EX-99 2 a110210g4q-ex99_1.htm CREDIT SUISSE FINANCIAL REPORT 4Q10 Credit Suisse Group - SEC Report









Financial highlights
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Net income (CHF million)  
Net income attributable to shareholders  841 609 793 38 6 5,098 6,724 (24)
   of which from continuing operations  841 609 793 38 6 5,117 6,555 (22)
Earnings per share (CHF)  
Basic earnings per share from continuing operations  0.59 0.48 0.59 23 3.93 5.14 (24)
Basic earnings per share  0.59 0.48 0.59 23 3.91 5.28 (26)
Diluted earnings per share from continuing operations  0.59 0.48 0.56 23 5 3.91 5.01 (22)
Diluted earnings per share  0.59 0.48 0.56 23 5 3.89 5.14 (24)
Return on equity (%)  
Return on equity attributable to shareholders (annualized)  9.8 7.0 8.3 14.4 18.3
Core Results (CHF million)  1
Net revenues  6,960 6,284 6,533 11 7 30,625 33,617 (9)
Provision for credit losses  (23) (26) (40) (12) (43) (79) 506
Total operating expenses  5,676 5,557 5,228 2 9 23,904 24,528 (3)
Income from continuing operations before taxes  1,307 753 1,345 74 (3) 6,800 8,583 (21)
Core Results statement of operations metrics (%)  1
Cost/income ratio  81.6 88.4 80.0 78.1 73.0
Pre-tax income margin  18.8 12.0 20.6 22.2 25.5
Effective tax rate  31.0 15.5 34.3 22.8 21.4
Net income margin 2 12.1 9.7 12.1 16.6 20.0
Assets under management and net new assets (CHF billion)  
Assets under management from continuing operations  1,253.0 1,251.2 1,229.0 0.1 2.0 1,253.0 1,229.0 2.0
Net new assets  13.9 14.6 12.5 (4.8) 11.2 69.0 44.2 56.1
Balance sheet statistics (CHF million)  
Total assets  1,032,005 1,067,388 1,031,427 (3) 0 1,032,005 1,031,427 0
Net loans  218,842 222,660 237,180 (2) (8) 218,842 237,180 (8)
Total shareholders' equity  33,282 34,088 37,517 (2) (11) 33,282 37,517 (11)
Tangible shareholders' equity 3 24,385 24,874 27,922 (2) (13) 24,385 27,922 (13)
Book value per share outstanding (CHF)  
Total book value per share  28.35 28.78 32.09 (1) (12) 28.35 32.09 (12)
Shares outstanding (million)  
Common shares issued  1,186.1 1,186.1 1,185.4 0 0 1,186.1 1,185.4 0
Treasury shares  (12.2) (1.8) (16.2) (25) (12.2) (16.2) (25)
Shares outstanding  1,173.9 1,184.3 1,169.2 (1) 0 1,173.9 1,169.2 0
Market capitalization  
Market capitalization (CHF million)  44,683 49,818 60,691 (10) (26) 44,683 60,691 (26)
Market capitalization (USD million)  47,933 50,483 58,273 (5) (18) 47,933 58,273 (18)
BIS statistics  
Risk-weighted assets (CHF million)  218,702 227,683 221,609 (4) (1) 218,702 221,609 (1)
Tier 1 ratio (%)  17.2 16.7 16.3 17.2 16.3
Total capital ratio (%)  21.9 21.9 20.6 21.9 20.6
Number of employees (full-time equivalents)  
Number of employees  50,100 50,500 47,600 (1) 5 50,100 47,600 5
1    For further information on Core Results, refer to I – Credit Suisse results – Credit Suisse – Credit Suisse reporting structure.   2    Based on amounts attributable to shareholders.   3    Tangible shareholders' equity attributable to shareholders is calculated by deducting goodwill and other intangible assets from total shareholders' equity attributable to shareholders.





Dear shareholders



Brady W. Dougan, Chief Executive Officer (left) and
Hans-Ulrich Doerig, Chairman of the Board of Directors. In the background is a portrait of Alfred Escher, who founded Credit Suisse in 1856.

In 2010, we have continued to execute on our client-focused, capital-efficient strategy with an industry leading return on equity of 14.4%. This has served us well through 2010, a year of transition toward the new regulatory environment. Our integrated business model with its balanced portfolio of income streams has proven resilient and leaves us well-capitalized with evidence of continued market share gains across businesses. We achieved net income attributable to shareholders of CHF 5.1 billion with total net new assets of CHF 69.0 billion and a tier 1 ratio of 17.2%.


Performance of our businesses in the fourth quarter

Private Banking achieved strong but seasonally lower net new assets of CHF 9.6 billion in 4Q10 and income before taxes of CHF 824 million. For the full year 2010, income before taxes was CHF 3,426 million, down 6% from 2009. We attracted net new assets of CHF 54.6 billion compared to CHF 41.6 billion in 2009. Our continued success in attracting client assets underscores our strong value proposition and the trust that clients place in us. Among the world’s wealth management firms, Private Banking has an unparalleled competitive position in regard to net new asset generation, profitability and client satisfaction. Revenues in 4Q10 increased 3% to CHF 2,914 million on higher client activity levels. As we continue to invest in our people, our advisory capabilities and multishore platform, our Private Bank is very well positioned for a recovery in client activity levels. In Switzerland, our Corporate & Institutional Clients business, which is an important provider of financing and services to the Swiss economy, achieved another strong result and had CHF 1.5 billion net new assets in 4Q10.

Investment Banking recorded pre-tax income of CHF 558 million in 4Q10 with net revenues of CHF 3,478 million. For the full year 2010, income before taxes was CHF 3,531 million compared to CHF 6,845 million in 2009. Investment Banking saw continued market share momentum while transitioning at a fast pace to a client focused model. The cash equities and prime services businesses maintained their leading positions.

Asset Management reported pre-tax income of CHF 180 million in 4Q10 with net revenue of CHF 617 million. For 2010,income before taxes was CHF 503 million compared to income before taxes of CHF 35 million in 2009. In 2010, Asset Management built on the progress already made and has maintained a positive trend in asset inflows with net new assets of CHF 4.5 billion in the fourth quarter. Our strong net new asset flows are a reflection of the division’s focus on asset allocation and alternative investments. We are pleased that the consistent execution of our strategy is maintaining strong momentum.


Positioned to succeed in new industry landscape

Our results for the full year with a return on equity of 14.4% underscore that our business model is able to produce sustainable returns over the cycle. We have a strong balance sheet, our capital base is solid and we have been very transparent on how we will meet the new requirements. We have remained focused on cost management and have demonstrated the ability to adjust quickly to the changing market environment. Our businesses have maintained good market share momentum and we are in a very strong position to deliver sustainable returns and consistent book value accretion for shareholders and clients.



The Board of Directors will propose a tax privileged distribution out of reserves from capital contributions of CHF 1.30 per share for 2010.


Outlook

2010 saw significant progress in defining the new regulatory environment. In light of this we have adjusted some of our existing targets, including the aim to achieve an annualized return on equity above 15%. These targets represent a prudent expectation of what our business can generate over the long term. If we can consistently meet those targets we are confident that this will establish Credit Suisse as best in class.



