

Arbitrage trading
Our arbitrage trading business focuses on quantitative and liquid trading strategies in the major global equity and fixed income markets.

Other
Other products and activities include lending, private equity investments that are not managed by Asset Management, certain real estate investments and the distressed asset portfolios. Lending includes senior bank debt in the form of syndicated loans and commitments to extend credit to investment grade and non-investment grade borrowers.

Research and HOLT
Credit Suisse’s equity and fixed income businesses are supported by the research and HOLT functions.

Equity research uses in-depth analytical frameworks, proprietary methodologies and data sources to analyze approximately 3,000 companies worldwide and provides macroeconomic insights into this constantly changing environment.

HOLT offers one of the fastest and most advanced corporate performance, valuation and strategic analysis frameworks, tracking more than 20,000 companies in over 64 countries.


Asset Management


Business profile

Asset Management offers investment solutions and services globally to a wide range of clients, including pension funds, governments, foundations and endowments, corporations and individuals. We invest across a broad range of asset classes with a focus on alternative investment strategies, emerging markets, asset allocation and traditional investment strategies. Our investment professionals deliver strong investment performance that can be accessed through best-in-class products and holistic client solutions. We had CHF 408.0 billion of assets under management as of the end of 2011.

We are an industry leader in alternative investment strategies, with CHF 190.9 billion of assets under management as of the end of 2011. Alternative investment strategies include hedge fund strategies, private equity, real estate & commodities, credit investments, exchange-traded funds (ETFs) and index strategies. Our alternative investments business also has a strong footprint in emerging markets, including Brazil and China.

Traditional investment strategies, with assets under management of CHF 216.2 billion as of year-end 2011, include multi-asset class solutions and other traditional investment strategies, primarily in Switzerland, where we are an industry leader. In multi-asset class solutions, we provide tailored asset allocation products to clients around the world and have CHF 109.9 billion of assets under management. In other traditional investment strategies, with CHF 106.3 billion of assets under management, we invest in fixed income and equity markets and provide institutional pension advisory services.

We pursue partnerships with leading investment managers globally, our strategic alliances and joint ventures allow us to provide our clients with strong investment capabilities across a broad array of asset classes. As part of our client-focused integrated business model, we are increasingly coordinating and leveraging our activities with Private Banking and Investment Banking. Through collaboration with both internal and external partners, we aspire to deliver best-in-class solutions to our clients.

Our funds make direct investments as well as investments in partnerships that make private equity and other investments in various portfolio companies and funds.

Key data - Asset Management
  in / end of
2011 2010 2009
Key data  
Net revenues (CHF million)  2,146 2,332 1,842
Income/(loss) before taxes (CHF million)  553 503 35
Assets under management (CHF billion)  408.0 425.8 416.0
Number of employees  2,700 2,900 3,100




Strategy

Industry trends and competition
The asset management industry demonstrated resilience and continued to recover from the global financial crisis in 2011, with assets under management rebounding to pre-crisis peaks. Nevertheless, investors remained cautious and hesitant to invest in riskier asset classes. In alternative investments, the hedge fund industry continued to see inflows, particularly in the first half of 2011, with top-performing, brand-name managers capturing the majority of asset inflows. Credit strategies continued to attract client inflows due to the relative value offered within the non-investment grade markets. Illiquid fundraising remained challenging, particularly in private equity and real estate. Within traditional asset classes, investors remained cautiously positioned given volatile markets and macroeconomic uncertainty. The demand for passive vehicles like ETFs and index products remained robust in 2011, while leading emerging markets debt and equity products continued their strong momentum.

The regulatory environment continued to evolve in 2011 and is expected to continue to do so. In October 2011, US regulators issued proposed regulations to implement the Volcker Rule under the Dodd-Frank Act, which will limit our ability to sponsor or invest in certain private equity or hedge funds. These changes, in addition to proposed changes in the alternative investments industry in Europe, continue to accelerate the trend towards simpler, more regulated fund structures, reinforced by investor appetite for better transparency and risk management. Many of these regulatory measures have a multi-year implementation period.

Asset managers across the industry continued to restructure their businesses to drive efficiencies and in certain cases, to meet new regulatory capital requirements. In parallel, leading asset managers continue to invest in new strategic initiatives. Expanding emerging markets capabilities, particularly in alternative investments, was a key initiative for many of our competitors. Alternative investment managers sought to broaden their product offerings and continued expanding into the retail client segment through the launch of regulated products.

Evolution of our strategy
We continue to focus on alternative investment strategies, emerging markets, asset allocation and the traditional businesses in Switzerland. As part of the evolution of our strategy, within these businesses, we will expand the range of products we offer our clients in collaboration with Private Banking and Investment Banking, grow our fee-based revenues and drive further cost reductions through platform optimization and outsourcing. Key initiatives we will focus on going forward include:

delivering consistently strong investment performance;

expanding our range of alternative products by building our liquid alternatives product range in hedge funds and hedge fund of funds;

targeting resources towards growth markets and establishing scalable emerging markets products;

continuing to strengthen our relationship with Private Banking through further collaboration and the distribution of Asset Management products and services to Private Banking clients;

continuing to implement our client coverage plan in alignment with our regional distribution model; and

further streamlining and simplifying our middle and back office

Key achievements and examples of our progress in 2011 include:

raising CHF 1.5 billion in our secondary private equity fund and over CHF 850 million in our green, international and global real estate funds;

launching a new collateralized loan obligation fund with assets of over CHF 300 million;

the expansion, in collaboration with Private Banking, of our range of ETFs to 58, listing two equity and two money market funds on the SIX Swiss Exchange;

the strategic agreement with HDFC Asset Management Company Ltd (HDFC AMC), one of India’s largest asset managers, through which Credit Suisse has become the exclusive distributor of HDFC AMC’s investment products outside India;

Asset Management Finance LLC acquiring a noncontrolling minority equity interest in Lucidus Capital Partners LLP, a fast growing long/short credit manager with offices in London and New York;

obtaining a license to provide portfolio management services to our clients in Hong Kong, broadening our global multi-asset class solutions business; and

receiving outstanding rankings in the 2011 Lipper Fund Awards for six Swiss and Luxembourg funds for delivering consistently strong risk-adjusted performance relative to peers.

Products and services
Asset Management offers institutional and individual clients a range of products, including alternative and traditional products. We reach our clients through our own distribution teams, the Private Banking and Investment Banking divisions and through third-party distribution channels. We also offer investment strategies through key joint ventures with external managers across various regions and asset classes.

Alternative investment strategies
We are a market leader in alternative investments, with a range of products including private equity, real estate and liquid strategies, including single-manager hedge funds, multi-manager hedge funds, credit strategies, commodities, and ETF and index strategies. We also offer a range of strategies focused on emerging markets through a range of products including hedge funds, private equity, real assets, index strategies, fixed income and equity solutions.

We offer a broad array of private equity funds to meet client needs. We have the ability to tailor fund strategies to meet specific private equity needs of our clients through our customized fund investment group. Our mezzanine funds use subordinated debt along with equity to invest in private companies, while our secondary funds capitalize on preferences for early liquidity in existing private equity investments. We also provide investment vehicles in infrastructure, commodities and emerging markets.

Our real estate core business aims to provide investors with stable and attractive cash flows, applying active portfolio management to reduce volatility.

In liquid strategies, we offer access to a number of assets through both active and passive investment strategies. Among our active strategies, our single-manager hedge fund platform provides access to leading in-house hedge fund managers and through partnerships with best-in-class partners. We also provide actively managed hedge fund of funds across several strategies, including event-driven, emerging markets, convertible arbitrage, fixed income arbitrage, global macro, managed futures, volatility arbitrage and long/short investing.

In addition, we offer highly liquid, systematic market exposure to equity, fixed income, real estate, commodity, volatility and hedge fund markets through enhanced index or passive investment strategies. Our indexed solutions business and ETF franchise allow institutions and individual clients to access a wide variety of asset classes in a cost-effective manner. Liquid strategies also includes the Dow Jones Credit Suisse Hedge Fund Index, one of the world’s leading hedge fund indices.

Our credit strategies business focuses on alpha generation within the non-investment grade credit markets, capitalizing on the relative value provided by various debt instruments and economic fluctuations that impact credit risk premiums. The business also specializes in the management of leveraged financial assets such as loans, high yield bonds and structured products.

In emerging markets we offer a range of Brazil-focused products through Credit Suisse Asset Management Brazil and Credit Suisse Hedging Griffo. Our Brazilian platform provides a range of institutional-quality products, including fixed income, equities and hedge fund solutions. Through our relationship with ICBC in China, we offer investment products to local clients through ICBC’s strong distribution network. We have also entered into a partnership with the asset management division of HDFC AMC, a leading Indian asset manager, to provide our clients access to their investment products globally.

Traditional investment strategies
In the area of multi-asset class solutions, we provide clients around the world with innovative solutions and comprehensive management across asset classes to optimize client portfolios, with services that range from funds to fully customized solutions. Stressing investment principles such as risk management and asset allocation, we take an active, disciplined approach to investing. We develop and implement custom investment allocation strategies across asset classes for both private and institutional clients. These solutions can combine traditional investments, such as cash, bonds and equities, with alternative investments. Discretionary mandates are managed with an open architecture approach, allowing us to tap into the investment capabilities of the best asset managers globally.

Other traditional investment strategies include a suite of fixed income and equity funds that are managed primarily in Switzerland. These strategies provide our clients access to an array of global and regional investment strategies and sophisticated investment processes, efficiency, flexibility, liquidity and transparency.




Organizational and regional structure


Organizational structure

We operate in three global business divisions and reporting segments – Private Banking, Investment Banking and Asset Management. Consistent with our client-focused, capital-efficient business strategy, we coordinate activities in four market regions: Switzerland, EMEA, Americas and Asia Pacific. In addition, Shared Services provides centralized corporate services and business support, as well as effective and independent controls procedures in the following areas:

The Chief Financial Officer (CFO) area comprises 16 functions, including Corporate Development, Corporate Real Estate & Services, Efficiency Management, Financial Accounting, Group Insurance, Group Financial Planning & Analysis, Investor Relations, New Business, Operations, Product Control, Tax and Treasury.

The General Counsel area provides legal and compliance support to help protect the reputation of Credit Suisse. It does so by giving legal and regulatory advice and furnishing employees with the tools and expertise to comply with applicable internal policies and external laws, rules and regulations.

The Chief Risk Officer (CRO) area comprises strategic risk management, credit risk management, risk analytics and reporting, and operational risk oversight activities, which cooperate closely to maintain a strict risk control environment and to help ensure that our risk capital is deployed wisely.

The Chief Information Officer (CIO) area partners with the business to leverage technology across the business to facilitate execution and product delivery, and designs innovative systems and platforms to meet the needs of our businesses and Shared Services. This area is organized in functional and regional departments.

The Talent, Branding and Communications area comprises human resources, corporate communications, corporate branding and advertising. Human Resources strives to attract, retain and develop staff, while also creating a stimulating working environment for all employees. Corporate Communications provides support in media relations, crisis management, executive and employee communications, branding and corporate sponsorship.

Other functions providing corporate services include One Bank Collaboration and Public Policy. One Bank Collaboration facilitates cross-divisional collaboration initiatives throughout the Group and measures and controls collaboration revenues. Public Policy promotes and protects the interests of Credit Suisse and its reputation.

The Chief Executive Officers (CEOs) of the divisions and regions report directly to the Group CEO, and, together with the CFO, CIO, CRO, General Counsel and Chief Talent, Branding and Communications Officer, they formed the Executive Board of Credit Suisse in 2011.

Our structure is designed to promote cross-divisional collaboration while leveraging resources and synergies within our four regions. The regions perform a number of essential functions to coordinate and support the global operations of the three divisions. On a strategic level, regions are responsible for corporate development and the establishment of regional business plans, projects and initiatives. They also have an oversight role in monitoring financial performance. Each region is responsible for the regulatory relationships within its boundaries, as well as for regulatory risk management and the resolution of significant issues in the region as a whole or its constituent countries. Other responsibilities include client and people leadership and the coordination of the delivery of Shared Services and business support in the region.


Market regions


Switzerland

Switzerland, our home market, represents a broad business portfolio. We employ approximately 21,200 people in Switzerland. The Private Banking division comprises our Wealth Management Clients and Corporate & Institutional Clients businesses. In Wealth Management Clients, we offer our clients a distinct value proposition combining a global reach with a structured advisory process and access to a broad range of sophisticated products and services tailored to different client groups, from private clients to >>>ultra-high-net-worth individuals. In Corporate & Institutional Clients, we provide premium advice and solutions within a broad range of banking services, including lending, cash and liquidity management, trade finance, corporate finance, investment solutions, global custody and asset and liability management. Clients include small and medium-sized enterprises, global corporations and commodity traders, banks and Swiss pension funds. The Investment Banking division offers a full range of financial services to its Swiss client base, holding market-leading positions in the Swiss debt and capital markets as well as in mergers and acquisition advisory. The Asset Management division has a market-leading position in the Swiss traditional business, and also offers a broad range of alternative investment products and multi-asset class solutions.


EMEA

We are active in 31 countries across the EMEA region with approximately 9,200 employees working in 74 offices. Our regional headquarters is in the UK, but we have an onshore presence in every major EMEA country. The EMEA region encompasses both developed markets, such as France, Germany, Italy, Spain and the UK, and emerging markets, including Russia, Poland, Turkey and Middle East. We implement our client-focused integrated strategy at the country level, serving corporate, government, institutional and private clients. All three divisions are strongly represented in the EMEA region, with the Investment Banking division providing a full spectrum of financial advisory services with strong market shares across many key products and markets. Private Banking continues to generate strong net new asset flows in the region and continues to further develop its ultra-high-net-worth offerings. The Asset Management division continues to focus on the distribution of a variety of investment products and the expansion of its ETF platform. To leverage our cross-divisional capabilities, we foster collaboration among employees across divisions to deliver innovative and tailored solutions to our clients.


Americas

Americas comprises our operations in the US, Canada, the Caribbean and Latin America with approximately 11,700 employees. In the US, our emphasis is on our core client-focused and >>>flow-based businesses in Investment Banking, and on building on the market share gains we have achieved in a capital-efficient manner. In Private Banking, we see considerable potential to leverage our cross-divisional capabilities, as we further develop our onshore wealth management platform in the US, Brazil and Mexico. Continued growth of our alternative investments business is at the heart of our focused growth strategy in Asset Management. In Latin America, particularly in our key markets of Brazil and Mexico, we continue to focus on providing clients with a full range of cross-divisional services.


Asia Pacific

Credit Suisse is present in 12 Asia Pacific markets with 7,600 employees, giving it one of the broadest footprints among international banks in the region. We have invested substantially in our presence in key major markets, including Australia, China, Hong Kong, Korea, Japan and India, are broadening the scope of our offerings in countries where we have built a competitive advantage and continued to grow emerging markets franchises. Private Banking has its principal centers in Singapore and Hong Kong, leveraging our Investment Banking and Asset Management activities to deliver integrated solutions to clients. The Investment Banking division continues to expand its coverage footprint in major markets, and we are one of the dominant players in Southeast Asia. Asset Management in Asia Pacific operates as a globally integrated business in close collaboration with the Private Banking and Investment Banking divisions to deliver quality investment performance with a focus on alternative investments, asset allocation and emerging markets.




Regulation and supervision


Overview

Our operations are regulated by authorities in each of the jurisdictions in which we have offices, branches and subsidiaries. Central banks and other bank regulators, financial services agencies, securities agencies and exchanges and self-regulatory organizations are among the regulatory authorities that oversee our banking, investment banking and asset management businesses. The supervisory and regulatory regimes of the countries in which we operate will determine to some degree our ability to expand into new markets, the services and products that we will be able to offer in those markets and how we structure specific operations. We are in compliance with our regulatory requirements in all material respects and in compliance with regulatory capital requirements.

There is coordination among our primary regulators in Switzerland, the US and the UK. The principal regulatory structures that apply to our operations are discussed below.

In response to the extremely challenging financial and credit market conditions that began in the second half of 2007, regulators, including our primary regulators, have focused on reforming the regulatory framework for financial services firms. Some of the more significant recently proposed and enacted regulations are noted below.

> Refer to “Risk factors” in the Appendix for further information on risks that may arise relating to regulation.


Recent regulatory developments and proposals

Governments and regulatory authorities around the world have responded to the financial crisis by proposing and enacting numerous reforms of the regulatory framework for financial services firms such as the Group. In particular, a number of reforms have been proposed and enacted by supranational organizations and in Switzerland, the US, the EU and the UK that could potentially have a material effect on our business. Although we expect regulatory-related costs and capital requirements for all major financial services firms (including the Group) to increase, we cannot predict the likely impact of proposed regulations on our businesses or results. As these and other financial reform proposals are considered, we believe the regulatory response must be closely coordinated on an international basis to provide a level playing field and must be carefully balanced to ensure a strong financial sector and global economy. These regulatory developments could result in additional costs or limit or restrict the way we conduct our business. We believe, however, that we are well positioned for regulatory reform, as we have reduced risk and maintained strong capital, funding and liquidity.


Basel framework

In December 2010, the Basel Committee on Banking Supervision (BCBS) issued the >>>Basel III framework, with higher minimum capital requirements and new conservation and countercyclical buffers, revised risk-based capital measures, a leverage ratio and liquidity standards. The framework was designed to strengthen the resilience of the banking sector. The new capital standards and capital buffers will require banks to hold more capital, mainly in the form of common equity. The new capital standards will be phased in from January 1, 2013 through January 1, 2019.

Prior to its issuance, the proposed BCBS framework was endorsed by the >>>Group of Twenty Finance Ministers and Central Bank Governors (G-20) in November 2010. Each G-20 nation will need to implement the rules, and stricter or different requirements may be adopted by any G-20 nation.

The Basel III international framework for liquidity risk measurement, standards and monitoring includes a >>>liquidity coverage ratio (LCR) and a net stable funding ratio (NSFR). The LCR, which is expected to be introduced January 1, 2015 following an observation period which began in 2011, addresses liquidity risk over a 30-day period. The NSFR, which is expected to be introduced January 1, 2018 following an observation period which began in 2012, establishes criteria for a minimum amount of stable funding based on the liquidity of a bank’s assets and activities over a one-year horizon. The BCBS has stated that it will review the effect of these liquidity standards on financial markets, credit extension and economic growth to address unintended consequences.

The LCR aims to ensure that banks have a stock of unencumbered high quality liquid assets available to meet liquidity needs for a 30-day time horizon under a severe stress scenario. The LCR is comprised of two components: the value of the stock of high quality liquid assets in stressed conditions and the total net cash outflows calculated according to specified scenario parameters. The ratio of liquid assets over net cash outflows should be at least 100%.

The NSFR is intended to ensure that banks maintain a structurally sound long-term funding profile beyond one year and is a complementary measure to the LCR. The NSFR is structured to ensure that illiquid assets are funded with an appropriate amount of stable long-term funds. The standard is defined as the ratio of available stable funding over the amount of required stable funding. The ratio should always be at least 100%.

Under Basel III, the minimum common equity tier 1 (CET1) ratio will increase from 2% to 4.5% and will be phased in from January 1, 2013 through January 1, 2015. This CET1 ratio will have certain regulatory deductions and other adjustments to common equity that will be phased in from January 1, 2014 through January 1, 2018, including deduction of deferred tax assets for tax-loss carryforwards, goodwill and intangibles and investments in banking and finance entities. In addition, increases in the tier 1 capital ratio from 4% to 6% will be phased in from January 1, 2013 through January 1, 2015.

Basel III also introduces an additional 2.5% CET1 requirement, known as a capital conservation buffer, to absorb losses in periods of financial and economic stress. Banks that do not maintain this buffer will be limited in their ability to pay dividends or make discretionary bonus payments or other earnings distributions. The new capital conservation buffer will be phased in from January 1, 2016 through January 1, 2019.

Basel III further provides for a countercyclical buffer that could require banks to hold up to an additional 2.5% of common equity or other capital that would be available to fully absorb losses. This requirement is expected to be imposed by national regulators where credit growth is deemed to be excessive and leading to the build-up of system-wide risk.

Most capital instruments that do not meet the strict criteria for inclusion in the Basel III CET1 will be excluded beginning January 1, 2013. Capital instruments that no longer qualify as non-CET 1 capital or tier 2 capital will be phased out over a 10-year period beginning January 1, 2013. In addition, instruments with an incentive to redeem prior to their stated maturity, if any, will be phased out at their effective maturity date, generally the date of the first step-up coupon.

In January 2011, the BCBS issued requirements to ensure that all classes of capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss. In order for a financial instrument issued by a bank to be included in additional tier 1 or tier 2 capital, it must meet the specified minimum requirements.

In November 2011, the BCBS issued final rules for global systemically important banks (G-SIBs), outlining a methodology for assessing whether a banking institution should be regarded as a G-SIB and determining additional capital requirements for such entities. Under the rules, G-SIBs must, in addition to meeting the Basel III requirements, have higher loss absorbency capacity to reflect the greater risks that they pose to the financial system. The additional requirements are to be met with CET1 requirements ranging from 1% to 2.5%, depending on a bank's systemic importance. For banks facing the highest G-SIB surcharge, an additional loss absorbency of 1% could be applied as a disincentive to a bank becoming even more systemically important. The additional requirements for G-SIBs will be phased in with the capital conservation and countercyclical buffers of Basel III from January 1, 2016 through year-end 2018. The Financial Stability Board has identified us as a G-SIB.


Switzerland

In September 2011, the Swiss Parliament passed the >>>"Too Big to Fail" legislation relating to big banks. The legislation became effective March 1, 2012. The legislation includes capital and liquidity requirements and rules regarding risk diversification. The legislation on capital requirements builds on Basel III, but goes beyond its minimum standards, requiring the Group and the Bank, each as a systemically important financial institution (SIFI), to have common equity of at least 10% of >>>risk-weighted assets (RWA) and contingent capital or other qualifying capital of up to 9% of RWA by January 1, 2019. This new capital regime will impose on us three components of capital: (i) a basic capital requirement in common equity of 4.5% of a bank's RWA, (ii) a capital buffer equal to 8.5% of RWA, which would consist of at least 5.5% in the form of common equity and up to 3% in the form of contingent capital, consisting of contingent convertible bonds, with a high trigger (7% of RWA), and (iii) a progressive capital component equal to 6% of RWA, which may consist entirely of contingent capital with a lower trigger (5% of RWA), and may increase or decrease based on our market share and the size of our balance sheet. A high trigger means the bonds are required to provide loss absorption through conversion into common equity or be written off in the event the CET1 ratio falls below 7%, and a low trigger means the bonds are required to convert into common equity or be written off in the event the CET1 ratio falls below 5%. These contingent capital instruments must comply with the Basel III minimum requirements for tier 2 capital (subordination, point-of-non-viability loss absorption and minimum tenor).

Also under the "Too Big to Fail" legislation, SIFIs are required to establish a Recovery and Resolution Plan (RRP) and provide the RRP to FINMA for approval. We are required to finalize an RRP by the end of 2012 and will be required to update the report at least annually. The "recovery" part of the RRP must outline recovery options available to a bank in various severe stress events, including those caused by idiosyncratic, systemic, capital or liquidity stress scenarios. The recovery plan's purpose is to prepare for the survival of the bank in such stress scenarios. As part of the plan, a governance framework must be defined with clear escalation and decision points and may be based on existing capital and liquidity plans. The "resolution" part of the RRP must demonstrate that a bank can be unwound in an orderly fashion while ensuring the continuation of systemically relevant functions in Switzerland (including payment services and access to savings deposits) in the event of the bank's impending insolvency. Under a resolution scenario, FINMA has significant power to act, including the authority to force the sale of all or part of a bank or the creation of a bridge-bank. It is expected a resolution would typically include recapitalization measures.

Draft implementing ordinances further detailing the requirements of the "Too Big to Fail" legislation were submitted by the Federal government for public comment in December 2011. The “Too Big to Fail” ordinances implementing the legislation must be adopted by the Federal Council and approved by the Swiss Parliament. The ordinances implementing the legislation are expected to be completed in 2012. The new requirements are to be gradually implemented through the end of 2018. One such draft ordinance includes a provision whereby Swiss banks which qualify as SIFIs would be required to comply with certain leverage ratio requirements effective January 1, 2013, which is earlier than required under Basel III.

In November 2011, the Swiss Federal Department of Finance initiated hearings to introduce a variable countercyclical capital buffer for all banks, in line with Basel III, in order to strengthen the banking sector's resilience towards the associated risks during periods of excess credit growth. The countercyclical capital buffer is expected to consist of a maximum of 2.5% of RWA and would be activated and subsequently deactivated by the Federal Council upon request of the Swiss National Bank (SNB) after consultation with FINMA. The Swiss Federal Department of Finance has proposed that this countercyclical buffer be implemented in 2012.

Credit Suisse believes that it can meet the new requirements within the prescribed time frames by building capital through earnings and by issuing contingent capital or other qualifying instruments.

> Refer to “Liquidity and funding management” and “Capital management” in III – Treasury, Risk, Balance sheet and Off-balance – Treasury management for further information regarding our current regulatory framework and expected changes to this framework affecting capital and liquidity standards.

In September 2011, the Swiss Federal Law on Banks and Savings Banks of November 8, 1934, as amended (Bank Law), was amended to streamline the procedure by which troubled banks are restructured, providing FINMA with increased regulatory authority to expedite restructurings, including the power to require a bank to complete a debt-for-stock swap in order to avoid insolvency.

On September 23, 2009, Switzerland and the US signed a protocol amending the countries' existing convention for the avoidance of double taxation with respect to taxes on income. While the ratification process in Switzerland has been concluded, the protocol still needs to be ratified by the US, after which the protocol will be applicable to bank information from September 23, 2009. The amendment will introduce two changes, both relaxing the requirements for a positive response to a request for bank information. Firstly, a request may be granted in cases of tax evasion by a person in the requesting state, where the current rules limit such requests to cases of "tax fraud and the like". Secondly, the identification of persons may be based on a fact pattern, where the current rules require a clear identification. Such a fact pattern is, however, only a valid basis for a request if the bank or its employees have contributed to it in a material way.

In September and October 2011, Switzerland signed respective bilateral tax agreements with Germany and the UK that would regularize assets of German and UK residents in Switzerland. Past assets are to be regularized through an anonymous one-off payment deducted by paying agents in Switzerland or by a bank client's voluntary disclosure to German or British authorities, as applicable. If the agreements enter into force, German and UK clients would have two options to regularize their future investment income and capital gains: they can either make an anonymous withholding tax payment or report to their home authorities. In order for the agreements to enter into force, they both require the approval of the parliaments in the contracting countries.

On February 22, 2012, the Swiss Federal Council confirmed its approach regarding a credible, tax-compliant and competitive financial center strategy, expecting to propose corresponding concrete measures by September 2012.


US

In July 2010, the US enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Although the Dodd-Frank Act provides a broad framework for regulatory changes, implementation will require further detailed rulemaking over several years by different regulators, including the US Department of the Treasury (US Treasury), the US Federal Reserve (Fed), the US Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), the Commodity Futures Trading Commission (CFTC) and the newly created Financial Stability Oversight Council (FSOC).

The Dodd-Frank Act will limit the ability of banking entities to sponsor or invest in certain private equity or hedge funds or to engage in certain types of proprietary trading in the US (the so-called “Volcker Rule”). In October 2011 and January 2012, US regulators issued proposed regulations to implement the Volcker Rule. We are assessing how the proposed regulations would affect our businesses if implemented as proposed.

The Dodd-Frank Act also provides regulators with tools to provide greater capital, leverage and liquidity requirements and other prudential standards, particularly for financial institutions that pose significant systemic risk.

US regulators will also be able to restrict the size and growth of systemically significant non-bank financial companies and large interconnected bank holding companies and will be required to impose bright-line debt-to-equity ratio limits on financial companies that the FSOC determines pose a grave threat to financial stability.

The Dodd-Frank Act will furthermore create an extensive framework for the regulation of >>>OTC derivatives and requires broader regulation of hedge funds and private equity funds, as well as credit agencies. The Dodd-Frank Act also establishes a new regime for the orderly liquidation of systemically significant non-bank financial companies and authorizes assessments on certain financial institutions, including those with USD 50 billion or more in consolidated assets to repay outstanding debts owed to the US Treasury in connection with a liquidation under the new insolvency regime. The Fed and the FDIC approved final rules to implement the resolution plan requirement in the Dodd-Frank Act, which requires bank holding companies with assets of USD 50 billion or more and certain designated non-bank financial firms to submit annually to the Fed and the FDIC resolution plans describing the strategy for rapid and orderly resolution under the US Bankruptcy Code or other applicable insolvency regimes. Our initial resolution plan must be submitted by July 1, 2012. In addition, the Dodd-Frank Act requires issuers with listed securities, which may include foreign private issuers like the Group, to establish a claw-back policy to recoup erroneously awarded compensation in the event of an accounting restatement. The Dodd-Frank Act also grants the SEC discretionary rule-making authority to impose a new fiduciary standard on brokers, dealers and investment advisers and expands the extraterritorial jurisdiction of US courts over actions brought by the SEC or the US with respect to violations of the antifraud provisions in the Securities Act of 1933, Securities Exchange Act of 1934 and Investment Advisers Act of 1940.

In December 2011, the CFTC finalized rules under the Dodd-Frank Act requiring regulatory and public reporting for a wide range of OTC derivatives beginning in July 2012. In addition, in January and February 2012, the CFTC began to finalize rules under the Dodd-Frank Act relating to the regulation of swap dealers and major swap participants. Among other things, these rules will require swap dealers and major swap participants, including certain Credit Suisse entities active in the US OTC derivatives markets, to register with and be subject to regulation by the CFTC. We are assessing how compliance with these new rules will affect our OTC derivatives business, including potentially leading to changes in the legal entities through which we conduct that business.

We are also in the process of developing and implementing the extensive technological, operational and compliance infrastructure that will be necessary for compliance with the rules.

Implementation of the Dodd-Frank Act and related final regulations could result in additional costs or limit or restrict the way we conduct our business, although uncertainty remains about many of the details, impact and timing of these reforms. These and other current reform proposals could potentially have a material effect on our businesses.