Yours sincerely



Hans-Ulrich Doerig      Brady W. Dougan

February 2011










Dear shareholders
Credit Suisse at a glance
Credit Suisse results
Operating environment
Credit Suisse
Core Results
Key performance indicators
Results by division
Private Banking
Wealth Management Clients
Corporate & Institutional Clients
Investment Banking
Asset Management
Overview of results and assets under management
Results
Assets under management
Treasury and Risk management
Treasury management
Risk management
Condensed consolidated financial statements – unaudited
Condensed consolidated financial statements – unaudited
Notes to the condensed consolidated financial statements – unaudited
Note 1 Summary of significant accounting policies
Note 2 Business developments
Note 3 Discontinued operations
Note 4 Segment information
Note 5 Net interest income
Note 6 Commissions and fees
Note 7 Trading revenues
Note 8 Other revenues
Note 9 Provision for credit losses
Note 10 Compensation and benefits
Note 11 General and administrative expenses
Note 12 Earnings per share
Note 13 Trading assets and liabilities
Note 14 Investment securities
Note 15 Loans
Note 16 Other assets and other liabilities
Note 17 Long-term debt
Note 18 Accumulated other comprehensive income
Note 19 Tax
Note 20 Employee variable deferred compensation
Note 21 Pension and other post-retirement benefits
Note 22 Derivatives and hedging activities
Note 23 Guarantees and commitments
Note 24 Transfers of financial assets and variable interest entities
Note 25 Fair value of financial instruments
Note 26 Assets pledged or assigned
Note 27 Subsidiary guarantee information
Note 28 Litigation
Investor information
Investor information
List of abbreviations





For purposes of this report, unless the context otherwise requires, the terms “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 only referring to Credit Suisse AG, the Swiss bank subsidiary of the Group, and its consolidated subsidiaries.



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







Credit Suisse at a glance


Credit Suisse

As one of the world’s leading financial services providers, we are committed to delivering our combined financial experience and expertise to corporate, institutional and government clients and to high-net-worth individuals worldwide, as well as to private clients in Switzerland. Founded in 1856, we have a truly global reach today, with operations in over 50 countries and 50,100 employees from approximately 100 different nations. This worldwide reach enables us to generate a geographically balanced stream of revenues and net new assets and allows us to capture growth opportunities wherever they are. We serve our diverse clients through our three divisions, which cooperate closely to provide holistic financial solutions based on innovative products and specially tailored advice.


Private Banking

Private Banking offers comprehensive advice and a wide range of financial solutions to private, corporate and institutional clients. The Private Banking division comprises the Wealth Management Clients and Corporate & Institutional Clients businesses. In Wealth Management Clients we serve ultra-high-net-worth and high-net-worth individuals around the globe and private clients in Switzerland. Our Corporate & Institutional Clients business serves the needs of corporations and institutional clients, mainly in Switzerland.


Investment Banking

Investment Banking provides a broad range of financial products and services, including global securities sales, trading and execution, prime brokerage and capital raising services, corporate advisory and comprehensive investment research, with a focus on businesses that are client-driven, flow-based and capital-efficient. Clients include corporations, governments, institutional investors, including hedge funds, and private individuals around the world. Credit Suisse delivers its investment banking capabilities via regional and local teams based in major global financial centers. Strongly anchored in Credit Suisse’s integrated model, Investment Banking works closely with the Private Banking and Asset Management divisions to provide clients with customized financial solutions.


Asset Management

Asset Management offers a wide range of investment products and solutions across asset classes, for all investment styles. The division manages global and regional portfolios, separate accounts, mutual funds and other investment vehicles for governments, institutions, corporations and individuals worldwide. Asset Management focuses on becoming a global leader in multi-asset class solutions as well as in alternative investments. To deliver the bank’s best investment performance, Asset Management operates as a global integrated network in close collaboration with the Private Banking and Investment Banking divisions.


Credit Suisse results

Operating environment

Credit Suisse

Core Results

Key performance indicators




Operating environment

The global economy continued to recover in 4Q10, but was constrained by high unemployment levels and renewed sovereign debt concerns in Europe. The US Federal Reserve (Fed) and the European Central Bank (ECB) responded with additional easing measures, however, on a global scale policy tightening continued. Equity markets ended the quarter higher, and volatility decreased. Bond yields in major markets increased sharply in 4Q10. The euro weakened against most major currencies due to the European sovereign debt crisis, and the Swiss franc strengthened against the US dollar and the euro.



Economic environment

Leading economic indicators pointed to renewed acceleration in economic momentum, driven by manufacturing gains across many major economies, but regional divergence remained pronounced. Greece continued to suffer from the effects of its austerity package, while growth in Germany remained strong. Gross domestic product (GDP) growth in emerging markets was strong, in some cases exceeding 5% year-on-year. In Switzerland, GDP increased 3%. Inflation remained subdued in developed countries, but there were signs of rising inflationary pressure in emerging markets.

The European sovereign debt crisis entered a second, broader phase. The Irish government announced that its 2010 budget deficit would rise to 32% of GDP as a result of additional capital injections into Irish banks, and Ireland was the first country to request support under the new European Union (EU) and International Monetary Fund rescue mechanism established in May. Ireland will receive a EUR 85 billion rescue package. European leaders announced in October that bondholders may have to share the burden of future bailouts by accepting losses on their investments. In December, European leaders agreed to establish a permanent rescue facility, after the expiration of the European Financial Stability Facility (EFSF) in June 2013, which will require an analysis of fiscal sustainability of any country requesting assistance. There were also discussions about a potential increase in the size of the EFSF. European sovereign debt has been closely watched by the major credit rating agencies. In 4Q10, Greece and Ireland's long-term debt ratings were downgraded. Portugal and Spain were also given lower ratings by some agencies. Moody’s issued a report confirming the AAA rating of US debt, but also discussed that its outlook could change.

Given high unemployment and low inflation and in order to promote a stronger economic recovery, the Fed announced in November further quantitative easing. The Fed said that it would purchase USD 600 billion of long-term treasuries by the end of the second quarter of 2011. The Fed also announced its intention to reinvest an additional USD 250 to 300 billion in treasuries with proceeds from existing securities holdings, while continuing to maintain interest rates at exceptionally low levels. The ECB expanded its European government bond buying program to support bond prices and lower the cost of borrowing for countries struggling with higher borrowing costs. The ECB also announced its decision to continue its extraordinary loan program to banks, which was initiated in August 2007 in response to the subprime crisis, rather than winding down the program as it had previously indicated. These monetary easing measures were an exception, however, as a number of central banks continued to tighten their policies. The Chinese central bank raised reserve requirement ratios and its policy rates. Policy rates were also raised in other countries including Australia, India and Sweden. Some central banks in emerging markets expressed concern about capital inflows. The Brazilian government raised the tax on foreign investment in fixed income instruments from 2% to 6%.

In Switzerland, the favorable economic trend continued, accompanied by a significant increase in the number of start-up companies, but with slowing momentum. Unemployment increased seasonally during 4Q10 and remained above the levels seen before the financial crisis, but below the levels of 4Q09. At the same time, the number of corporate bankruptcies remained at high levels, and there was concern that further appreciation of the Swiss franc could adversely affect the competitiveness of Swiss exports. Interest rates in Switzerland remained at historical lows, and there was strong competition and margin pressure in the mortgage business.

Equity markets had a good quarter, with major indices in the US, Japan and Germany recording gains above 9%. Switzerland was only up 2%, reflecting the underperformance of the banking sector compared to MSCI World in 4Q10 (refer to the charts “Equity markets”). Equity market gains reflected strong third quarter earnings and improved investor sentiment. Market volatility as indicated by the Chicago Board of Options Exchange Market Volatility Index (VIX) decreased in 4Q10 (refer to the charts “Equity markets”). Equity underwriting volume increased significantly, driven by strong initial public offering (IPO) volumes. October and November were the best two months for global IPO volume on record, driven by activity in Asia.