The Foreign Account Tax Compliance Act (FATCA) became law in the US on March 18, 2010. The legislation requires Foreign Financial Institutions (FFIs) (such as Credit Suisse) to enter into an FFI agreement and agree to identify and provide the US Internal Revenue Service (IRS) with information on accounts held by US persons and US-owned foreign entities, or otherwise face 30% withholding tax on withholdable payments. In addition, FFIs that have entered into an FFI agreement will be required to withhold on such payments made to FFIs that have not entered into an FFI Agreement, account holders who fail to provide sufficient information to classify an account as a US or non-US account, and US account holders who do not agree to the FFI reporting their account to the IRS. In February 2012, the IRS and Treasury released a comprehensive set of regulatory proposals that would replace guidance given to date regarding the implementation of FATCA and, among other things, would delay implementation of certain FATCA requirements and permit grandfathering of certain instruments outstanding as of January 1, 2013. Any final regulations are expected to apply to all FFIs globally and complying with the required identification, withholding and reporting obligations is expected to require significant investment in an FFI's compliance and reporting framework. We are following developments regarding FATCA closely and are coordinating with all relevant authorities.


EU

The EU and the UK have also proposed and enacted regulations to address systemic risk and to further regulate the securities industry.

In September 2010, the European Commission published a draft regulation on OTC Derivatives, Central Counterparties and Trade Repositories (also known as the European Market Infrastructure Regulation, or EMIR). The proposed regulation would require certain standardized OTC derivatives contracts to be centrally cleared and require market participants to file information on non-cleared OTC derivatives trades with central trade repositories. The EMIR is expected to apply from the end of 2012.

In September 2011, the European Commission published a legislative proposal for a financial transaction tax in the 27 Member States. If implemented, Member States would be required to tax a variety of financial transactions at minimum rates of 0.1% for the trading of bonds and shares and 0.01% for derivative products. In addition, a number of Member States have proposed or implemented bank levies in order to ensure fair burden sharing and create incentives to contain systemic risks, including France, Germany and the UK. Further details of the levy implemented in the UK can be found below.

In October 2011, the EU approved a regulation proposal that limits sovereign >>>CDS and naked short selling of government bonds and stocks. The regulation is expected to come into force in November 2012.

In October 2011, the European Commission adopted legislative proposals for a new regulation on insider dealing and market manipulation (market abuse) and for a directive on criminal sanctions for insider dealing and market manipulation. These proposals would significantly extend the scope of the current EU regime prohibiting market abuse.

In October 2011, the European Commission published its proposed revisions to the Markets in Financial Instruments Directive (MiFID II) setting out proposals for a revised EU regulatory framework for the provision of investment services and trading in financial instruments. A number of substantial reforms are proposed, including significantly increased regulatory requirements for non-EU firms (such as Credit Suisse) in order to provide certain financial services in the EU.

A European Commission proposal for a directive establishing a framework for the recovery and resolution of credit institutions and investment firms is expected in mid-2012. The framework will give national regulators wide-ranging powers to intervene where an entity is likely to fail in order to avoid adverse effects on wider financial stability. The directive will also outline a set of bank resolution tools to likely include bridge bank and debt write-down (bail-in) solutions. National regulators will be given powers to direct entities to remove any barriers to resolvability that they identify in advance. Affected entities will also be required to have recovery plans approved by national regulators. Recovery plans will set out actions to be taken to return their financial condition to normal following a significant deterioration.

In the UK, the Financial Services Authority (FSA) is obliged to draw up rules on recovery and resolution plans under the Financial Services Act 2010. The proposals for recovery and resolution plans are independent of, but broadly consistent with, the EU proposals mentioned above. Covered entities will be required to have recovery plans similar to those proposed by the European Commission as approved by the FSA. In addition, they will be required to submit certain organizational data in order to allow the FSA to draw up resolution plans. The FSA is expected to publish final rules in the near future.

In the UK, the Independent Commission on Banking (ICB) published a final report setting out certain recommendations designed to improve stability and competition in UK banking. The proposals would also apply to UK banks which are subsidiaries of a non-UK bank group. The ICB recommendations include the enhancement of loss absorbing capacity of bank capital, and the creation of a “retail ring fence” that would separate the taking of deposits from, and the provision of overdrafts to, individuals and small and medium-sized enterprises from a broad range of investment and other banking activities. The ICB report sets out various principles and alternatives for implementing these proposed reforms. The Government will publish a White Paper in early 2012 containing further details of how the ICB reforms will be implemented. The reforms are expected to be implemented in stages, with full implementation by 2019.


Regulatory framework


Switzerland

Although Credit Suisse Group is not a bank according to the Bank Law, and its Implementing Ordinance of May 17, 1972, as amended (Implementing Ordinance), the Group is required, pursuant to the provisions on consolidated supervision of financial groups and conglomerates of the Bank Law, to comply with certain requirements for banks, including with respect to capital adequacy, solvency and risk concentration on a consolidated basis and reporting obligations. Effective January 1, 2009, the Swiss Federal Banking Commission was merged into FINMA. Our banks in Switzerland are regulated by FINMA on a legal entity basis and, if applicable, on a consolidated basis.

Our banks in Switzerland operate under banking licenses granted by FINMA pursuant to the Bank Law and the Implementing Ordinance. In addition, certain of these banks hold securities dealer licenses granted by FINMA pursuant to the Swiss Federal Act of Stock Exchanges and Securities Trading (SESTA).

FINMA is the sole bank supervisory authority in Switzerland and is independent from the SNB. Under the Bank Law, FINMA is responsible for the supervision of the Swiss banking system. The SNB is responsible for implementing the government’s monetary policy relating to banks and securities dealers and for ensuring the stability of the financial system.

Our banks in Switzerland are subject to close and continuous prudential supervision and direct audits by FINMA. Under the Bank Law, our banks are subject to inspection and supervision by an independent auditing firm recognized by FINMA, which is appointed by the bank’s board of directors and required to perform annual audits of the bank’s financial statements and to assess whether the bank is in compliance with laws and regulations, including the Bank Law, the Implementing Ordinance and FINMA regulations.

Under the Bank Law, a bank must maintain an adequate ratio between its capital resources and its total risk-weighted assets. This requirement applies to the Group on a consolidated basis. For purposes of complying with Swiss capital requirements, bank regulatory capital is divided into tier 1 and tier 2 capital.

Our regulatory capital is calculated on the basis of US GAAP, with certain adjustments required by, or agreed with, FINMA. The Group is required by FINMA to maintain a minimum regulatory capital ratio, set by the Bank for International Settlements and Swiss capital adequacy regulations, of 8% measured on a consolidated basis, calculated by dividing total eligible capital, adjusted for certain deductions, by aggregate risk-weighted assets.

The Group became subject to international capital adequacy standards known as >>>Basel II on January 1, 2008, subject to certain additional requirements for large banks known as “Swiss finish” under the Capital Adequacy Ordinance and as set forth by FINMA. In November 2008, we agreed to a decree issued by FINMA requiring that we comply with new capital adequacy ratios, in lieu of the “Swiss finish”, and leverage capital requirements by the year 2013. The new capital adequacy target will be in a range between 50% and 100% above the Pillar I requirements under Basel II. In addition, the decree includes leverage capital requirements that require us to maintain by 2013 a ratio of tier 1 capital to total assets (on a non-risk-weighted basis) of 3% at the Group and Bank consolidated level and 4% at the Bank legal entity level. Total assets are adjusted for purposes of calculating the leverage ratio, and adjustments relate to assets from Swiss lending activities and assets excluded in determining regulatory core capital. These requirements, which will be phased in, are intended to be counter-cyclical, with the expected capital adequacy target level 100% above the Pillar I requirements, and a leverage ratio above the minimum 3% or 4%, during good times. We will continue to be subject to these various requirements until new requirements under Basel III are phased in, beginning January 1, 2013, through January 1, 2019.

Banks are required to maintain a specified liquidity standard under Swiss law. In April 2010, we implemented revised liquidity principles agreed with FINMA, following its consultation with the SNB, to ensure that the Group and the Bank have adequate holdings on a consolidated basis of liquid, unencumbered, high-quality securities available in a crisis situation for designated periods of time. The principles went into effect as of the end of the second quarter of 2010. The crisis scenario assumptions include global market dislocation, large on and off-balance sheet outflows, no access to unsecured wholesale funding markets, a significant withdrawal of deposits, varying access to secured market funding and the impacts from fears of insolvency. The principles aim to ensure we can meet our financial obligations in an extreme scenario for a minimum of 30 days. The principles take into consideration quantitative and qualitative factors and require us to address the possibility of emergency funding costs as we manage our capital and business and call for additional reporting to FINMA. The principles may be modified to reflect the final BCBS liquidity requirements. In March 2011, the liquidity principles were extended to cover the Bank (without its consolidated subsidiaries), both with and without foreign branches.

> Refer to “Treasury management” in III – Treasury, Risk, Balance sheet and Off-balance for further information regarding our current regulatory framework and expected changes to this framework affecting capital and liquidity standards.

Under Swiss banking law, banks and securities dealers are required to manage risk concentration within specific limits. Aggregated credit exposure to any single counterparty or a group of related counterparties must bear an adequate relationship to the bank’s eligible capital, taking into account counterparty risks and >>>risk mitigation instruments.

Under the Bank Law and SESTA, Swiss banks and securities dealers are obligated to keep confidential the existence and all aspects of their relationships with customers. These customer confidentiality laws do not, however, provide protection with respect to criminal offenses such as insider trading, money laundering, terrorist financing activities, tax fraud or evasion or prevent the disclosure of information to courts and administrative authorities.

Swiss rules and regulations to combat money laundering and terrorist financing are comprehensive and require banks and other financial intermediaries to thoroughly verify and document customer identity before commencing business. In addition, these rules and regulations include obligations to maintain appropriate policies for dealings with politically exposed persons and procedures and controls to detect and prevent money laundering and terrorist financing activities, including reporting suspicious activities to authorities.

Our securities dealer activities in Switzerland are conducted primarily through the Bank and are subject to regulation under SESTA, which regulates all aspects of the securities dealer business in Switzerland, including regulatory capital, risk concentration, sales and trading practices, record-keeping requirements and procedures and periodic reporting procedures. Securities dealers are supervised by FINMA.

Our asset management activities in Switzerland, which include the establishment and administration of mutual funds registered for public distribution, are conducted under the supervision of FINMA.

Effective January 1, 2010, compensation design and its implementation and disclosure must comply with standards promulgated by FINMA under its Circular on Remuneration Schemes.


US

Our banking operations are subject to extensive federal and state regulation and supervision in the US. Our direct US offices are composed of a New York branch (New York Branch) and representative offices in California. Each of these offices is licensed with, and subject to examination and regulation by, the state banking authority in the state in which it is located.

Effective October 3, 2011, the New York State Banking Department and the New York State Insurance Department were abolished and the authority of both former agencies was transferred to a new Department of Financial Services, whose head is the Superintendent of Financial Services (Superintendent). The New York Branch is licensed by the Superintendent, examined by the New York State Department of Financial Services, and subject to laws and regulations applicable to a foreign bank operating a New York branch. Under the New York Banking Law, the New York Branch must maintain eligible assets with banks in the state of New York. The amount of eligible assets required, which is expressed as a percentage of third-party liabilities, would increase if the New York Branch is no longer designated well rated by the Superintendent.

The New York Banking Law authorizes the Superintendent to take possession of the business and property of the New York Branch under circumstances generally including violations of law, unsafe or unsound practices or insolvency. In liquidating or dealing with the New York Branch’s business after taking possession, the Superintendent would only accept for payment the claims of depositors and other creditors (unaffiliated with us) that arose out of transactions with the New York Branch. After the claims of those creditors were paid out of the business and property of the Bank in New York, the Superintendent would turn over the remaining assets, if any, to us or our liquidator or receiver.

Under New York Banking Law, the New York Branch is generally subject to single borrower lending limits expressed as a percentage of the worldwide capital of the Bank.

Our operations are also subject to reporting and examination requirements under US federal banking laws. Our US non-banking operations are subject to examination by the Fed in its capacity as our US umbrella supervisor. The New York Branch is also subject to examination by the Fed and is subject to Fed requirements and limitations on the acceptance and maintenance of deposits. The New York Branch is no longer subject to restrictions on the payment of interest on demand deposits, which were repealed under the Dodd-Frank Act effective July 2011. Because the New York Branch does not engage in retail deposit taking, it is not a member of, and its deposits are not insured by, the FDIC.

US federal banking laws provide that a state-licensed branch (such as the New York Branch) or agency of a foreign bank may not, as a general matter, engage as principal in any type of activity that is not permissible for a federally licensed branch or agency of a foreign bank unless the Fed has determined that such activity is consistent with sound banking practice. US federal banking laws also subject a state branch or agency to single borrower lending limits based on the capital of the entire foreign bank. Under the Dodd-Frank Act, lending limits will take into account credit exposure arising from derivative transactions, securities borrowing and lending transactions and >>>repurchase and >>>reverse repurchase agreements with counterparties. In addition, regulations which the FSOC may adopt could affect the nature of the activities which the Bank (including the New York Branch) may conduct, and may impose restrictions and limitations on the conduct of such activities.

The Fed may terminate the activities of a US branch or agency of a foreign bank if it finds that the foreign bank: (i) is not subject to comprehensive supervision in its home country; (ii) has violated the law or engaged in an unsafe or unsound banking practice in the US; or (iii) for a foreign bank that presents a risk to the stability of the US financial system, the home country of the foreign bank has not adopted, or made demonstrable progress toward adopting, an appropriate system of financial regulation to mitigate such risk.

A major focus of US policy and regulation relating to financial institutions has been to combat money laundering and terrorist financing. These laws and regulations impose obligations to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing, verify the identity of customers and comply with economic sanctions. Any failure to maintain and implement adequate programs to combat money laundering and terrorist financing, and violations of such economic sanctions, laws and regulations, could have serious legal and reputational consequences. We take our obligations to prevent money laundering and terrorist financing in the US and globally very seriously, while appropriately respecting and protecting the confidentiality of clients. We have policies, procedures and training intended to ensure that our employees comply with “know your customer” regulations and understand when a client relationship or business should be evaluated as higher risk for us.

On March 23, 2000, Credit Suisse Group and the Bank became financial holding companies for purposes of US federal banking law and, as a result, may engage in a broad range of non-banking activities in the US, including insurance, securities, private equity and other financial activities, in each case subject to regulatory requirements and limitations. Credit Suisse Group is still required to obtain the prior approval of the Fed (and potentially other US banking regulators) before acquiring, directly or indirectly, the ownership or control of more than 5% of any class of voting shares of (or otherwise controlling) any US bank, bank holding company or many other US depositary institutions and their holding companies, and as a result of Dodd-Frank, before making certain acquisitions involving large non-bank companies. The New York Branch is also restricted from engaging in certain tying arrangements involving products and services, and in certain transactions with certain of its affiliates. If Credit Suisse Group or the Bank ceases to be well-capitalized or well-managed under applicable Fed rules, or otherwise fails to meet any of the requirements for financial holding company status, it may be required to discontinue certain financial activities or terminate its New York Branch. Credit Suisse Group’s ability to undertake acquisitions permitted by financial holding companies could also be adversely affected.

Our US-based broker-dealers are subject to extensive regulation by US regulatory authorities. The SEC is the federal agency primarily responsible for the regulation of broker-dealers, investment advisers and investment companies, while the CFTC is the federal agency primarily responsible for the regulation of futures commission merchants, commodity pool operators and commodity trading advisors. In addition, the US Treasury has the authority to promulgate rules relating to US Treasury and government agency securities, the Municipal Securities Rulemaking Board (MSRB) has the authority to promulgate rules relating to municipal securities, and the MSRB also promulgates regulations applicable to certain securities credit transactions. In addition, broker-dealers are subject to regulation by securities industry self-regulatory organizations, including the Financial Industry Regulation Authority (FINRA) (formed in July 2007 by the merger of the former National Association of Securities Dealers, Inc. and the member regulation, enforcement and arbitration functions of the New York Stock Exchange), and by state securities authorities. For futures activities, broker-dealers are subject to futures industry self-regulatory organizations such as the National Futures Association.

Our US broker-dealers are registered with the SEC and in all 50 states, the District of Columbia, Puerto Rico and the US Virgin Islands, and our US futures commission merchants and commodity trading advisors are registered with the CFTC. Our US registered entities are subject to extensive regulatory requirements that apply to all aspects of their securities and futures activities, including: capital requirements; the use and safekeeping of customer funds and securities; the suitability of customer investments; record-keeping and reporting requirements; employee-related matters; limitations on extensions of credit in securities transactions; prevention and detection of money laundering and terrorist financing; procedures relating to research analyst independence; procedures for the clearance and settlement of trades; and communications with the public.

Our US broker-dealers are also subject to the SEC’s net capital rule, which requires broker-dealers to maintain a specified level of minimum net capital in relatively liquid form. Compliance with the net capital rule could limit operations that require intensive use of capital, such as underwriting and trading activities and the financing of customer account balances and also could restrict our ability to withdraw capital from our broker-dealers. Our US broker-dealers are also subject to the net capital requirements of FINRA and, in some cases, other self-regulatory organizations.

Certain of our US broker-dealers are also registered as futures commission merchants and subject to the capital and other requirements of the CFTC.

Our securities and asset management businesses include legal entities registered and regulated as investment advisers by the SEC. The SEC-registered mutual funds that we advise are subject to the Investment Company Act of 1940. For pension fund customers, we are subject to the Employee Retirement Income Security Act of 1974 and similar state statutes. We are subject to the Commodity Exchange Act for investment vehicles we advise that are commodity pools.


EU

Since it was announced in 1999, the EU’s Financial Services Action Plan has given rise to numerous measures (both directives and regulations) aimed at increasing integration and harmonization in the European market for financial services. While regulations have immediate and direct effect in member states, directives must be implemented through national legislation. As a result, the terms of implementation of directives are not always consistent from country to country. The EU has established a European Systemic Risk Board for macro-prudential oversight of the financial system, a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority. These institutions are responsible for promoting consistency between national regulators in the implementation of EU legislation.

The Capital Requirements Directive (CRD), implemented in various EU countries including the UK, applies the >>>Basel II capital framework for banking groups operating in the EU. The CRD has been amended by CRD II, which governs own funds, large exposures, supervisory arrangements, qualitative standards for liquidity risk management and securitization, and which came into force on December 31, 2010, and by CRD III, which governs both the disclosure and content of remuneration policies, effective January 1, 2011, and capital requirements for trading books and re-securitizations and disclosure of securitization exposures, effective December 31, 2011. Further reforms are proposed by CRD IV, which will replace the current CRD directive with new measures implementing the Basel III requirements, as well as creating a single harmonized prudential rule book for banks, introducing new corporate governance requirements, and enhancing the powers of the regulators. CRD IV is expected to come into force on January 1, 2013.

The existing Markets in Financial Instruments Directive (MiFID) establishes high-level organizational and business conduct standards that apply to all investment firms. These include standards for managing conflicts of interest, best execution, customer classification and suitability requirements for customers. MiFID sets standards for regulated markets (i.e., exchanges) and multilateral trading facilities and sets out pre-trade and post-trade price transparency requirements for equity trading. MiFID also sets standards for the disclosure of fees and other payments received from or paid to third parties in relation to investment advice and services and regulates investment services relating to commodity derivatives. In relation to these and other EU-based investment services and activities, MiFID provides a “passport” for investment firms, enabling them to conduct cross-border activities and establish branches throughout the EU on the basis of authorization from their home state regulator.


UK

The UK FSA is the principal statutory regulator of financial services activity in the UK, deriving its powers from the Financial Services and Markets Act 2000 (FSMA). The FSA regulates banking, insurance, investment business and the activities of mortgage intermediaries. The FSA generally adopts a risk-based approach, supervising all aspects of a firm’s business, including capital resources, systems and controls and management structures, the conduct of its business, anti-money laundering and staff training. The FSA has wide investigatory and enforcement powers, including the power to require information and documents from financial services businesses, appoint investigators, apply to the court for injunctions or restitution orders, prosecute criminal offenses, impose financial penalties, issue public statements or censures and vary, cancel or withdraw authorizations it has granted. In June 2010, the UK Government announced that the FSA will be replaced by three new agencies by the end of 2012: the Prudential Regulation Authority, a subsidiary of the Bank of England, which will be responsible for the micro-prudential regulation of banks and larger investment firms; the Financial Conduct Authority, which will regulate markets, the conduct of business of all financial firms, and the prudential regulation of firms not regulated by the Prudential Regulation Authority; and the Financial Policy Committee of the Bank of England, which will be responsible for macro-prudential regulation.

As a member state of the EU, the UK is required to implement EU directives into national law. The regulatory regime for banks operating in the UK conforms to required EU standards including compliance with capital adequacy standards, customer protection requirements, conduct of business rules and anti-money laundering rules. These standards, requirements and rules are similarly implemented, under the same directives, throughout the other member states of the EU in which we operate and are broadly comparable in scope and purpose to the regulatory capital and customer protection requirements imposed under US law.

The London branch of Credit Suisse (London Branch), Credit Suisse International and Credit Suisse (UK) Limited are authorized to take deposits. We also have a number of entities authorized to conduct investment business and asset management activities. In deciding whether to grant authorization, the FSA must first determine whether a firm satisfies the threshold conditions for authorization, including the requirement for the firm to be fit and proper. In addition to regulation by the FSA, certain wholesale money markets activities are subject to the Non-Investment Products Code, a voluntary Code of Conduct published by the Bank of England which FSA-regulated firms are expected to follow when conducting wholesale money market business.

The London Branch will be required to continue to comply principally with Swiss home country regulation. However, as a response to the global financial crisis, the FSA made changes to its prudential supervision rules in its Handbook of Rules and Guidance, applying a principle of “self-sufficiency”, meaning that a UK branch of European Economic Area (EEA) and non-EEA financial institutions would no longer be permitted to rely on capital held by other members of its group. The FSA, from December 1, 2009, has required UK branches of EEA and non-EEA financial institutions to maintain adequate liquidity resources, both as to quantity and quality of capital reserves. The London Branch is required to ensure that its liquidity resources are under the day-to-day supervision of the London Branch senior management, held in a custodian account in the name of the London Branch, unencumbered and attributed to the London Branch balance sheet. In addition, the FSA requires Credit Suisse International and Credit Suisse (UK) Limited to maintain a minimum capital ratio and to monitor and report large exposures in accordance with the rules implementing the CRD.

Our London broker-dealer subsidiaries and asset management companies are authorized under the FSMA and are subject to regulation by the FSA. In deciding whether to authorize an investment firm in the UK, the FSA will consider threshold conditions for suitability, including the general requirement for a firm to be fit and proper. The FSA is responsible for regulating most aspects of an investment firm’s business, including its regulatory capital, sales and trading practices, use and safekeeping of customer funds and securities, record-keeping, margin practices and procedures, registration standards for individuals carrying on certain functions, anti-money laundering systems and periodic reporting and settlement procedures.

On January 1, 2011, the FSA implemented the requirements of CRD III when its revised code of practice on remuneration policies became effective, requiring both EEA and non-EEA banks, building societies and investment firms to have in place remuneration policies that are consistent with effective risk management. It also includes twelve principles covering areas of governance, performance measurement and composition of remuneration, to help firms understand how the FSA will assess compliance.

On January 1, 2011, a levy attributable to the UK operations of large banks on certain funding came into effect. During 2011, the levy was applied at the rate of 7.5 basis points for short-term liabilities and 3.75 basis points for long-term equity and liabilities. The levy will increase on January 1, 2012 to 8.8 basis points and 4.4 basis points, respectively.






Operating and financial review

Operating environment

Credit Suisse

Core Results

Key performance indicators

Private Banking

Investment Banking

Asset Management

Corporate Center

Results overview

Assets under management

Critical accounting estimates





Operating environment

The global economy faced significant challenges in 2011. Increasing concerns regarding European sovereign debt weighed heavily on the markets. Major central banks kept rates low and indicated rates will remain at low levels for some time. Due to the continued strengthening of the Swiss franc, the Swiss National Bank announced a floor for the EUR/CHF exchange rate. Equity markets were volatile throughout the year.



Economic environment

The global economy began 2011 showing signs of recovery, with manufacturing gains in most major economies and unemployment levels declining in the US and Europe. As the year continued, however, uncertainty and volatility affected economies and markets through the rest of the year. Significant causes included political unrest in the Middle East and North Africa, the European sovereign debt crisis, economic disruptions resulting from the natural disaster in Japan and US political gridlock and the related downgrading of US sovereign debt. The situation culminated in a summer equity market sell-off. By mid-year it was clear the global economy was cooling after a relatively robust post-crisis rebound. Fears that the global economy could re-enter a recession eased somewhat towards the end of the year as indicators of economic growth in the US began to strengthen and major central banks continued to support loose monetary policies.

In the first half of the year global inflation was increasing. Central banks in many regions increased interest rates or were expected to do so. The European Central Bank (ECB) raised interest rates in April. After a second increase in July, the ECB signaled in September that it would not raise them further. In the fourth quarter of 2011, the ECB lowered interest rates again to levels seen at the beginning of the year due to the weaker economic outlook in the eurozone. The US Federal Reserve (Fed) maintained low interest rates, unchanged throughout the year, and completed its plan to purchase USD 600 billion of long-term treasuries in an effort to stimulate the US economy. The Fed also announced it would keep short-term interest rates at low levels through mid-2013 and changed the composition of its US treasury securities holdings to hold a greater proportion of longer maturities in an effort to lower long-term interest rates. In the emerging markets, monetary policy actions were diverse. Brazil's central bank increased its benchmark rate by 1.75 percentage points from the beginning of the year until August, but then lowered rates gradually in the second half of the year. India's central bank raised rates throughout the year. China tightened monetary policy during the year by requiring banks to hold higher reserves against margin deposits, but then lowered the reserve requirement ratio in the fourth quarter of 2011. By the end of 2011, inflation was falling in many emerging markets again and slowing in most developed countries.

In 2011, the indebtedness of several developed countries was cause for substantial concern. In the third quarter of 2011, the ratings agency, Standard & Poor's, downgraded the US long-term debt rating to AA+. Several European countries also had their ratings downgraded, and Italian and Spanish government bond spreads reached new highs, while German bond yields fell to record lows. Greek government bonds were an ongoing concern, with EU leaders moving to increase the >>>haircut on Greek government bonds held by private investors. In July, EU finance ministers agreed to increase the effective capacity of the European Financial Stability Facility and widen the scope of its mandate.

In Switzerland, the first three quarters had robust growth, low inflation and low unemployment, though there were moderate signs of weakening. A sharp and sustained appreciation of the Swiss franc against major currencies sparked concerns of dampening growth in the future. The Swiss franc appreciation was driven by its safe-haven status as the sovereign debt concerns in the EU continued. In September, the Swiss National Bank (SNB) announced a floor of 1.20 Swiss francs per euro, which the SNB maintained.

Equity markets were highly volatile in 2011. Volatility, as indicated by the Chicago Board of Options Exchange Market Volatility Index (VIX), reached its highest level in the third quarter of 2011 when both developed and emerging equity markets corrected sharply (refer to the charts "Equity markets"). In the fourth quarter of 2011, most equity markets recovered somewhat as overall corporate earnings proved fairly solid, but overall equity trading volumes were low. US equities outperformed European stocks and were stronger than emerging market equities in Asia and Latin America (refer to the charts "Equity markets").

Government bond yields across most major markets declined during the year (refer to the charts "Yield curves"). Ten-year US treasury bonds traded below 2% in the second half of the year, and Swiss ten-year treasury yields were below 70 basis points at the end of 2011. After a good performance for credit markets in the first half of 2011, the debt crisis in Europe drove yields of some fiscally weaker European sovereigns and European banks to record highs. In 2011, the US high yield credit segment posted positive total returns supported by improving US economic data, outperforming the European segment, which recorded negative returns for the year (refer to the charts "Credit spreads").

The European debt crisis, US dollar funding pressure for many European banks and concerns over global growth were the key drivers in currency markets. Low interest rates in the US and its external deficit prevented the US dollar from appreciating until the fourth quarter 2011 when the US dollar was broadly stronger, particularly versus European currencies. The Japanese yen was the strongest currency among the G-10 over the year, driven by its safe-haven status. Emerging market currencies weakened against the US dollar on concerns over global growth at the end of the year.

Commodity markets were volatile, starting with a sharp increase in prices in the first quarter followed by declining prices in the middle of the year. Due to heightened political tensions in the Middle East and North Africa, oil prices rose sharply in the first four months of the year. After declines during the middle of the year, energy markets saw significant gains at the end of 2011, mainly due to rising oil prices driven by robust consumption and falling inventories. Gold ended the year below USD 1,600, after having reached a high of over USD 1,900 per ounce in September 2011.
















Sector environment

2011 was a challenging year for the banking sector. European bank stocks lost more than 30% in 2011 due to, among other challenges, the deepening sovereign debt crisis. North American bank stocks ended the year about 8% lower (refer to the charts "Equity markets"). Volatility in the sector was high.

Industry participants took further steps to adjust their business models to reflect the sector's changing regulatory framework. The sector’s underperformance reflected regulatory uncertainty, for example, proposals to limit specific bank activities, requirements for higher equity capital ratios and the imposition of financial transaction taxes. European banks’ underperformance was largely due to discussions regarding the need for a recapitalization of the banks.

Funding availability, especially for many European banks, was difficult in 2011. Increased uncertainty due to sovereign debt concerns in Europe and higher capital and liquidity requirements from regulators forced many banks to announce restructuring and deleveraging plans. In addition, the weak operating environment throughout the year and subdued business activity added to banks' challenges.

The wealth management sector was affected by low trading activity in fixed income and equity markets. Negative market sentiment resulted in subdued client activity. The strong Swiss franc continued to have an adverse impact on the Swiss wealth management institutions. The sector continued adapting to industry-specific regulatory changes, including cross-border business and investor protection requirements.

In the investment banking sector, the global fee pool saw a relatively good level of activity in the first two quarters of the year. The second half of the year, however, was affected by market volatility, a significant reduction in investor risk appetite and weakening of capital markets. Overall, the fee pool for 2011 was flat compared to 2010. Contributions from loan and mergers and acquisitions (M&A) activity increased, whereas debt and equity capital market activity decreased. 2011 global equity market volumes were in line with 2010. US fixed income volumes were slightly higher in 2011 than in 2010, though with similar overall levels of volatility.