Bond yields increased sharply in 4Q10 after the Fed’s announcement of its intention to purchase USD 600 billion of treasuries. Yields in other major markets also increased, leading to a global bear market trend in major bond markets, with the US treasury market as the worst performer (refer to the charts “Yield curves”). Credit markets suffered from the increase in yields in 4Q10, posting unchanged or even negative total returns. Fixed income markets remained challenged by sovereign debt concerns in Europe, which drove credit spreads wider and volatility higher. The high yield and emerging markets credit segments continued to perform above average.

The two main topics in currency markets in 4Q10 were the Fed’s decision to buy more treasuries and the renewed European sovereign debt crisis. The latter weighed on the euro, which depreciated against most major currencies. Within Europe, the Swiss franc, the Norwegian krone and Swedish krona appreciated against the euro, with the Swiss franc reaching a new record. The significant rise of US yields in 4Q10 supported the US dollar against most Asian currencies, with only the Taiwanese dollar and the Chinese renminbi posting modest gains. High-yielding currencies of countries that export commodities, such as the Australian dollar and the South African rand, benefited from higher commodity prices and capital inflows.

4Q10 was a very strong quarter for commodity markets. Most major commodity indices achieved gains of more than 10%, with prices increasing across all sectors. In the agricultural sector, crop failures in several markets and regions triggered significant price increases. Gold prices rose to new all-time highs above USD 1,400 per ounce, driven by strong investment demand, and oil prices increased due to colder than normal temperatures in December and improving economic indicators.












Sector environment

As a result of the renewed European sovereign debt concerns in 4Q10, European banks underperformed the world banks index (refer to the charts “Equity markets”). Nevertheless, 4Q10 was characterized by improved client activity and higher trading volumes compared to 3Q10.

Regulators and governments continued regulatory reform, including capital and liquidity requirements, compensation and systemic risk. For further information, refer to – Core results – Regulatory proposals and developments.

The funding situation for European banks remained mixed during 4Q10, with full access to funding only available to better-positioned banks. Many smaller European banks experienced ongoing difficulties and significantly higher prices in fundraising. As a result, the ECB decided to extend its extraordinary loan program to banks.

The wealth management sector was better supported by improved equity and fixed income trading volumes despite sovereign debt concerns. The demand for products with underlying real assets, such as gold, real estate funds and inflation hedges, remained high. The strength of the Swiss franc continued to have an adverse foreign exchange impact on assets under management and results at Swiss institutions. The regulatory scrutiny of offshore banking in Europe continued in 4Q10. Retail banking in Switzerland was dampened by strong competition and margin pressure in the mortgage business, despite the first signs of increasing yields in December.

The investment banking sector experienced improved market activity compared to 3Q10. Global equity trading increased 8%. The global equity derivatives market recorded strong volumes reflecting investor demand for hedging tools. US bond market volumes increased 11% compared to 3Q10, driven primarily by trading in US treasuries and mortgage-backed bonds. Global equity capital market activities improved in 4Q10, with the highest quarterly equity underwriting volume on record. Global debt underwriting activity recorded a decrease of 8% compared to 3Q10, but an increase of 5% compared to 4Q09.

In the asset management sector, the Dow Jones Credit Suisse Hedge Fund Index was up almost 5% in 4Q10 and gained almost 11% in 2010, underperforming US equity indices, but outperforming several major European equity indices. There were strong inflows in equity funds and exchange-traded funds (ETFs), net inflows in money market funds and net outflows from bond funds. The MSCI Emerging Markets Index increased 7% from 3Q10.


Market volumes (growth in %)
  Global Europe
end of 4Q10 QoQ YoY QoQ YoY
Equity trading volume 1 8 (1) 12 2
Announced mergers and acquisitions 2 (5) 9 7 6
Completed mergers and acquisitions 2 9 (17) 7 (16)
Equity underwriting 2 84 (6) 269 (15)
Debt underwriting 2 (8) 5 (26) (31)
Syndicated lending - investment grade 2 24 60 3
1    London Stock Exchange, Borsa Italiana, Deutsche Börse, BME and Euronext. Global also includes New York Stock Exchange and NASDAQ.   2    Dealogic   3    12M10 vs 12M09





Credit Suisse

In 4Q10, we recorded net income attributable to shareholders of CHF 841 million. Diluted earnings per share were CHF 0.59. Return on equity attributable to shareholders was 9.8%. Our capital position remained strong with a BIS tier 1 ratio of 17.2%. For 2010, we had net income attributable to shareholders of CHF 5,098 million, down 24% compared to CHF 6,724 million in 2009. Return on equity attributable to shareholders was 14.4% in 2010.






Results
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Statements of operations (CHF million)  
Net revenues  7,268 6,566 6,715 11 8 31,386 33,294 (6)
Provision for credit losses  (23) (26) (40) (12) (43) (79) 506
Compensation and benefits  3,371 3,355 2,467 0 37 14,599 15,013 (3)
General and administrative expenses  1,743 1,752 2,298 (1) (24) 7,231 7,701 (6)
Commission expenses  575 484 530 19 8 2,148 1,997 8
Total other operating expenses  2,318 2,236 2,828 4 (18) 9,379 9,698 (3)
Total operating expenses  5,689 5,591 5,295 2 7 23,978 24,711 (3)
Income from continuing operations before taxes  1,602 1,001 1,460 60 10 7,487 8,077 (7)
Income tax expense  405 117 461 246 (12) 1,548 1,835 (16)
Income from continuing operations  1,197 884 999 35 20 5,939 6,242 (5)
Income/(loss) from discontinued operations  0 0 0 (19) 169
Net income  1,197 884 999 35 20 5,920 6,411 (8)
Less net income/(loss) attributable to noncontrolling interests  356 275 206 29 73 822 (313)
Net income attributable to shareholders  841 609 793 38 6 5,098 6,724 (24)
   of which from continuing operations  841 609 793 38 6 5,117 6,555 (22)
   of which from discontinued operations  0 0 0 (19) 169
Earnings per share (CHF)  
Basic earnings per share from continuing operations  0.59 0.48 0.59 23 0 3.93 5.14 (24)
Basic earnings per share  0.59 0.48 0.59 23 0 3.91 5.28 (26)
Diluted earnings per share from continuing operations  0.59 0.48 0.56 23 5 3.91 5.01 (22)
Diluted earnings per share  0.59 0.48 0.56 23 5 3.89 5.14 (24)
Return on equity (%)  
Return on equity attributable to shareholders (annualized)  9.8 7.0 8.3 14.4 18.3
Return on tangible equity attributable to shareholders (annualized) 1 13.4 9.7 11.1 19.8 25.1
Number of employees (full-time equivalents)  
Number of employees  50,100 50,500 47,600 (1) 5 50,100 47,600 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 4Q10 3Q10 4Q09 4Q10 3Q10 4Q09 4Q10 3Q10 4Q09
Statements of operations (CHF million)  
Net revenues  6,960 6,284 6,533 308 282 182 7,268 6,566 6,715
Provision for credit losses  (23) (26) (40) 0 0 0 (23) (26) (40)
Compensation and benefits  3,362 3,327 2,428 9 28 39 3,371 3,355 2,467
General and administrative expenses  1,739 1,746 2,270 4 6 28 1,743 1,752 2,298
Commission expenses  575 484 530 0 0 0 575 484 530
Total other operating expenses  2,314 2,230 2,800 4 6 28 2,318 2,236 2,828
Total operating expenses  5,676 5,557 5,228 13 34 67 5,689 5,591 5,295
Income from continuing operations before taxes    1,307 753 1,345 295 248 115 1,602 1,001 1,460
Income tax expense  405 117 461 0 0 0 405 117 461
Income from continuing operations  902 636 884 295 248 115 1,197 884 999
Income from discontinued operations  0 0 0 0 0 0 0 0 0
Net income  902 636 884 295 248 115 1,197 884 999
Less net income attributable to noncontrolling interests    61 27 91 295 248 115 356 275 206
Net income attributable to shareholders    841 609 793 841 609 793
Statement of operations metrics (%)  
Cost/income ratio  81.6 88.4 80.0 78.3 85.2 78.9
Pre-tax income margin  18.8 12.0 20.6 22.0 15.2 21.7
Effective tax rate  31.0 15.5 34.3 25.3 11.7 31.6
Net income margin 1 12.1 9.7 12.1 11.6 9.3 11.8
1    Based on amounts attributable to shareholders.












Core Results

In 4Q10, we recorded net income attributable to shareholders of CHF 841 million. Private Banking had resilient net new assets and stable income before taxes. Investment Banking net revenues reflected strong underwriting and advisory results and solid equity sales and trading results, with fixed income sales and trading results negatively impacted by challenging market conditions. Asset Management had higher performance, placement and transaction fees and gains from equity participations, and continued its positive trend in net new assets.


Core Results
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Statements of operations (CHF million)  
Net interest income  1,670 1,699 1,890 (2) (12) 6,474 6,763 (4)
Commissions and fees  3,836 3,271 3,917 17 (2) 14,131 13,702 3
Trading revenues  1,308 938 525 39 149 9,328 12,127 (23)
Other revenues  146 376 201 (61) (27) 692 1,025 (32)
Net revenues  6,960 6,284 6,533 11 7 30,625 33,617 (9)
Provision for credit losses  (23) (26) (40) (12) (43) (79) 506
Compensation and benefits  3,362 3,327 2,428 1 38 14,562 14,927 (2)
General and administrative expenses  1,739 1,746 2,270 0 (23) 7,194 7,604 (5)
Commission expenses  575 484 530 19 8 2,148 1,997 8
Total other operating expenses  2,314 2,230 2,800 4 (17) 9,342 9,601 (3)
Total operating expenses  5,676 5,557 5,228 2 9 23,904 24,528 (3)
Income from continuing operations before taxes  1,307 753 1,345 74 (3) 6,800 8,583 (21)
Income tax expense  405 117 461 246 (12) 1,548 1,835 (16)
Income from continuing operations  902 636 884 42 2 5,252 6,748 (22)
Income/(loss) from discontinued operations  0 0 0 (19) 169
Net income  902 636 884 42 2 5,233 6,917 (24)
Less net income attributable to noncontrolling interests  61 27 91 126 (33) 135 193 (30)
Net income attributable to shareholders  841 609 793 38 6 5,098 6,724 (24)
   of which from continuing operations  841 609 793 38 6 5,117 6,555 (22)
   of which from discontinued operations  0 0 0 (19) 169
Statement of operations metrics (%)  
Cost/income ratio  81.6 88.4 80.0 78.1 73.0
Pre-tax income margin  18.8 12.0 20.6 22.2 25.5
Effective tax rate  31.0 15.5 34.3 22.8 21.4
Net income margin 1 12.1 9.7 12.1 16.6 20.0
Number of employees (full-time equivalents)  
Number of employees  50,100 50,500 47,600 (1) 5 50,100 47,600 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.

Our Core Results are impacted by changes in credit spreads on Credit Suisse vanilla debt carried at fair value. For segment reporting purposes, the cumulative fair value gains of CHF 1.5 billion on Credit Suisse debt as of the opening 1Q10 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. For further information, refer to I – Credit Suisse results – Core Results – Accounting changes adopted in 1Q10 in the Credit Suisse Financial Report 1Q10 and II – Operating and financial review – Core Results in the Credit Suisse Annual Report 2009. Our Core Results are also impacted by fair valuation gains/losses on cross currency swaps relating to our long-term debt. These fair valuation gains/losses on the cross currency swaps are recorded in the Corporate Center, reflect the volatility in the basis between the relevant currency yield curves and, over the life of the swaps, will result in no net gains/losses.

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.

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


Results overview

In 4Q10, we recorded net income attributable to shareholders of CHF 841 million, up 6% compared to 4Q09. Net revenues were CHF 6,960 million, up 7%, and total operating expenses were CHF 5,676 million, up 9%, compared to 4Q09. Revenues were adversely impacted and expenses were favorably impacted by the weakening of the average rate of the euro and US dollar against the Swiss franc. Our 4Q10 results included fair value losses of CHF 164 million on Credit Suisse vanilla debt. CHF 58 million of fair value losses were charged to the segments (primarily Investment Banking), reflecting the straight-line amortization, and CHF 106 million of fair value losses were included in the Corporate Center. The Corporate Center also included CHF 22 million of fair valuation losses on cross currency swaps relating to our long-term debt.

In Private Banking, net revenues of CHF 2,914 million declined 3% compared to 4Q09. Recurring revenues, representing 77% of net revenues, decreased 2%. In an ongoing low interest rate environment, net interest income decreased 2%, reflecting lower deposit margins on stable average volumes and slightly higher loan margins on higher average volumes. Recurring commissions and fees were down 3%, mainly reflecting lower semi-annual performance fees. Transaction-based revenues decreased 5%, primarily due to gains on auction rate securities (ARS) positions in 4Q09.

In Investment Banking, net revenues of CHF 3,478 million increased 14% compared to 4Q09. In 4Q10, fixed income sales and trading results were stronger compared to a weak 4Q09. 4Q10 fixed income sales and trading results reflected macroeconomic uncertainties, a seasonal decline in client activity and difficult market conditions for our global rates business. Fixed income sales and trading results in 4Q10 were driven by revenues in US residential mortgage-backed securities (RMBS) trading, emerging markets, global rates and foreign exchange, commodities and credit businesses. Equity sales and trading results were solid and stronger compared to 4Q09. Results in these businesses benefited from improved client trading activity during 4Q10 and continued leading franchise positions. Underwriting and advisory results were strong. We had strong equity underwriting revenues, driven by higher industry-wide issuance levels, particularly in IPOs, which had record industry-wide issuance levels during the quarter. Revenues in debt underwriting reflected strong results in leveraged finance, driven by record industry-wide high yield issuance volumes.Advisory revenues reflected improved completed mergers and acquisitions (M&A) market share. Results reflected fair value losses on Credit Suisse vanilla debt of CHF 54 million in 4Q10 compared to net fair value losses of CHF 243 million in 4Q09.

In Asset Management, net revenues of CHF 617 million were down 3%. Asset management fees of CHF 341 million were down 5%, largely as a result of the spin-off of businesses in 3Q10 and lower fees from fund administration services in 4Q10. Average assets under management increased 0.9% compared to 4Q09 reflecting increases in ETFs, index products and emerging markets, mostly offset by the effect of the transfer of the managed lending business to Investment Banking at the end of 4Q09. Placement, transaction and other fees were down 50%, primarily reflecting losses related to investments held by Asset Management Finance (AMF) and lower revenues from integrated solutions, partially offset by higher transaction fees from real estate funds and higher private equity placement fees. Performance fees and carried interest were down 24%, primarily from lower performance fees from Hedging-Griffo and from diversified investments relating to management of the Partner Asset Facility (PAF), partially offset by carried interest relating to realized private equity gains. Income from equity participations was down 55%, primarily reflecting the gains of CHF 58 million from the sale of Polish and Korean joint ventures in 4Q09. Investment-related gains were CHF 95 million, compared to losses of CHF 47 million in 4Q09. Other revenues decreased CHF 33 million, primarily reflecting gains of CHF 47 million in 4Q09 from securities purchased from our money market funds.

For further information on Private Banking, Investment Banking and Asset Management, refer to II – Results by division.