In the asset management sector, the Dow Jones Credit Suisse Hedge Fund Index lost 2.5%. In the face of the generally high volatility, most hedge funds were unable to exploit trends. Private equity fundraising remained subdued in 2011, with funds raising USD 266 billion globally, slightly lower than 2010. Emerging regions contributed approximately 20% of all fundraising.

Market volumes (growth in % year on year)
2011 Global Europe
Equity trading volume 1 3
Announced mergers and acquisitions 2 4 5
Completed mergers and acquisitions 2 13 25
Equity underwriting 2 (25) (23)
Debt underwriting 2 (9) (10)
Syndicated lending - investment-grade 2 38
1    London Stock Exchange, Borsa Italiana, Deutsche Börse, BME and Euronext. Global also includes New York Stock Exchange and NASDAQ.   2    Dealogic.








Credit Suisse

In 2011, we recorded net income attributable to shareholders of CHF 1,953 million. Diluted earnings per share were CHF 1.36. Return on equity attributable to shareholders was 6.0%. Our capital position remained strong with a BIS tier 1 ratio under Basel II.5 of 15.2% as of the end of 2011.




Results
  in % change
2011 2010 2009 11 / 10 10 / 09
Statements of operations (CHF million)  
Net interest income  6,433 6,541 6,891 (2) (5)
Commissions and fees  12,952 14,078 13,750 (8) 2
Trading revenues  5,020 9,338 12,151 (46) (23)
Other revenues  1,820 1,429 502 27 185
Net revenues  26,225 31,386 33,294 (16) (6)
Provision for credit losses  187 (79) 506
Compensation and benefits  13,213 14,599 15,013 (9) (3)
General and administrative expenses  7,372 7,231 7,701 2 (6)
Commission expenses  1,992 2,148 1,997 (7) 8
Total other operating expenses  9,364 9,379 9,698 0 (3)
Total operating expenses  22,577 23,978 24,711 (6) (3)
Income from continuing operations before taxes  3,461 7,487 8,077 (54) (7)
Income tax expense  671 1,548 1,835 (57) (16)
Income from continuing operations  2,790 5,939 6,242 (53) (5)
Income/(loss) from discontinued operations  0 (19) 169 100
Net income  2,790 5,920 6,411 (53) (8)
Less net income/(loss) attributable to noncontrolling interests  837 822 (313) 2
Net income attributable to shareholders  1,953 5,098 6,724 (62) (24)
   of which from continuing operations  1,953 5,117 6,555 (62) (22)
   of which from discontinued operations  0 (19) 169 100
Earnings per share (CHF)  
Basic earnings per share from continuing operations  1.37 3.93 5.14 (65) (24)
Basic earnings per share  1.37 3.91 5.28 (65) (26)
Diluted earnings per share from continuing operations  1.36 3.91 5.01 (65) (22)
Diluted earnings per share  1.36 3.89 5.14 (65) (24)
Return on equity (%)  
Return on equity attributable to shareholders  6.0 14.4 18.3
Return on tangible equity attributable to shareholders 1 8.1 19.8 25.1
Number of employees (full-time equivalents)  
Number of employees  49,700 50,100 47,600 (1) 5
1    Based on tangible shareholders' equity attributable to shareholders, which is calculated by deducting goodwill and other intangible assets from total shareholders' equity attributable to shareholders. Management believes that the return on tangible shareholders' equity attributable to shareholders is meaningful as it allows consistent measurement of the performance of businesses without regard to whether the businesses were acquired.

Credit Suisse and Core Results 
  Core Results Noncontrolling interests without SEI Credit Suisse
in 2011 2010 2009 2011 2010 2009 2011 2010 2009
Statements of operations (CHF million)  
Net revenues  25,429 30,625 33,617 796 761 (323) 26,225 31,386 33,294
Provision for credit losses  187 (79) 506 0 0 0 187 (79) 506
Compensation and benefits  13,151 14,562 14,927 62 37 86 13,213 14,599 15,013
General and administrative expenses  7,350 7,194 7,604 22 37 97 7,372 7,231 7,701
Commission expenses  1,992 2,148 1,997 0 0 0 1,992 2,148 1,997
Total other operating expenses  9,342 9,342 9,601 22 37 97 9,364 9,379 9,698
Total operating expenses  22,493 23,904 24,528 84 74 183 22,577 23,978 24,711
Income/(loss) from continuing operations before taxes    2,749 6,800 8,583 712 687 (506) 3,461 7,487 8,077
Income tax expense  671 1,548 1,835 0 0 0 671 1,548 1,835
Income/(loss) from continuing operations  2,078 5,252 6,748 712 687 (506) 2,790 5,939 6,242
Income/(loss) from discontinued operations  0 (19) 169 0 0 0 0 (19) 169
Net income/(loss)  2,078 5,233 6,917 712 687 (506) 2,790 5,920 6,411
Less net income/(loss) attributable to noncontrolling interests    125 135 193 712 687 (506) 837 822 (313)
Net income attributable to shareholders  1,953 5,098 6,724 0 0 0 1,953 5,098 6,724
Statement of operations metrics (%)  
Cost/income ratio  88.5 78.1 73.0 86.1 76.4 74.2
Pre-tax income margin  10.8 22.2 25.5 13.2 23.9 24.3
Effective tax rate  24.4 22.8 21.4 19.4 20.7 22.7
Net income margin 1 7.7 16.6 20.0 7.4 16.2 20.2
1    Based on amounts attributable to shareholders.





Differences between Group and Bank

Except where noted, the business of the Bank is substantially the same as the business of Credit Suisse Group, and substantially all of the Bank’s operations are conducted through the Private Banking, Investment Banking and Asset Management segments. These segment results are included in Core Results. Certain other assets, liabilities and results of operations are managed as part of the activities of the three segments, however, since they are legally owned by the Group, they are not included in the Bank’s financial statements. These related principally to the activities of Clariden Leu, Neue Aargauer Bank and BANK-now, which are managed as part of Private Banking, and hedging activities relating to share-based compensation awards. Core Results also includes certain Group corporate center activities that are not applicable to the Bank.

These operations and activities vary from period to period and give rise to differences between the Bank’s assets, liabilities, revenues and expenses, including pensions and taxes, and those of the Group.

> Refer to “Note 39 – Subsidiary guarantee information” in V – Consolidated financial statements – Credit Suisse Group for further information on the Bank.



Differences between Group and Bank businesses
Entity Principal business activity
Clariden Leu  Banking and securities
Neue Aargauer Bank  Banking (in the Swiss canton of Aargau)
BANK-now  Private credit and car leasing (in Switzerland)
Financing vehicles of the Group    Special purpose vehicles for various funding activities of the Group, including for purposes of raising capital

Comparison of consolidated statements of operations
  Group Bank
in 2011 2010 2009 2011 2010 2009
Statements of operations (CHF million)  
Net revenues  26,225 31,386 33,294 24,301 29,598 31,993
Total operating expenses  22,577 23,978 24,711 21,842 23,451 24,176
Income from continuing operations before taxes  3,461 7,487 8,077 2,362 6,271 7,357
Income tax expense  671 1,548 1,835 433 1,258 1,794
Income from continuing operations  2,790 5,939 6,242 1,929 5,013 5,563
Income/(loss) from discontinued operations  0 (19) 169 0 (19) 169
Net income  2,790 5,920 6,411 1,929 4,994 5,732
Less net income/(loss) attributable to noncontrolling interests  837 822 (313) 901 802 (697)
Net income attributable to shareholders  1,953 5,098 6,724 1,028 4,192 6,429

Comparison of consolidated balance sheets
  Group Bank
end of 2011 2010 2011 2010
Balance sheet statistics (CHF million)  
Total assets  1,049,165 1,032,005 1,023,175 1,008,761
Total liabilities  1,008,080 988,990 986,725 969,597

Capitalization and indebtedness
  Group Bank
end of 2011 2010 2011 2010
Capitalization and indebtedness (CHF million)  
Due to banks  40,147 37,493 51,484 47,675
Customer deposits  313,401 287,564 287,699 263,767
Central bank funds purchased, securities sold under repurchase agreements and securities lending transactions    176,559 168,394 176,559 168,394
Long-term debt  162,655 173,752 159,407 171,140
Other liabilities  315,318 321,787 311,576 318,621
Total liabilities  1,008,080 988,990 986,725 969,597
Total equity  41,085 43,015 36,450 39,164
Total capitalization and indebtedness  1,049,165 1,032,005 1,023,175 1,008,761

Capital adequacy
  Group Bank
  Basel II.5 Basel II Basel II Basel II.5 Basel II Basel II
end of 2011 2011 2010 2011 2011 2010
Capital (CHF million)  
Tier 1 capital  36,844 38,029 37,725 33,459 34,644 35,310
   of which hybrid instruments  10,888 10,888 11,098 10,888 10,888 10,589
Total eligible capital  48,654 51,024 47,799 46,628 48,998 47,569
Capital ratios (%)  
Tier 1 ratio  15.2 18.1 17.2 14.5 17.4 17.1
Total capital ratio  20.1 24.2 21.9 20.2 24.6 23.1

Dividends of the Bank to the Group
end of 2011 2010
Per share issued (CHF)  
Dividend 1, 2 0.23 3 0.23
Registered shares of CHF 100.00 nominal value each. As of December 31, 2011 and 2010, total share capital consisted of 43,996,652 registered shares.
1    Dividends are determined in accordance with Swiss law and the Bank's articles of incorporation.   2    In 2009, 2008 and 2007, dividends per share issued were CHF 68.19, CHF 0.23 and CHF 59.10, respectively.   3    Proposal of the Board of Directors to the Annual General Meeting on April 27, 2012, to be paid out of reserves from capital contributions.








Core Results

For 2011, net income attributable to shareholders was CHF 1,953 million. Results reflected the impacts of a challenging market environment and the implementation of our strategy. As we implemented our strategy, results included negative impacts of an aggregate CHF 1.8 billion from realignment costs, businesses we are exiting and the reduction of risk-weighted assets in our Investment Banking fixed income business. Also included were litigation provisions of CHF 478 million in connection with German and US tax matters. We made substantial progress in reducing Basel III risk-weighted assets in Investment Banking by CHF 76 billion to CHF 233 billion in 2011. We attracted CHF 40.9 billion of net new assets.



Results
  in % change
2011 2010 2009 11 / 10 10 / 09
Statements of operations (CHF million)  
Net interest income  6,405 6,474 6,763 (1) (4)
Commissions and fees  12,984 14,131 13,702 (8) 3
Trading revenues  4,921 9,328 12,127 (47) (23)
Other revenues  1,119 692 1,025 62 (32)
Net revenues  25,429 30,625 33,617 (17) (9)
Provision for credit losses  187 (79) 506
Compensation and benefits  13,151 14,562 14,927 (10) (2)
General and administrative expenses  7,350 7,194 7,604 2 (5)
Commission expenses  1,992 2,148 1,997 (7) 8
Total other operating expenses  9,342 9,342 9,601 (3)
Total operating expenses  22,493 23,904 24,528 (6) (3)
Income from continuing operations before taxes  2,749 6,800 8,583 (60) (21)
Income tax expense  671 1,548 1,835 (57) (16)
Income from continuing operations  2,078 5,252 6,748 (60) (22)
Income/(loss) from discontinued operations  0 (19) 169 100
Net income  2,078 5,233 6,917 (60) (24)
Less net income attributable to noncontrolling interests  125 135 193 (7) (30)
Net income/(loss) attributable to shareholders  1,953 5,098 6,724 (62) (24)
   of which from continuing operations  1,953 5,117 6,555 (62) (22)
   of which from discontinued operations  0 (19) 169 100
Statement of operations metrics (%)  
Cost/income ratio  88.5 78.1 73.0
Pre-tax income margin  10.8 22.2 25.5
Effective tax rate  24.4 22.8 21.4
Net income margin 1 7.7 16.6 20.0
Number of employees (full-time equivalents)  
Number of employees  49,700 50,100 47,600 (1) 5
1    Based on amounts attributable to shareholders.

Core Results include the results of our three segments, the Corporate Center and discontinued operations. Core Results exclude revenues and expenses in respect of noncontrolling interests in which we do not have SEI. The Corporate Center includes parent company operations such as Group financing, expenses for projects sponsored by the Group and certain expenses and revenues that have not been allocated to the segments. In addition, the Corporate Center includes consolidation and elimination adjustments required to eliminate intercompany revenues and expenses.

In managing the business, revenues are evaluated in the aggregate, including an assessment of trading gains and losses and the related interest income and expense from financing and hedging positions. For this reason, individual revenue categories may not be indicative of performance.

As the Basel Committee on Banking Supervision (BCBS) >>>Basel III framework (Basel III) will not be implemented before January 1, 2013, we have calculated our Basel III >>>risk-weighted assets for purposes of this report in accordance with the currently proposed requirements and our current interpretation of such requirements, including relevant assumptions. Changes in the actual implementation of Basel III would result in different numbers from those shown in this report.

Certain reclassifications have been made to prior periods to conform to the current presentation.


Results overview


2011 versus 2010

In 2011, we recorded net income attributable to shareholders of CHF 1,953 million, down 62% compared to 2010. Net revenues were CHF 25,429 million, down 17%, and total operating expenses were CHF 22,493 million, down 6%, compared to 2010, mainly due to lower compensation and benefits. Our 2011 results included negative impacts of CHF 1.8 billion consisting of realignment costs of CHF 847 million from cost-efficiency measures and CHF 974 million (CHF 547 million of negative revenues and CHF 427 million of associated costs) from businesses we are exiting and the reduction of risk-weighted assets in our Investment Banking fixed income business. Also included were litigation provisions of CHF 478 million in connection with German and US tax matters. We had fair value gains of CHF 1,210 million on Credit Suisse long-term vanilla debt and fair value losses of CHF 291 million on stand-alone derivatives. Revenues were adversely impacted and expenses were favorably impacted by the strengthening of the Swiss franc against major currencies. Compared to 2010, the adverse impact on net revenues and income before taxes was CHF 3,092 million and CHF 909 million, respectively.

In Private Banking, net revenues of CHF 10,877 million decreased 6% compared to 2010. The adverse impact of the lower average exchange rate of major currencies against the Swiss franc on net revenues and income before taxes in Private Banking was CHF 844 million and CHF 550 million, respectively. Excluding this adverse foreign exchange impact and gains of CHF 72 million from the sale of real estate in 2011, revenues remained stable compared to 2010. In an ongoing low interest rate environment, net interest income decreased 7%. Recurring commissions and fees were down 7% as average assets under management decreased slightly, mainly due to the adverse foreign exchange translation impact. Excluding fair value losses of CHF 17 million and CHF 50 million related to the Clock Finance transaction in 2011 and 2010, respectively, and the gains from the sale of real estate in 2011, transaction-based revenues decreased 9%. This decrease was driven by significantly lower brokerage and product issuing fees, reflecting lower client activity and lower transaction-based volumes.