Corporate Center loss before taxes was CHF 255 million. The loss included CHF 128 million of fair value losses on our long-term vanilla debt, consisting of CHF 106 million from narrowing credit spreads and CHF 22 million from fair valuation losses on cross currency swaps relating to our long-term debt. The fair valuation losses on cross currency swaps were primarily due to volatility in the basis between euro and US dollar yield curves and, over the life of the swaps, will result in no net mark-to-market gains/losses. 4Q09 loss from continuing operations before taxes of CHF 701 million primarily reflected an additional charge of CHF 467 million for the settlement of the US economic sanctions matter.

Provision for credit losses reported net releases of CHF 23 million in 4Q10, with net releases of CHF 27 million in Investment Banking and net provisions of CHF 4 million in Private Banking.

Total operating expenses of CHF 5,676 million were up 9% compared to 4Q09, reflecting 38% higher compensation and benefits, offset in part by 23% lower general and administrative expenses. The increase in compensation and benefits was primarily due to the reversal of previously accrued performance-related variable compensation in 4Q09, reflecting the full-year risk-adjusted profitability in Investment Banking. The increase also included an increase in salaries and benefits, reflecting higher base salaries and increased headcount, and higher deferred compensation from prior-year awards. The decrease in general and administrative expenses was mainly due to lower provisions and losses, as 4Q09 reflected an additional charge of CHF 467 million for the settlement of the US economic sanctions matter. Operating expenses in 4Q10 were favorably impacted by the weakening of the average rate of the euro and US dollar against the Swiss franc compared to 4Q09.

The Core Results effective tax rate was 31.0% in 4Q10, compared to 15.5% in 3Q10. The 4Q10 effective tax rate was mainly impacted by the geographical mix of results but also reflected an increase in the valuation allowance against deferred tax assets, mainly in the UK, and a decrease in deferred tax liability balances in Switzerland. The lower effective tax rate in 3Q10 was due to the positive impact of a net release of tax contingency accruals following the favorable resolution of certain tax matters in 3Q10. The effective tax rate in 2010 of 22.8% was beneficially impacted by 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 decreased CHF 340 million to CHF 9,005 million as of the end of 4Q10. For further information, refer to Note 19 – Tax in V – Condensed consolidated financial statements – unaudited.

Assets under management were CHF 1,253.0 billion as of the end of 4Q10, stable compared to the end of 3Q10. Positive market performance and net new assets were offset by adverse foreign exchange-related movements. Compared to the end of 4Q09, assets under management were up 2.0%. The increase reflected net new assets in both Private Banking, and Asset Management, and positive market performance, partially offset by adverse foreign exchange-related movements.

For 2010, net income attributable to shareholders was CHF 5,098 million, down 24% compared to 2009. Revenues were adversely impacted and expenses were favorably impacted by the weakening of the average rate of the euro and US dollar against the Swiss franc. Net revenues were CHF 30,625 million, down 9% compared to 2009, primarily due to a 21% decrease in Investment Banking revenues, reflecting the foreign exchange translation impact and significantly lower trading revenues, offset in part by higher debt underwriting and advisory revenues. Revenues in Private Banking were stable, reflecting stable net interest income, slightly higher recurring commissions and fees and slightly lower transaction-based revenues. Asset Management revenues increased 27%, primarily reflecting significant investment-related gains compared to losses in 2009. Provisions for credit losses improved significantly, with releases of CHF 79 million in 2010 compared to provisions of CHF 506 million in 2009. 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. In 2010, we reported net new assets of CHF 69.0 billion, up 56.1% compared to 2009. Private Banking had CHF 54.6 billion of net new assets and Asset Management had net new assets of CHF 20.6 billion. For further information, refer to III – Overview of results and assets under management – Assets under management.


Core Results reporting by division
  in % change in % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Net revenues (CHF million)  
      Wealth Management Clients  2,464 2,385 2,572 3 (4) 9,829 9,871 0
      Corporate & Institutional Clients  450 441 428 2 5 1,802 1,791 1
Private Banking  2,914 2,826 3,000 3 (3) 11,631 11,662 0
Investment Banking  3,478 3,421 3,038 2 14 16,214 20,537 (21)
Asset Management  617 582 637 6 (3) 2,332 1,842 27
Corporate Center  (49) (545) (142) (91) (65) 448 (424)
Net revenues  6,960 6,284 6,533 11 7 30,625 33,617 (9)
Provision for credit losses (CHF million)  
      Wealth Management Clients  14 8 9 75 56 70 33 112
      Corporate & Institutional Clients  (10) (16) 17 (38) (52) 147
Private Banking  4 (8) 26 (85) 18 180 (90)
Investment Banking  (27) (18) (66) 50 (59) (97) 326
Provision for credit losses  (23) (26) (40) (12) (43) (79) 506
Total operating expenses (CHF million)  
      Wealth Management Clients  1,844 1,765 1,871 4 (1) 7,231 6,940 4
      Corporate & Institutional Clients  242 233 246 4 (2) 956 891 7
Private Banking  2,086 1,998 2,117 4 (1) 8,187 7,831 5
Investment Banking  2,947 3,044 2,074 (3) 42 12,780 13,366 (4)
Asset Management  437 447 478 (2) (9) 1,829 1,807 1
Corporate Center  206 68 559 203 (63) 1,108 1,524 (27)
Total operating expenses  5,676 5,557 5,228 2 9 23,904 24,528 (3)
Income/(loss) from continuing operations before taxes (CHF million)  
      Wealth Management Clients  606 612 692 (1) (12) 2,528 2,898 (13)
      Corporate & Institutional Clients  218 224 165 (3) 32 898 753 19
Private Banking  824 836 857 (1) (4) 3,426 3,651 (6)
Investment Banking  558 395 1,030 41 (46) 3,531 6,845 (48)
Asset Management  180 135 159 33 13 503 35
Corporate Center  (255) (613) (701) (58) (64) (660) (1,948) (66)
Income from continuing operations before taxes  1,307 753 1,345 74 (3) 6,800 8,583 (21)


Core Results reporting by region
  in % change in % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Net revenues (CHF million)  
Switzerland  2,030 2,006 2,066 1 (2) 8,416 8,800 (4)
EMEA  1,507 1,446 1,570 4 (4) 7,145 9,009 (21)
Americas  2,688 2,610 2,316 3 16 11,558 12,794 (10)
Asia Pacific  784 767 723 2 8 3,058 3,438 (11)
Corporate Center  (49) (545) (142) (91) (65) 448 (424)
Net revenues  6,960 6,284 6,533 11 7 30,625 33,617 (9)
Income/(loss) from continuing operations before taxes (CHF million)  
Switzerland  653 682 784 (4) (17) 2,913 3,295 (12)
EMEA  (219) (113) 205 94 417 2,146 (81)
Americas  1,038 660 932 57 11 3,762 4,262 (12)
Asia Pacific  90 137 125 (34) (28) 368 828 (56)
Corporate Center  (255) (613) (701) (58) (64) (660) (1,948) (66)
Income from continuing operations before taxes  1,307 753 1,345 74 (3) 6,800 8,583 (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 distribution proposal

Our Board of Directors will propose a distribution of CHF 1.30 per share out of reserves from capital contributions for 2010 at the annual general meeting on April 29, 2011. Due to a change in Swiss tax law that came into force in January 2011, 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.


Management changes

In November, Paul Calello, Chairman of Investment Banking, and a member of our Executive Board, passed away from non-Hodgkin's Lymphoma.


Recent developments

During 4Q10, Asset Management completed the acquisition of a significant noncontrolling interest in York Capital Management, a leading global hedge fund manager, based in New York.