In Investment Banking, net revenues of CHF 11,496 million decreased 29% compared to 2010. Results in many of our businesses in 2011 were impacted by significantly lower levels of client activity and a volatile trading environment compared to 2010. We have accelerated our risk-weighted asset reduction plan and expect to exceed our previously announced year-end 2012 Basel III risk-weighted assets target of USD 229 billion by the end of the first quarter of 2012. Basel III risk-weighted assets were reduced by CHF 76 billion in 2011. Our fixed income sales and trading revenues were significantly lower in 2011, reflecting challenging trading conditions, subdued client activity levels across most businesses and the execution of our risk reduction strategy. We incurred losses of CHF 547 million from businesses we are exiting and the reduction of the risk-weighted assets. Revenues in securitized products were significantly weaker than 2010, reflecting valuation reductions on client inventory, losses on sales of client inventory as we reduced risk-weighted assets and lower client activity. Results in our credit businesses, including leveraged finance and investment grade trading, also noticeably declined from 2010, reflecting mark-to-market losses on client inventory. Our equity sales and trading results were resilient despite lower levels of client activity. We had lower cash equities results, driven by reduced client trading activity and weaker results in derivatives, reflecting reduced customer flow. Prime services revenues declined, reflecting the foreign exchange translation impact. In US dollars, we had record prime services results due to higher client activity and higher client balances. In 2011, we maintained our market share and leading market share rankings in cash equities and prime services. Underwriting and advisory results were lower, reflecting a decline in industry-wide capital issuance levels and a decrease in our completed M&A market share, respectively. Our results included debit valuation adjustment (DVA) gains relating to structured note liabilities of CHF 698 million in 2011 compared to DVA losses of CHF 73 million in 2010.

In Asset Management, net revenues of CHF 2,146 million decreased 8% compared to 2010, primarily reflecting the adverse foreign exchange translation impact in 2011 and gains in 2010 of CHF 143 million from securities purchased from our money market funds. The adverse impact of the higher average exchange rate of the Swiss franc against major currencies on net revenues and income before taxes was CHF 239 million and CHF 69 million, respectively. Net revenues before investment-related gains were CHF 1,841 million, up 5% excluding gains in 2010 from securities purchased from our money market funds. Compared with 2010, fee-based revenues increased 2%. Asset management fees of CHF 1,263 million were down 10%, reflecting the adverse foreign exchange translation impact and the spin-off and sale of non-core businesses in 2010. Average assets under management decreased 2.0% to CHF 419.3 billion and were adversely impacted by negative market performance and adverse foreign exchange-related movements. Placement, transaction and other fees of CHF 259 million were up 61% from improved private equity placement fees and losses in 2010 related to investments held by Asset Management Finance LLC (AMF). Performance fees and carried interest of CHF 221 million were up 18% from higher carried interest relating to realized private equity gains, partially offset by lower performance fees. Income from equity participations of CHF 122 million was up 37% from 2010, reflecting higher income from single-manager hedge funds. Investment-related gains were CHF 305 million, down 29% from 2010.

Corporate Center includes parent company operations such as Group financing, expenses for projects sponsored by the Group and certain expenses and revenues that have not been allocated to the segments. In addition, the Corporate Center includes consolidation and elimination adjustments required to eliminate intercompany revenues and expenses. In 2011, losses before taxes were CHF 231 million compared to losses before taxes of CHF 660 million in 2010, primarily reflecting fair value gains on Credit Suisse long-term vanilla debt of CHF 1,421 million compared to CHF 590 million in 2010. The fair value gains on own debt reflected the widening of credit spreads across all currencies, including senior and subordinated debt. Additionally, the 2011 losses included CHF 847 million of costs consisting primarily of severance and other compensation expenses relating to the accelerated Group-wide cost-efficiency initiatives and losses on stand-alone derivatives of CHF 291 million.

Provision for credit losses reflected net provisions of CHF 187 million, with net provisions of CHF 110 million and CHF 77 million in Private Banking and Investment Banking, respectively.

Total operating expenses were CHF 22,493 million, down 6%, mainly reflecting a 10% decrease in compensation and benefits due to lower discretionary performance-related compensation expense and the favorable foreign exchange translation impact, partly offset by CHF 715 million from cost-efficiency measures. General and administrative expenses increased 2%, reflecting an increase in litigation provisions, IT investment costs and costs of CHF 132 million in connection with our cost-efficiency initiatives, partially offset by lower professional fees and the favorable foreign exchange translation impact. Litigation provisions included CHF 478 million in connection with German and US tax matters.

The Core Results effective tax rate was 24.4% in 2011, compared to 22.8% in 2010. The effective tax rate for full-year 2011 was mainly impacted by the geographical mix of results, an increase in deferred tax balances in Switzerland and the US and the release of tax contingency accruals. The effective tax rate also reflected an increase in valuation allowances against deferred tax assets in the UK and Asia and a write-down of deferred tax assets reflecting legislation in the UK and Japan that decreased the corporate income tax rate. Overall, net deferred tax assets decreased CHF 495 million to CHF 8,510 million during 2011.

> Refer to “Note 26 – Tax” in V – Consolidated financial statements – Credit Suisse Group for further information.

Assets under management from continuing operations were CHF 1,229.5 billion as of the end of 2011, a decrease of 1.9% compared to the end of 2010. In 2011, we reported net new assets of CHF 40.9 billion, down 40.7% compared to 2010. We had net new assets of CHF 44.5 billion in Private Banking and net asset outflows of CHF 0.9 billion in Asset Management.


2010 versus 2009

In 2010, we recorded net income attributable to shareholders of CHF 5,098 million, down 24% compared to 2009. Net revenues were CHF 30,625 million, down 9%, and total operating expenses were CHF 23,904 million, down 3%, compared to 2009. Our 2010 Core Results included fair value gains of CHF 341 million on Credit Suisse vanilla debt. CHF 249 million of fair value losses were charged to the segments (primarily Investment Banking), reflecting the straight-line amortization, and CHF 590 million of fair value gains were included in the Corporate Center. Provision for credit losses were net releases of CHF 79 million compared to net provisions of CHF 506 million as of the end of 2009, reflecting the improved credit environment. Total operating expenses declined slightly, mainly due to the foreign exchange translation impact and lower performance-related compensation.

In Private Banking, net revenues of CHF 11,631 million were stable compared to 2009. Results in 2010 were impacted by the weakening of the average rate of the US dollar and euro against the Swiss franc compared to 2009, adversely affecting net revenues in Wealth Management Clients by approximately CHF 350 million and income before taxes by approximately CHF 250 million. Recurring revenues, representing 78% of net revenues, were stable. In an ongoing low interest rate environment, stable net interest income reflected slightly lower loan and deposit margins on slightly higher average volumes. Recurring commissions and fees were up 3% and average assets under management increased 9.9%. Investor behavior remained cautious during 2010, reflected in investments in less complex, lower-margin products, also within managed investment products, and a significant portion of assets under management in cash. Transaction-based revenues decreased slightly, reflecting lower client activity. The decline was driven by lower revenues from integrated solutions and brokerage fees and gains from the sale of real estate and >>>auction rate securities (ARS) in 2009, partially offset by higher product issuing fees and lower fair value losses on the Clock Finance transaction compared to 2009.

In Investment Banking, net revenues of CHF 16,214 million decreased 21% compared to 2009. Approximately CHF 1.3 billion of 2009 revenues were due to the normalization of market conditions that had become severely dislocated in the fourth quarter of 2008. In addition, 2010 results in many businesses were impacted by lower levels of client trading activity compared to 2009. We continued to make progress in the implementation of our client-focused, capital-efficient strategy and continued to increase our market share across most businesses and regions. Fixed income sales and trading revenues were resilient, although significantly lower compared to 2009, reflecting a challenging environment for the industry affected by macroeconomic uncertainties. Results were driven by >>>residential mortgage-backed securities (RMBS), credit, global rates and emerging markets trading. Revenues in global rates and credit, including leveraged finance and investment grade trading, although solid, reflected less favorable market conditions than in 2009 and market volatility triggered by sovereign debt concerns in Europe in 2010. Revenues in RMBS and leveraged finance trading benefited from an increase in investor demand for yield-driven products. Equity sales and trading results were solid, although lower compared to a strong 2009, reflecting lower levels of client trading activity. Results were driven by revenues in cash equities, prime services and >>>derivatives. In 2010, we improved our market share while maintaining our leading market share rankings in cash equities and prime services. We had strong underwriting and advisory results, reflecting an increase in industry-wide capital issuance levels, an increase in completed M&A market share and improved share of wallet with clients. We had near-record revenues in debt underwriting, driven by higher industry-wide high yield issuance volumes, and improved advisory revenues, reflecting an increase in completed M&A market share. Equity underwriting revenues were in line with lower industry-wide equity issuance levels, particularly in follow-on and convertible issuances, partially offset by a significant increase in initial public offering (IPO) volumes. Results included net fair value losses on Credit Suisse vanilla debt of CHF 232 million in 2010, compared to net fair value losses of CHF 397 million in 2009, and significant allocated funding costs.

In Asset Management, net revenues of CHF 2,332 million were up 27% compared to CHF 1,842 million in 2009, primarily reflecting investment-related gains compared to losses in 2009, partially offset by lower income from equity participations. Investment-related gains were CHF 420 million, compared to losses of CHF 365 million in 2009, reflecting improved equity markets. Asset management fees of CHF 1,412 million were up 3%, reflecting higher average assets under management. Average assets under management increased 2.2% to CHF 427.8 billion and were adversely impacted by foreign exchange-related movements and the spin-off of non-core businesses. Placement, transaction and other fees of CHF 143 million were down 15%, reflecting losses related to investments held by AMF and lower revenues from integrated solutions, partially offset by higher private equity placement and real estate transaction fees. Performance fees and carried interest of CHF 187 million were down 15% from lower performance fees from Hedging-Griffo and from diversified investments relating to management of the 2008 Partner Asset Facility (PAF), partially offset by carried interest relating to realized private equity gains. Equity participations income of CHF 41 million was down 88% from 2009, which included significant gains from the sale of part of the traditional investments business to Aberdeen Asset Management (Aberdeen) and the sale of Polish and Korean joint ventures. Other revenues in 2010 and 2009 primarily reflected gains on the sale of securities purchased from money market funds and securities acquired from client securities lending portfolios. Net revenues before securities purchased from money market funds and investment-related gains of CHF 1,769 million were down 16%, primarily due to lower revenues from equity participations.

In Corporate Center, the decreased loss of CHF 660 million compared to a loss of CHF 1,948 million primarily reflected lower litigation provisions and fair value gains on Credit Suisse vanilla debt versus losses in 2009. The 2010 loss included a charge of CHF 404 million for the UK levy on variable compensation and CHF 216 million of litigation provisions, partly offset by CHF 590 million of fair value gains on our long-term vanilla debt, which reflected the positive difference between the straight-line amortization charged to the segments and the net impact of fair valuation adjustments on Credit Suisse debt from widening credit spreads.

Provision for credit losses were net releases of CHF 79 million, with releases of CHF 97 million in Investment Banking and net provisions of CHF 18 million in Private Banking.

Total operating expenses were CHF 23,904 million, down 3%, mainly due to the foreign exchange translation impact and lower performance-related variable compensation, partially offset by an increase in salaries and benefits, reflecting higher base salaries and increased headcount, and the CHF 404 million charge relating to the UK levy on variable compensation. 2010 performance-related variable compensation accruals reflected lower risk-adjusted profitability, the higher base salaries and a higher proportion of performance-related variable compensation deferred through share-based, restricted cash and other awards. Compensation and benefits included significantly lower expenses relating to the PAF. General and administrative expenses decreased 5%, reflecting the foreign exchange translation impact and a significant decrease in litigation provisions and charges, offset in part by higher professional fees and IT costs.

The Core Results effective tax rate was 22.8% in 2010, compared to 21.4% in 2009. The effective tax rate reflected the geographical mix of results and included the recognition of additional deferred tax assets, a decrease of deferred tax liability balances in Switzerland and the release of tax contingency accruals. Overall, net deferred tax assets increased CHF 186 million to CHF 9,005 million as of the end of 2010.

> Refer to “Note 26 – Tax” in V – Consolidated financial statements – Credit Suisse Group for further information.

Assets under management from continuing operations were CHF 1,253.0 billion as of the end of 2010, an increase of 2.0% compared to the end of 2009. In 2010, we reported net new assets of CHF 69.0 billion, up 56.1% compared to 2009. We had net new assets of CHF 54.6 billion in Private Banking and CHF 20.6 billion in Asset Management.

Impact from movements in credit spreads
Our Core Results revenues are impacted by changes in credit spreads on Credit Suisse long-term vanilla debt carried at >>>fair value. For segment reporting purposes, the cumulative fair value gains of CHF 1.5 billion on Credit Suisse long-term vanilla debt as of the opening first quarter 2010 balance sheet are charged to the segments on a straight-line amortization basis, and the difference between this amortization and the fair valuation on this Credit Suisse debt from changes in credit spreads is included in the Corporate Center.

> Refer to “Accounting changes adopted in the first quarter 2010” in II – Operating and financial review – Core Results in the Credit Suisse Annual Report 2010 for further information.

Our Core Results are also impacted by fair valuation gains/(losses) on stand-alone derivatives relating to certain of our funding liabilities. These fair valuation gains/(losses) on the stand-alone derivatives are recorded in the Corporate Center, reflect the volatility of cross-currency swaps and yield curve volatility and, over the life of the derivatives, will result in no net gains/(losses). Regulatory capital excludes cumulative fair value gains/(losses) related to own long-term vanilla debt and structured notes, net of tax.



in 2011 2010 2009
Net income/(loss) attributable to shareholders, excluding impact from movements in credit spreads (CHF million)    1,337 4,880 7,325
Fair value gains/(losses) on own long-term vanilla debt  1,210 341 (750)
   of which in Corporate Center  1,421 590 (327)
   of which allocated to Investment Banking  (197) (232) (397)
   of which allocated to other divisions  (14) (17) (26)
Fair value gains/(losses) on stand-alone derivatives  (291) 1
Tax expense/(benefit)  303 124 (149)
Net income attributable to shareholders  1,953 5,098 6,724



Core Results reporting by division
  in % change
2011 2010 2009 11 / 10 10 / 09
Net revenues (CHF million)  
   Wealth Management Clients  9,030 9,829 9,871 (8) 0
   Corporate & Institutional Clients  1,847 1,802 1,791 2 1
Private Banking  10,877 11,631 11,662 (6) 0
Investment Banking  11,496 16,214 20,537 (29) (21)
Asset Management  2,146 2,332 1,842 (8) 27
Corporate Center  910 448 (424) 103
Net revenues  25,429 30,625 33,617 (17) (9)
Provision for credit losses (CHF million)  
   Wealth Management Clients  83 70 33 19 112
   Corporate & Institutional Clients  27 (52) 147
Private Banking  110 18 180 (90)
Investment Banking  77 (97) 326
Provision for credit losses  187 (79) 506
Total operating expenses (CHF million)  
   Wealth Management Clients  7,479 7,231 6,940 3 4
   Corporate & Institutional Clients  940 956 891 (2) 7
Private Banking  8,419 8,187 7,831 3 5
Investment Banking  11,340 12,780 13,366 (11) (4)
Asset Management  1,593 1,829 1,807 (13) 1
Corporate Center  1,141 1,108 1,524 3 (27)
Total operating expenses  22,493 23,904 24,528 (6) (3)
Income/(loss) from continuing operations before taxes (CHF million)  
   Wealth Management Clients  1,468 2,528 2,898 (42) (13)
   Corporate & Institutional Clients  880 898 753 (2) 19
Private Banking  2,348 3,426 3,651 (31) (6)
Investment Banking  79 3,531 6,845 (98) (48)
Asset Management  553 503 35 10
Corporate Center  (231) (660) (1,948) (65) (66)
Income from continuing operations before taxes  2,749 6,800 8,583 (60) (21)

Core Results reporting by region
  in % change
2011 2010 2009 11 / 10 10 / 09
Net revenues (CHF million)  
Switzerland  8,130 8,416 8,800 (3) (4)
EMEA  6,474 7,145 9,009 (9) (21)
Americas  7,304 11,558 12,794 (37) (10)
Asia Pacific  2,611 3,058 3,438 (15) (11)
Corporate Center  910 448 (424) 103
Net revenues  25,429 30,625 33,617 (17) (9)
Income/(loss) from continuing operations before taxes (CHF million)  
Switzerland  2,518 2,913 3,295 (14) (12)
EMEA  293 417 2,146 (30) (81)
Americas  124 3,762 4,262 (97) (12)
Asia Pacific  45 368 828 (88) (56)
Corporate Center  (231) (660) (1,948) (65) (66)
Income from continuing operations before taxes  2,749 6,800 8,583 (60) (21)
A significant portion of our business requires inter-regional coordination in order to facilitate the needs of our clients. The methodology for allocating our results by region is dependent on management judgment. For Private Banking, results are allocated based on the management reporting structure of our relationship managers and the region where the transaction is recorded. For Investment Banking, trading results are allocated based on where the risk is primarily managed and fee-based results are allocated where the client is domiciled. For Asset Management, results are allocated based on the location of the investment advisors and sales teams.


Capital trends

Our consolidated Bank for International Settlements (BIS) tier 1 ratio under >>>Basel II.5 was strong at 15.2% as of the end of 2011, compared to 14.2% as of the end of 2010. The increase reflected decreased risk-weighted assets and increased tier 1 capital.

Our Board of Directors will propose a distribution of CHF 0.75 per share against reserves from capital contributions to the shareholders for 2011 at the Annual General Meeting (AGM) on April 27, 2012. The distribution will be free of Swiss withholding tax and will not be subject to income tax for Swiss resident individuals holding the shares as a private investment. The distribution will be payable in cash or, subject to any legal restrictions applicable in shareholders’ home jurisdictions, in new shares of Credit Suisse Group at the option of the shareholder.

> Refer to “Capital management” in III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management for further information on capital trends.


Risk trends

In 2011, we continued to prudently manage our risk profile to meet the challenges of a volatile market environment and changing regulatory framework. We strengthened our risk management function, improved our risk management approaches and methodologies and continued to invest significantly in our IT infrastructure. We continued to review our risk appetite framework which establishes key principles for managing our risks to ensure an appropriate balance of return and assumed risk, stability of earnings and capital levels we seek to maintain. Overall >>>position risk increased 2%, average >>>risk management Value-at-Risk (VaR) for our trading books decreased 26% and our impaired loans decreased 8%.

> Refer to “Risk management” in III – Treasury, Risk, Balance sheet and Off-balance sheet for further information on risk trends.


Management and Board of Directors changes

Effective August 1, 2011, the Board of Directors appointed Walter Berchtold as chairman of Private Banking and Hans-Ulrich Meister as Chief Executive Officer of Private Banking. Mr. Meister assumed his new position in addition to his role as Chief Executive Officer of Credit Suisse Switzerland. Mr. Berchtold and Mr. Meister remain members of the Executive Board.

As of the AGM on April 29, 2011, Hans-Ulrich Doerig stepped down as Chairman of the Board and was succeeded by Urs Rohner as full-time Chairman. The Board proposes the following candidates to be elected to the Board at the AGM on April 27, 2012: Ms. Iris Bohnet, Academic Dean and Professor of Public Policy at the Harvard Kennedy School, and Mr. Jean-Daniel Gerber, former State Secretary and Director of the Swiss State Secretariat for Economic Affairs. The Board also proposes the following members to be re-elected to the Board: Walter B. Kielholz, Andreas N. Koopmann, Urs Rohner, Richard E. Thornburgh and John Tiner. Peter F. Weibel, the former Audit Committee chairman, having reached the internal age limit, has decided to step down from the Board as of the 2012 AGM.


Evolution of our strategy

In November 2011, we announced that we are adapting our client-focused, capital-efficient strategy to optimize our use of capital and improve our cost structure in order to sustain returns for shareholders.

> Refer to “Strategy” in I – Information on the company for further information.


Regulatory developments and proposals

Government leaders and regulators continued to focus on reform of the financial services industry, including capital, leverage and liquidity requirements, changes in compensation practices and systemic risk.

> Refer to “Regulation and supervision” in I – Information on the company for further information on regulatory developments and proposals.


Compensation and benefits

Compensation and benefits for a given year reflect the strength and breadth of the business results and staffing levels and include fixed components, such as salaries, benefits and the amortization of share-based and other deferred compensation from prior-year awards, and a discretionary variable component. The variable component reflects the performance-based variable compensation for the current year. The portion of the performance-based compensation for the current year deferred through share-based and other awards is expensed in future periods and is subject to vesting and other conditions.

Our shareholders’ equity reflects the effect of share-based compensation. Share-based compensation expense (which is generally based on fair value at the time of grant) reduces equity, however, the recognition of the obligation to deliver the shares increases equity by a corresponding amount. Equity is generally unaffected by the granting and vesting of share-based awards, including through the issuance of shares from approved conditional capital. The Group issues shares from conditional capital to meet its obligations to deliver share-based compensation awards. If Credit Suisse purchases shares from the market to meet its obligation to employees, these purchased treasury shares reduce equity by the amount of the purchase price. Shareholders’ equity also includes, as additional paid-in capital, the excess tax benefits/charges that arise at settlement of share-based awards.

> Refer to “Consolidated statements of changes in equity” and “Note 27 – Employee deferred compensation” in V – Consolidated financial statements – Credit Suisse Group for further information.
> Refer to “Tax benefits associated with share-based compensation” in Note 26 – Tax in V – Consolidated financial statements – Credit Suisse Group for further information.


Variable compensation for 2011

Modifications to the 2011 compensation plan are based on existing compensation principles, reflective of industry and regulatory trends and are part of our capital management plan.

Deferred compensation for 2011 was awarded in the form of Group share awards and 2011 Partner Asset Facility (PAF2) units.

Group share awards vest ratably over three years and their final value depends upon the development of the Group share price during the vesting period. In addition, managing directors and other employees designated as material risk takers were awarded performance share awards with the same vesting period that contain a claw-back provision.

The PAF2 plan is a new deferred compensation plan for managing directors and directors. PAF2 units are essentially fixed income structured notes that are exposed to a portion of the credit risk that arises in the Group’s derivative activities, including both current and possible future swaps and other derivative transactions. Employees holding PAF2 units are entitled to coupon payments of 5 6.5% per annum, but suffer a reduction of principal if losses in excess of USD 500 million are incurred on positions in the portfolio. The PAF2 plan is a transfer of risk from the Group to employees, thereby contributing to risk reduction and capital efficiency. The PAF2 units will vest on March 31, 2012 and will result in costs of CHF 540 million in the first quarter 2012. The change in the fair value of the PAF2 units will be reflected in our results until the awards are finally settled.

Other changes included a change in the threshold for deferred compensation from a CHF/USD 50,000 variable compensation trigger in 2010 to a CHF/USD 250,000 total compensation trigger in 2011. Additionally, the percentage of an employee’s compensation that is deferred starts at the rate of 15% compared to 35% for 2010. Our deferral policy remains in line with regulators’ demands that a substantial portion of variable compensation be subject to future performance and claw-back provisions.


Allocations and funding


Revenue sharing and cost allocation

Responsibility for each product is allocated to a segment, which records all related revenues and expenses. Revenue-sharing and service level agreements govern the compensation received by one segment for generating revenue or providing services on behalf of another. These agreements are negotiated periodically by the relevant segments on a product-by-product basis.

The aim of revenue-sharing and service level agreements is to reflect the pricing structure of unrelated third-party transactions.

Corporate services and business support in finance, operations, including human resources, legal and compliance, risk management and IT are provided by the Shared Services area. Shared Services costs are allocated to the segments and Corporate Center based on their requirements and other relevant measures.


Funding

We centrally manage our funding activities. New securities for funding and capital purposes are issued primarily by the Bank. The Bank lends funds to our operating subsidiaries and affiliates on both a senior and subordinated basis, as needed, the latter typically to meet capital requirements, or as desired by management to capitalize on opportunities. Capital is distributed to the segments considering factors such as regulatory capital requirements, utilized economic capital and the historic and future potential return on capital.

Transfer pricing, using market rates, is used to record net revenues and expenses in each of the segments for this capital and funding. Our funds transfer pricing system is designed to allocate to our businesses funding costs in a way that incentivizes their efficient use of funding. Our funds transfer pricing system is an essential tool that allocates to the businesses the short-term and long-term costs of funding their balance sheet and the costs associated with funding liquidity and balance sheet items, such as goodwill, which are beyond the control of individual businesses. This is of greater importance in a stressed capital markets environment where raising funds is more challenging and expensive. Under this system, our businesses are also credited to the extent they provide long-term stable funding.


Fair valuations

>>>Fair value can be a relevant measurement for financial instruments when it aligns the accounting for these instruments with how we manage our business. The levels of the fair value hierarchy as defined by the relevant accounting guidance are not a measurement of economic risk, but rather an indication of the observability of prices or valuation inputs.

> Refer to “Note 1 – Summary of significant accounting policies” and “Note 33 – Financial instruments” in V – Consolidated financial statements – Credit Suisse Group for further information.

Based on the Group’s regular review of observable parameters used in its pricing models, in 2011 the Group adopted a change in estimate relating to the use of overnight indexed swap (OIS) interest rate yield curves, instead of other reference rates such as >>>London interbank offered rate (LIBOR), in determining the fair value of certain collateralized derivatives, resulting in a loss of CHF 146 million in Investment Banking fixed income sales and trading revenue.

The fair value of the majority of the Group’s financial instruments is based on quoted prices in active markets (level 1) or observable inputs (level 2). These instruments include government and agency securities, certain >>>commercial paper, most investment grade corporate debt, certain high yield debt securities, exchange-traded and certain >>>over-the-counter (OTC) derivative instruments and most listed equity securities.

In addition, the Group holds financial instruments for which no prices are available and which have little or no observable inputs (level 3). For these instruments, the determination of fair value requires subjective assessment and judgment depending on liquidity, pricing assumptions, the current economic and competitive environment and the risks affecting the specific instrument. In such circumstances, valuation is determined based on management’s own judgments about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These instruments include certain OTC derivatives, including equity and credit derivatives, certain corporate equity-linked securities, mortgage-related and >>>collateralized debt obligation (CDO) securities, private equity investments, certain loans and credit products, including leveraged finance, certain syndicated loans and certain high yield bonds, and life finance instruments.

Models were used to value these products. Models are developed internally and are reviewed by functions independent of the front office to ensure they are appropriate for current market conditions. The models require subjective assessment and varying degrees of judgment depending on liquidity, concentration, pricing assumptions and risks affecting the specific instrument. The models consider observable and unobservable parameters in calculating the value of these products, including certain indices relating to these products. Consideration of these indices is more significant in periods of lower market activity.

As of the end of 2011, 52% and 40% of our total assets and total liabilities, respectively, were measured at fair value.

While the majority of our level 3 assets are recorded in Investment Banking, some are recorded in Asset Management, specifically certain private equity investments. Total assets recorded as level 3 declined by CHF 3.5 billion during 2011, primarily reflecting decreases in other investments and loans held-for-sale, partially offset by increases in loans. The decrease in other investments primarily reflected net sales, partially offset by realized gains. The decrease in loans held-for-sale primarily reflected net transfers out of level 3 due to improved observability of pricing data and net sales. The increase in loans primarily reflected net purchases.

Our level 3 assets, excluding noncontrolling interests and assets of consolidated VIEs that are not risk-weighted assets under the Basel framework, were CHF 39.3 billion, compared to CHF 39.0 billion as of the end of 2010. As of the end of 2011, these assets comprised 4% of total assets and 8% of total assets measured at fair value, both adjusted on the same basis, compared to 4% and 7% as of the end of 2010, respectively.

We believe that the range of any valuation uncertainty, in the aggregate, would not be material to our financial condition, however, it may be material to our operating results for any particular period, depending, in part, upon the operating results for such period.


Personnel

Headcount at the end of 2011 was 49,700, down 400 from the end of 2010. This reflected reductions in headcount of 2,100 employees in connection with our cost-efficiency initiatives in the second half of 2011, primarily in Investment Banking and Private Banking, offset by seasonal graduate and apprentice recruitment, increases due to regulatory requirements and additional headcount from the acquisition of the PFS hedge fund administration business of ABN AMRO (formerly Fortis Bank Nederland) completed in the second quarter of 2011. Compared to year-end 2009, headcount increased 2,100.

> Refer to “Overview” in IV – Corporate Governance and Compensation – Corporate Governance for additional information on personnel.






Key performance indicators

Our key performance indicators (KPIs) are targets to be achieved over a three to five year period across market cycles. Our KPIs are assessed annually as part of our normal planning process.



Growth

We target collaboration revenues of 18% to 20% of net revenues. Collaboration revenues were 16.8% of net revenues for 2011.

For net new assets, we target a growth rate above 6.0%. In 2011, we recorded a net new asset growth rate of 3.3%.


Efficiency and performance

For total shareholder return, we target superior share price appreciation plus dividends compared to our peer group. Our 2011 total shareholder return was (39.4)%. The 2011 average total shareholder return of our peer group was (35.0)%.

For return on equity attributable to shareholders, we target an annual rate of return above 15.0%. The return on equity attributable to shareholders was 6.0% in 2011.

For Core Results, we target a pre-tax income margin above 28.0%. Our pre-tax income margin was 10.8% for 2011.


Capital

Our capital targets are based upon compliance with the Swiss >>>“Too Big to Fail” and >>>Basel III capital standards.

The tier 1 ratio was 15.2% under >>>Basel II.5 and the core tier 1 ratio was 10.7% under Basel II.5 as of the end of 2011.

> Refer to “Capital management” in III – Treasury, Risk, Balance sheet and Off-balance sheet – Treasury management for further information.

in / end of Target 2011 2010 2009
Growth (%)  
Collaboration revenues  18 - 20% of net revenues 16.8 14.4 15.5
Net new asset growth  Above 6% 3.3 5.6 4.0
Efficiency and performance (%)  
Total shareholder return (Credit Suisse) 1 Superior return vs peer group (39.4) (23.3) 80.1
   Total shareholder return of peer group 1, 2 (35.0) (1.7) 36.6
Return on equity attributable to shareholders  Above 15% 6.0 14.4 18.3
Core Results pre-tax income margin  Pre-tax income margin above 28% 10.8 22.2 25.5
1    Source: Bloomberg. Total shareholder return is calculated as equal to the appreciation or depreciation of a particular share, plus any dividends, over a given period, expressed as a percentage of the share's value as of the beginning of the period.   2    The peer group for this comparison comprises Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, HSBC, JPMorgan Chase, Société Générale and UBS. The total shareholder return of this peer group is calculated as a simple, unweighted average of the return reported by Bloomberg for each of the members of the peer group.




Private Banking

In 2011, we reported income before taxes of CHF 2,348 million and net revenues of CHF 10,877 million. We attracted net new assets of CHF 44.5 billion, mainly from emerging markets and the ultra-high-net-worth individual client segment, despite a challenging environment.