As of November 17, 2010, the Group owned 99.95% of the share capital of Neue Aargauer Bank AG following its tender offer for shares not owned by the Group. The Group has applied for the cancellation of the remaining shares pursuant to Art. 33 of the Federal Act on Stock Exchanges and Securities Trading.

For further information, refer to Note 2 – Business developments in V – Condensed consolidated financial statements – unaudited.


Regulatory proposals and developments

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. The Group of Twenty Finance Ministers and Central Bank Governors (G-20) pledged to increase regulation and improve coordination of oversight of banks and financial institutions.

For information on the liquidity principles agreed with the Swiss Financial Market Supervisory Authority (FINMA), the liquidity and capital standards under the Basel Committee on Banking Supervision (BCBS) Basel III framework, the report of the Swiss Expert Commission on “Too Big to Fail” issues relating to big banks, and the revisions to the Basel II market risk framework (Basel II.5), refer to IV – Treasury and Risk management – Treasury management – Liquidity and funding management and – Regulatory developments and proposals.

In July 2010, the US enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Reform Act). Although the Reform Act provides a broad framework for regulatory changes, implementation will require further detailed rulemaking over several years by different regulators, including the Department of the Treasury, the Fed, the US Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the newly created Financial Stability Oversight Council. The Reform Act will limit the ability of banking entities to sponsor or invest in private equity or hedge funds (including an aggregate investment limit of 3% of tier 1 capital) or to engage in certain types of proprietary trading unrelated to serving clients, and 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. In addition, the Reform Act will create an extensive framework for the regulation of over-the-counter (OTC) derivatives and requires broader regulation of hedge funds and private equity funds, as well as credit agencies. The Reform Act also establishes a new regime for the orderly liquidation of systemically significant financial companies and authorizes assessments on financial institutions with USD 50 billion or more in consolidated assets to repay outstanding debts owed to the Treasury in connection with liquidation under the new insolvency regime. Implementation of the Reform Act and related final regulations could result in additional costs or limit or restrict the way we conduct our business, although uncertainty remains about the details, impact and timing of these reforms.

EU leaders have agreed that member states should impose a levy on financial institutions to ensure fair burden sharing and create incentives to contain systemic risks. While there is currently no consensus among member states on details of how the levies should be designed, the UK, Germany and France have said they would impose such levies. In June 2010, the UK proposed a levy attributable to the UK operations of large banks on certain funding. If adopted, in 2011 a levy would be imposed of four basis points on short-term liabilities and two basis points on longer-term liabilities, with the rates rising to seven basis points and three and a half basis points, respectively, in 2012.

In July 2010, the European Parliament approved amendments to the Capital Requirements Directive, including restrictions on the bonuses of senior management and certain other employees who could have a material impact on risk. These restrictions include limiting the portion that may be paid initially in cash and imposing deferrals and “at risk” requirements for a large portion of such bonuses. The amended directive requires member states to adopt national rules ensuring that institutions have compliant remuneration principles by January 2011, which are applicable to compensation awarded for services in 2010.

In September 2010, the EU Council of Ministers, the EU Commission and the European Parliament reached agreement on a new EU supervisory framework. The framework created four new supervisory bodies: the European Banking Authority, the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority, with responsibility for micro-prudential regulation, safeguarding financial soundness at the level of individual financial firms and protecting consumers of financial services, and the European Systemic Risk Board, with responsibility for macro-prudential oversight, monitoring potential threats to financial stability that arise from macro-economic developments.

In September 2010, the EU Commission published a proposal for a regulation on short selling and certain aspects of credit defaults swaps, which is expected to enter into force on July 1, 2012. The proposed regulation is intended to enhance disclosure obligations for short positions relating to EU shares, EU sovereign debt and credit default swaps (CDS) relating to EU sovereign debt issuers and would restrict uncovered, or naked, short selling.

In September 2010, the EU Commission published its proposal for a Regulation on OTC derivatives, Central Counterparties and Trade Repositories. 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.

In October 2010, the EU Commission published a communication setting out certain proposals for the taxation of the financial sector and a communication on a proposed EU framework for crisis management in the financial sector that would apply to all credit institutions and some investment firms whose failure presents a risk to the stability of the financial system. The EU Commission intends to publish a legislative proposal on the crisis management framework in 2011.

In December 2010, the EU Commission published a consultation on a review of the Markets in Financial Instruments Directive (MiFID). The consultation sets out a number of significant proposals, including a proposal for harmonizing the conduct of cross-border business by non-EU investment firms and credit institutions and proposals relating to broker crossing systems and trading activities that are currently outside MiFID's scope, new conduct of business requirements, and enhancements to the regulation of underwriting and placing. The EU Commission plans to propose amendments to MiFID in 2011.

Other governmental bodies are considering imposing taxes on, or limiting the tax deductibility of, certain large bonuses.

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.


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 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, including the impact of related share repurchases and other hedging activities. Equity is generally unaffected by the granting and vesting of share-based awards, including through the issuance of shares from approved conditional capital. 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. When 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. Treasury shares are managed in aggregate and are not allocated to specific obligations under any particular share-based compensation program. Shareholders’ equity also includes, as additional paid-in capital, the excess tax benefits/charges that arise at settlement of share-based awards. For further information, refer to the Consolidated statements of changes in equity and Note 20 – Employee variable deferred compensation in V – Condensed consolidated financial statements – unaudited and Note 25 – Tax – Tax benefits associated with share-based compensation in V – Consolidated Financial Statements – Credit Suisse Group in the Credit Suisse Annual Report 2009.


Changes to our compensation structure

The 2010 compensation structure is based on existing compensation principles and responds to shareholder feedback, regulatory initiatives and dialogue and political as well as public concerns. Our 2010 compensation reflected changes to variable compensation awards to increase the amount of deferred compensation and to simplify the share-based and other awards. The new features of our compensation design are described below.

The threshold for participation in variable deferred compensation awards has been lowered from CHF 125,000 to CHF 50,000, and the proportion of variable deferred compensation has been increased.

Variable deferred compensation awards granted to employees up to and including the level of vice president will be in the form of share awards. Share awards granted as part of 2010 variable awards will vest over four years. The upside and downside potential is based solely on changes in the Group’s share price over four years.

50% of the variable deferred awards granted to members of the Executive Board, managing directors and directors will be in the form of share awards and 50% in Adjustable Performance Plan (APP) awards. APP awards are cash-based awards that vest over four years, on a pro-rata basis. Outstanding awards will be adjusted upwards or downwards based on the Group’s return on equity (ROE). For revenue-generating employees of each division, if the division is loss-making, outstanding awards for employees of that division will be adjusted downward. If the division generates a loss and the Group’s ROE is negative, the greater of the two adjustments will apply. For employees in Shared Services and other support functions, as well as for all Executive Board members, all outstanding APP awards are linked to the Group ROE. Only a negative Group ROE will trigger a negative adjustment of outstanding APP awards for these employees. This link to Group performance is intended to ensure that the compensation of employees in support functions is not directly linked to the performance of the businesses they support.

Managing directors in Investment Banking will receive variable cash compensation in the form of restricted cash, which vests ratably over a two-year period and are subject to repayment if certain clawback events occur.


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 expense 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. For further information, refer to Note 1 – Summary of significant accounting policies and Note 25 – Fair value of financial instruments in V – Condensed consolidated financial statements – unaudited.

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 (CP), most investment grade corporate debt, certain high yield debt securities, exchange-traded and certain 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 varying degrees of judgment depending on liquidity, concentration, pricing assumptions and the risks affecting the specific instrument. In such circumstances, valuation is determined based on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These instruments include certain high yield debt securities, distressed debt securities, certain OTC derivatives, certain collateralized debt obligations (CDO), certain asset-backed and mortgage-backed securities, certain loans, certain loans held-for-sale, non-traded equity securities, private equity and other long-term investments.