Results
  in / end of % change
2011 2010 2009 11 / 10 10 / 09
Statements of operations (CHF million)  
Net revenues  10,877 11,631 11,662 (6) 0
Provision for credit losses  110 18 180 (90)
Compensation and benefits  4,601 4,737 4,651 (3) 2
General and administrative expenses  3,176 2,793 2,580 14 8
Commission expenses  642 657 600 (2) 10
Total other operating expenses  3,818 3,450 3,180 11 8
Total operating expenses  8,419 8,187 7,831 3 5
Income before taxes  2,348 3,426 3,651 (31) (6)
   of which Wealth Management Clients  1,468 2,528 2,898 (42) (13)
   of which Corporate & Institutional Clients  880 898 753 (2) 19
Statement of operations metrics (%)  
Cost/income ratio  77.4 70.4 67.1
Pre-tax income margin  21.6 29.5 31.3
Utilized economic capital and return  
Average utilized economic capital (CHF million)  6,940 6,589 6,236 5 6
Pre-tax return on average utilized economic capital (%) 1 34.2 52.5 59.0
Number of employees (full-time equivalents)  
Number of employees  25,200 25,600 24,300 (2) 5
1    Calculated using a return excluding interest costs for allocated goodwill.

Results (continued)
  in / end of % change
2011 2010 2009 11 / 10 10 / 09
Net revenue detail (CHF million)  
Net interest income  4,592 4,931 5,000 (7) (1)
Recurring commissions and fees  3,827 4,105 3,980 (7) 3
Transaction-based  2,458 2,595 2,682 (5) (3)
Net revenues  10,877 11,631 11,662 (6) 0
Provision for credit losses (CHF million)  
New provisions  276 289 419 (4) (31)
Releases of provisions  (166) (271) (239) (39) 13
Provision for credit losses  110 18 180 (90)
Balance sheet statistics (CHF million)  
Net loans  196,268 182,880 176,009 7 4
   of which Wealth Management Clients 1 139,725 130,435 125,671 7 4
   of which Corporate & Institutional Clients  56,543 52,445 50,338 8 4
Deposits  257,521 245,108 257,650 5 (5)
   of which Wealth Management Clients 1 203,350 194,013 210,718 5 (8)
   of which Corporate & Institutional Clients  54,171 51,095 46,932 6 9
Number of relationship managers  
Switzerland  1,950 2,020 1,980 (3) 2
EMEA  1,180 1,260 1,190 (6) 6
Americas  550 560 550 (2) 2
Asia Pacific  360 360 360 0 0
Wealth Management Clients  4,040 4,200 4,080 (4) 3
Corporate & Institutional Clients (Switzerland)  520 490 490 6 0
Number of relationship managers  4,560 4,690 4,570 (3) 3
1    Wealth Management Clients covers individual clients, including affluent, high-net-worth and ultra-high-net-worth individual clients.


Results overview

For 2011, we reported income before taxes of CHF 2,348 million, down 31% compared to 2010. Net revenues of CHF 10,877 million decreased 6% compared to 2010. The adverse impact of the lower average exchange rate of major currencies against the Swiss franc on net revenues and income before taxes in Private Banking was CHF 844 million and CHF 550 million, respectively. Excluding this adverse foreign exchange impact and gains of CHF 72 million from the sale of real estate in 2011, revenues remained stable compared to 2010.

In an ongoing low interest rate environment, net interest income decreased 7%. Recurring commissions and fees were down 7% as average assets under management decreased slightly, mainly due to the adverse foreign exchange translation impact. Excluding fair value losses of CHF 17 million and CHF 50 million related to the Clock Finance transaction in 2011 and 2010, respectively, and the gains from the sale of real estate in 2011, transaction-based revenues decreased 9%. This decrease was driven by significantly lower brokerage and product issuing fees, reflecting lower client activity and lower transaction-based volumes.

Provision for credit losses in 2011 was CHF 110 million compared to CHF 18 million in 2010, mainly driven by lower releases in 2011 compared to 2010.

Total operating expenses were CHF 8,419 million, slightly up compared to 2010, mainly driven by litigation provisions of CHF 478 million, of which CHF 183 million (EUR 150 million) was in connection with the German tax matter and CHF 295 million was in connection with the US tax matter. Excluding these litigation provisions in 2011, and the non-credit-related provisions for >>>ARS of CHF 44 million in 2010, operating expenses decreased 2%. Compensation and benefits decreased 3%, reflecting a favorable foreign exchange translation impact and lower discretionary performance-related compensation expense.

Assets under management as of the end of 2011 were CHF 927.9 billion, stable compared to the end of 2010, as strong net new assets of CHF 44.5 billion were mainly offset by adverse market movements. Net new assets reflect the strength of our international footprint despite the challenging economic environment, including highly volatile equity and foreign exchange markets and client risk aversion. Wealth Management Clients contributed net new assets of CHF 37.8 billion with strong contributions from emerging markets and the >>>ultra-high-net-worth individual (UHNWI) client segment. Switzerland contributed net new assets of CHF 12.8 billion, including CHF 6.7 billion from Corporate & Institutional Clients. Average assets under management in 2011 decreased slightly, as net new assets were more than offset by lower equity markets and foreign exchange-related movements.

In light of increasing regulatory and capital requirements and continued challenging market and economic conditions, we announced a refinement of our Private Banking strategy.

> Refer to “Evolution of our strategy” in I – Information on the company – Strategy and “Private Banking” in I – Information on the company – Our businesses for further information.

For 2010, we reported income before taxes of CHF 3,426 million, down 6% compared to 2009. Net revenues of CHF 11,631 million were stable compared to 2009. Results in 2010 were impacted by the weakening of the average rate of the US dollar and euro against the Swiss franc compared to 2009, adversely affecting net revenues in Wealth Management Clients by approximately CHF 350 million and income before taxes by approximately CHF 250 million.

Recurring revenues, representing 78% of net revenues, were stable. In an ongoing low interest rate environment, stable net interest income reflected slightly lower loan and deposit margins on slightly higher average volumes. Recurring commissions and fees were up 3% and average assets under management increased 9.9%. Investor behavior remained cautious during 2010, reflected in investments in less complex, lower-margin products, also within managed investment products, and a significant portion of assets under management in cash. Transaction-based revenues decreased slightly, reflecting lower client activity. The decline was driven by lower revenues from integrated solutions and brokerage fees and gains from the sale of real estate and ARS in 2009, partially offset by higher product issuing fees and fair value losses on the Clock Finance transaction of CHF 50 million compared to CHF 118 million in 2009. Excluding the fair value losses on the Clock Finance transaction in 2010 and 2009, transaction-based revenues decreased 6%.

We recorded substantially lower net provisions for credit losses of CHF 18 million compared to CHF 180 million in 2009, primarily reflecting net releases of CHF 52 million compared to net provisions of CHF 147 million in 2009 in Corporate & Institutional Clients.

Total operating expenses were CHF 8,187 million, up 5% compared to 2009. General and administrative expenses increased 8%, primarily reflecting insurance proceeds of CHF 100 million in 2009, higher marketing and sales expenses and ongoing investments in our client advisory services and international platforms, mainly IT investments, in 2010. Compensation and benefits increased slightly, primarily due to increases in headcount and base salaries, partially offset by lower performance-related compensation, reflecting higher base salaries and a higher proportion of performance-related variable compensation deferred through share-based and other awards.

Assets under management as of the end of 2010 were CHF 932.9 billion, up 2.0% compared to 2009. The increase reflected strong net new assets and positive equity and bond market movements, mostly offset by adverse foreign exchange-related movements, mainly due to the weakening of the euro and the US dollar against the Swiss franc. Net new assets of CHF 54.6 billion benefited from strong inflows in all regions and were up 31.3% compared to 2009. Wealth Management Clients contributed net new assets of CHF 45.3 billion. Over 80% of these net new assets were from international regions, with particularly strong inflows from emerging markets and the UHNWI client segment. Switzerland contributed net new assets of CHF 17.6 billion, including CHF 9.3 billion from Corporate & Institutional Clients. While assets under management as of the end of 2010 were 2.0% higher, average assets under management increased 9.9% compared to 2009.

Assets under management - Private Banking
  in / end of % change
2011 2010 2009 11 / 10 10 / 09
Assets under management by region (CHF billion)  
Switzerland  305.2 323.7 328.2 (5.7) (1.4)
EMEA  262.4 268.6 277.3 (2.3) (3.1)
Americas  140.9 137.2 129.6 2.7 5.9
Asia Pacific  83.0 78.5 67.7 5.7 16.0
Wealth Management Clients  791.5 808.0 802.8 (2.0) 0.6
Corporate & Institutional Clients (Switzerland)  136.4 124.9 112.1 9.2 11.4
Assets under management  927.9 932.9 914.9 (0.5) 2.0
Average assets under management (CHF billion)  
Average assets under management  921.4 941.8 857.2 (2.2) 9.9
Assets under management by currency (CHF billion)  
USD  296.6 300.9 298.2 (1.4) 0.9
EUR  204.5 220.7 248.4 (7.3) (11.2)
CHF  296.2 292.3 269.9 1.3 8.3
Other  130.6 119.0 98.4 9.7 20.9
Assets under management  927.9 932.9 914.9 (0.5) 2.0
Net new assets by region (CHF billion)  
Switzerland  6.1 8.3 5.5 (26.5) 50.9
EMEA  13.7 15.1 10.3 (9.3) 46.6
Americas  7.6 9.5 8.0 (20.0) 18.8
Asia Pacific  10.4 12.4 11.5 (16.1) 7.8
Wealth Management Clients  37.8 45.3 35.3 (16.6) 28.3
Corporate & Institutional Clients (Switzerland)  6.7 9.3 6.3 (28.0) 47.6
Net new assets  44.5 54.6 41.6 (18.5) 31.3
Growth in assets under management (CHF billion)  
Net new assets  37.8 45.3 35.3
Other effects  (54.3) (40.1) 73.3
   of which market movements  (37.9) 36.8 83.3
   of which currency  (8.2) (70.8) (4.1)
   of which other  (8.2) (6.1) (5.9)
Wealth Management Clients  (16.5) 5.2 108.6
Corporate & Institutional Clients  11.5 12.8 17.4
Growth in assets under management  (5.0) 18.0 126.0
Growth in assets under management (%)  
Net new assets  4.8 6.0 5.3
   of which Wealth Management Clients  4.7 5.6 5.1
   of which Corporate & Institutional Clients  5.4 8.3 6.7
Other effects  (5.3) (4.0) 10.7
Growth in assets under management  (0.5) 2.0 16.0


Performance indicators


Pre-tax income margin (KPI)

Our target over market cycles is a pre-tax income margin above 35%. In 2011, the pre-tax income margin was 21.6% compared to 29.5% in 2010 and 31.3% in 2009.


Net new asset growth rate for Wealth Management Clients (KPI)

Our target over market cycles is a growth rate over 6%. In 2011, our net new asset growth rate was 4.7%. In 2010, our net new asset growth rate was 5.6%. In 2009, which included net client outflows of CHF 5.6 billion related to a tax amnesty in Italy, our net new asset growth rate was 5.1%.


Results detail

The following provides a comparison of our 2011 results versus 2010 and 2010 results versus 2009.


Net revenues

Recurring revenues arise from net interest income, recurring commissions and fees, including performance-based fees, related to assets under management and custody assets, as well as fees for general banking products and services. Net interest income includes a term spread credit on stable deposit funding and a term spread charge on loans. Transaction-based revenues arise primarily from brokerage and product issuing fees, foreign exchange income from client transactions and other transaction-based income.

2011 vs 2010: Down 6% from CHF 11,631 million to CHF 10,877 million
The decrease was driven by lower revenues across all revenue categories and an adverse foreign translation impact of CHF 844 million. Net interest income decreased 7%, due to lower deposit margins on lower average volumes and slightly lower loan margins on slightly higher average volumes. Lower deposit margins reflected the low interest environment with a relatively flat interest curve. Recurring commissions and fees declined 7% due to lower revenues across most categories, mainly reflecting the adverse foreign exchange translation impact, including the impact on average assets under management. Transaction-based revenues were 5% lower, mainly due to significantly lower brokerage and product issuing fees, reflecting lower client activity and lower transaction-based volumes, particularly from bonds, equities and mutual funds, partially offset by a gain from the sale of real estate of CHF 72 million in 2011. Transaction-based revenues included fair value losses on the Clock Finance transactions of CHF 17 million in 2011 compared to fair value losses of CHF 50 million in 2010.

2010 vs 2009: Stable at CHF 11 , 631 million
Stable net revenues reflected higher recurring commissions and fees, lower transaction-based revenues and stable net interest income. Net interest income reflected the ongoing low interest rate environment and slightly lower loan and deposit margins on slightly higher average volumes. Recurring commissions and fees were up 3% and average assets under management increased 9.9%. The increase in recurring commissions and fees was mainly driven by higher security account and service fees, reflecting an increase in average volumes, partially offset by lower commissions from fiduciary business, reflecting lower margins and volumes. Management fees were stable despite the 9.9% increase in average assets under management, reflecting the ongoing risk-averse asset mix. Fund management fees were positively impacted by a change in estimate for prior-year fee accruals. Transaction-based revenues declined 3% and included fair value losses of CHF 50 million on the Clock Finance portfolio in 2010 compared to fair value losses of CHF 118 million in 2009. Excluding this impact, transaction-based revenues decreased 6%, driven by lower revenues from integrated solutions, which were particularly strong in 2009, and lower brokerage fees, partially offset by higher product issuing fees. 2009 transaction-based revenues included gains on ARS positions and the sale of real estate.


Provision for credit losses

2011 vs 2010: Up from CHF 18 million to CHF 110 million
Provision for credit losses of CHF 110 million were up CHF 92 million compared to 2010, driven by lower releases of provisions compared to 2010. New provisions were 4% lower. Provisions for credit losses reflected net provisions of CHF 83 million in Wealth Management Clients and CHF 27 million in Corporate & Institutional Clients. The Wealth Management Clients loan portfolio is substantially comprised of residential mortgages in Switzerland and loans collateralized by securities. Our corporate and institutional loan portfolio has sound quality, relatively low concentrations and is mainly secured by mortgages, securities and other financial collateral.

2010 vs 2009: Down from CHF 180 million to CHF 18 million
The change in provision for credit losses primarily reflected net releases of provisions in 2010 in Corporate & Institutional Clients compared to net provisions in 2009 in Corporate & Institutional Clients. Provision for credit losses of CHF 18 million reflected net provisions of CHF 70 million in Wealth Management Clients and net releases of CHF 52 million in Corporate & Institutional Clients. A substantial part of the provisions of CHF 289 million were in Wealth Management Clients, while a substantial part of the releases of CHF 271 million were related to our Corporate & Institutional Clients loan portfolio, despite the record level of corporate insolvencies in Switzerland during 2010. The Wealth Management Clients loan portfolio is substantially comprised of residential mortgages in Switzerland and loans collateralized by securities. Our corporate and institutional loan portfolio has sound quality, relatively low concentrations and is mainly collateralized by mortgages and securities. Provision for credit losses in Wealth Management Clients in 2010 and 2009 were mostly related to our Swiss consumer finance business.


Operating expenses

Compensation and benefits