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 4Q10, 57% and 43% 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 at fair value recorded as level 3 decreased by CHF 9.6 billion during 4Q10, primarily reflecting decreases in loans held-for-sale, loans and other investments. These decreases primarily reflected transfers to level 2, foreign currency translation impacts and sales.

Our level 3 assets, excluding noncontrolling interests and assets which we do not consolidate under Basel II, were CHF 39.0 billion, compared to CHF 45.1 billion as of the end of 3Q10. As of the end of 4Q10, these assets comprised 4% of total assets and 7% of total assets measured at fair value, both adjusted on the same basis, compared to 4% and 8% as of the end of 3Q10, 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 4Q10 was 50,100, stable compared to 3Q10. A 2% decrease in Investment Banking, mainly driven by a selective reduction of front office headcount across businesses, reflecting current market conditions, and a reduction in IT professionals, was offset by an increase in Private Banking, mainly in IT, reflecting the investment in growth markets, advisory and solutions capabilities and in the multi-shore business model. Headcount at the end of 4Q10 was up 5% from 4Q09, mainly due to an increase in IT professionals, reflecting investment in our growth markets and businesses, and employees in our client-facing businesses in Private Banking.



Number of employees by division
  end of % change
4Q10 3Q10 4Q09 QoQ YoY
Number of employees by division (full-time equivalents)  
Private Banking  25,600 25,500 24,300 0 5
Investment Banking  20,700 21,200 19,400 (2) 7
Asset Management  2,900 2,900 3,100 0 (6)
Corporate Center  900 900 800 0 13
Number of employees  50,100 50,500 47,600 (1) 5





Key performance indicators

To benchmark our achievements, we have defined a set of key performance indicators (KPI) for which we have targets to be achieved over a three to five year period across market cycles.


Our KPIs are targets to be achieved over a three to five year period across market cycles. As such, year-to-date results may be more meaningful than individual quarterly results. Our KPIs are assessed annually as part of our normal planning process.


Growth

We targeted integrated bank collaboration revenues in excess of CHF 10 billion annually by 2012. Integrated bank collaboration revenues were CHF 1.2 billion for 4Q10 and CHF 4.4 billion for 2010. Going forward, we will target collaboration revenues of 18% to 20% of total revenues.

For net new assets, we target a growth rate above 6%. In 4Q10, we recorded an annualized net new asset growth rate of 4.4% and a rolling four-quarter average growth rate of 5.6%.


Efficiency and performance

For total shareholder return, we target superior share price appreciation plus dividends compared to our peer group. Our 4Q10 total shareholder return was (9.8)%. The 4Q10 average total shareholder return of our peer group was (0.1)%.

For return on equity attributable to shareholders, we targeted an annual rate of return above 18%. The annualized return on equity attributable to shareholders was 9.8% in 4Q10. Going forward, in light of our strategic plan, we will target an annualized return on equity attributable to shareholders above 15%.

We targeted a Core Results cost/income ratio of 65%. Our Core Results cost/income ratio was 81.6% for 4Q10. Going forward, we will target a pre-tax income margin above 28%.


Capital

For the Bank for International Settlements (BIS) tier 1 ratio, we targeted a minimum ratio of 12.5%. The BIS tier 1 ratio was 17.2% as of the end of 4Q10. Going forward, our capital targets will be based upon compliance with the Swiss “Too Big to Fail” and Basel III capital standards.


in / end of Target 4Q10 2010 2009 2008 2007
Growth  
Collaboration revenues (CHF billion)  CHF 10 billion annually by 2012 1.2 4.4 5.2 5.2 5.9
Net new asset growth (%) (annualized)  Above 6% 4.4 5.6 4.0 (0.2) 3.1
Efficiency and performance (%)  
Total shareholder return (Credit Suisse) 1 Superior return vs. peer group (9.8) (23.3) 80.1 (56.1) (17.8)
   Total shareholder return of peer group 1,2 (0.1) 0.2 35.2 (55.0) (18.0)
Return on equity attributable to shareholders (annualized)  Above 18% 9.8 14.4 18.3 (21.1) 18.0
Core Results cost/income ratio  Below 65% 81.6 78.1 73.0 195.7 73.1
Capital (%)  
BIS tier 1 ratio (Basel II)  Above 12.5% 17.2 17.2 16.3 13.3 10.0 3
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 at the beginning of the period.   2    Peer group for this comparison comprises Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, HSBC, JPMorgan Chase 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.   3    Under Basel I we reported a tier 1 ratio of 11.1% as of the end of 2007.



Results by division

Private Banking

Investment Banking

Asset Management




Private Banking

In 4Q10, we reported net revenues of CHF 2,914 million and income before taxes of CHF 824 million. Net new assets of CHF 9.6 billion were resilient, but seasonally lower. Wealth Management Clients contributed net new assets of CHF 8.1 billion. For 2010, income before taxes declined 6%, reflecting stable revenues, higher expenses and lower provision for credit losses. Net new assets for 2010 were CHF 54.6 billion, up 31.3% from 2009.



Results
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Statements of operations (CHF million)  
Net revenues  2,914 2,826 3,000 3 (3) 11,631 11,662 0
Provision for credit losses  4 (8) 26 (85) 18 180 (90)
Compensation and benefits  1,201 1,139 1,213 5 (1) 4,737 4,651 2
General and administrative expenses  712 715 761 0 (6) 2,793 2,580 8
Commission expenses  173 144 143 20 21 657 600 10
Total other operating expenses  885 859 904 3 (2) 3,450 3,180 8
Total operating expenses  2,086 1,998 2,117 4 (1) 8,187 7,831 5
Income before taxes  824 836 857 (1) (4) 3,426 3,651 (6)
   of which Wealth Management Clients  606 612 692 (1) (12) 2,528 2,898 (13)
   of which Corporate & Institutional Clients  218 224 165 (3) 32 898 753 19
Statement of operations metrics (%)  
Cost/income ratio  71.6 70.7 70.6 70.4 67.1
Pre-tax income margin  28.3 29.6 28.6 29.5 31.3
Utilized economic capital and return  
Average utilized economic capital (CHF million)  6,590 6,857 6,140 (4) 7 6,493 6,151 6
Pre-tax return on average utilized economic capital (%) 1 50.5 49.3 56.3 53.2 59.8
Number of employees (full-time equivalents)  
Number of employees  25,600 25,500 24,300 0 5 25,600 24,300 5
1    Calculated using a return excluding interest costs for allocated goodwill.


Results (continued)
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Net revenue (CHF million)  
Net interest income  1,224 1,217 1,248 1 (2) 4,931 5,000 (1)
Non-interest income  1,690 1,609 1,752 5 (4) 6,700 6,662 1
Net revenues  2,914 2,826 3,000 3 (3) 11,631 11,662 0
Net revenue detail (CHF million)  
Recurring  2,244 2,218 2,297 1 (2) 9,036 8,980 1
Transaction-based  670 608 703 10 (5) 2,595 2,682 (3)
Net revenues  2,914 2,826 3,000 3 (3) 11,631 11,662 0
Provision for credit losses (CHF million)  
New provisions  77 47 74 64 4 289 419 (31)
Releases of provisions  (73) (55) (48) 33 52 (271) (239) 13
Provision for credit losses  4 (8) 26 (85) 18 180 (90)
Balance sheet statistics (CHF million)  
Net loans  182,880 183,015 176,009 0 4 182,880 176,009 4
   of which Wealth Management Clients 1 130,435 132,744 125,671 (2) 4 130,435 125,671 4
   of which Corporate & Institutional Clients  52,445 50,271 50,338 4 4 52,445 50,338 4
Deposits  245,108 258,135 257,650 (5) (5) 245,108 257,650 (5)
   of which Wealth Management Clients 1 194,013 207,078 210,718 (6) (8) 194,013 210,718 (8)
   of which Corporate & Institutional Clients  51,095 51,057 46,932 0 9 51,095 46,932 9
Number of relationship managers  
Switzerland  2,020 2,010 1,980 0 2 2,020 1,980 2
EMEA  1,260 1,260 1,190 0 6 1,260 1,190 6
Americas  560 560 550 0 2 560 550 2
Asia Pacific  360 360 360 0 0 360 360 0
Wealth Management Clients  4,200 4,190 4,080 0 3 4,200 4,080 3
Corporate & Institutional Clients (Switzerland)  490 490 490 0 0 490 490 0
Number of relationship managers  4,690 4,680 4,570 0 3 4,690 4,570 3
1    Wealth Management Clients covers individual clients, including affluent, high-net-worth and ultra-high-net-worth clients.



Results overview

Income before taxes of CHF 824 million decreased 4% compared to 4Q09 and net revenues of CHF 2,914 million declined 3%. Recurring revenues, representing 77% of net revenues, decreased 2%. In an ongoing low interest rate environment, net interest income decreased 2%, reflecting lower deposit margins on stable average volumes and slightly higher loan margins on higher average volumes. Recurring commissions and fees were down 3%, mainly reflecting lower semi-annual performance fees. Transaction-based revenues decreased 5%, primarily due to gains on ARS positions in 4Q09.

We recorded provision for credit losses of CHF 4 million, with net provisions of CHF 14 million in Wealth Management Clients and net releases of CHF 10 million in Corporate & Institutional Clients.

Total operating expenses of CHF 2,086 million were stable compared to 4Q09, reflecting stable compensation and benefits and slightly lower other operating expenses. Stable compensation and benefits reflected increases in headcount and base salaries offset by lower performance-related variable compensation. Other operating expenses decreased 2%, as 6% lower general and administrative expenses were partially offset by higher commission expenses.

Compared to 3Q10, income before taxes was stable. Net revenues increased 3%, reflecting a 10% increase in transaction-based revenues and stable recurring revenues. The increase in transaction-based revenues mainly resulted from higher brokerage and product issuing fees, due to some recovery from the particularly low client activity in 3Q10, and higher revenues from integrated solutions. Stable net interest income reflected slightly higher loan margins on stable average volumes and stable deposit margins on slightly lower average volumes. A 2% increase in recurring commissions and fees was primarily driven by semi-annual performance fees. Total operating expenses increased 4%, reflecting an increase in performance-related variable compensation and higher commission expenses.

Results in 4Q10 were impacted by the weakening of the average rate of the US dollar and euro against the Swiss franc compared to 3Q10 and 4Q09.

For 2010, income before taxes was CHF 3,426 million, down 6% from 2009. Net revenues of CHF 11,631 million were stable compared to 2009. 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. Excluding fair value losses of CHF 50 million and CHF 118 million related to the Clock Finance transaction in 2010 and 2009, respectively, transaction-based revenues decreased 6%, mainly driven by lower integrated solutions revenues and brokerage fees and gains on real estate and ARS positions in 2009. Provision for credit losses in 2010 was CHF 18 million compared to CHF 180 million in 2009. 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 2%, primarily due to increases in headcount and base salaries, partially offset by lower performance-related variable compensation, reflecting the higher base salaries and the higher proportion of performance-related variable compensation deferred through share-based and other awards.

Assets under management as of the end of 4Q10 of CHF 932.9 billion were stable compared to the end of 3Q10, reflecting positive equity market movements and net new assets, offset by adverse foreign exchange-related movements, mainly due to the weakening of the euro and US dollar against the Swiss franc. Compared to the end of 4Q09, assets under management were up 2.0%, reflecting net new assets and positive equity and bond market movements, mostly offset by the adverse foreign exchange-related movements. Net new assets of CHF 9.6 billion in 4Q10 were resilient, but seasonally lower, and benefited from strong inflows from international regions of CHF 7.1 billion.

In 2010, we acquired net new assets of CHF 54.6 billion compared to CHF 41.6 billion in 2009, up 31.3%. Wealth Management Clients contributed net new assets of CHF 45.3 billion. Over 80% of Wealth Management Clients net new assets were from international regions, with particularly strong inflows from emerging markets and the ultra-high-net-worth (UHNW) 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 at the end of 2010 were only 2.0% higher than at the end of 2009, average assets under management increased 5.3% compared to 4Q09 and 2.1% compared to 3Q10. Average assets under management in 2010 increased 9.9% compared to 2009.


Assets under management - Private Banking
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Assets under management by region (CHF billion)  
Switzerland  323.7 327.4 328.2 (1.1) (1.4) 323.7 328.2 (1.4)
EMEA  268.6 271.7 277.3 (1.1) (3.1) 268.6 277.3 (3.1)
Americas  137.2 135.8 129.6 1.0 5.9 137.2 129.6 5.9
Asia Pacific  78.5 78.2 67.7 0.4 16.0 78.5 67.7 16.0
Wealth Management Clients  808.0 813.1 802.8 (0.6) 0.6 808.0 802.8 0.6
Corporate & Institutional Clients (Switzerland)  124.9 122.0 112.1 2.4 11.4 124.9 112.1 11.4
Assets under management  932.9 935.1 914.9 (0.2) 2.0 932.9 914.9 2.0
Average assets under management (CHF billion)  
Average assets under management  948.5 929.3 900.8 2.1 5.3 941.8 857.2 9.9
Assets under management by currency (CHF billion)  
USD  300.9 304.3 298.2 (1.1) 0.9 300.9 298.2 0.9
EUR  220.7 229.0 248.4 (3.6) (11.2) 220.7 248.4 (11.2)
CHF  292.3 285.1 269.9 2.5 8.3 292.3 269.9 8.3
Other  119.0 116.7 98.4 2.0 20.9 119.0 98.4 20.9
Assets under management  932.9 935.1 914.9 (0.2) 2.0 932.9 914.9 2.0
Net new assets by region (CHF billion)  
Switzerland  1.0 1.2 (2.1) (16.7) 8.3 5.5 50.9
EMEA  2.8 4.3 0.6 (34.9) 366.7 15.1 10.3 46.6
Americas  2.8 3.1 3.1 (9.7) (9.7) 9.5 8.0 18.8
Asia Pacific  1.5 3.8 3.8 (60.5) (60.5) 12.4 11.5 7.8
Wealth Management Clients  8.1 12.4 5.4 (34.7) 50.0 45.3 35.3 28.3
Corporate & Institutional Clients (Switzerland)  1.5 0.2 1.0 50.0 9.3 6.3 47.6
Net new assets  9.6 12.6 6.4 (23.8) 50.0 54.6 41.6 31.3
Growth in assets under management (CHF billion)  
Net new assets  8.1 12.4 5.4 45.3 35.3
Other effects  (13.2) (4.6) 4.6 (40.1) 73.3
   of which market movements  17.4 26.9 13.1 36.8 83.3
   of which currency  (28.6) (30.6) (6.4) (70.8) (4.1)
   of which other  (2.0) (0.9) (2.1) (6.1) (5.9)
Wealth Management Clients  (5.1) 7.8 10.0 5.2 108.6
Corporate & Institutional Clients  2.9 1.7 3.1 12.8 17.4
Growth in assets under management  (2.2) 9.5 13.1 18.0 126.0
Growth in assets under management (annualized) (%)  
Net new assets  4.1 5.4 2.8 6.0 5.3
   of which Wealth Management Clients  4.0 6.2 2.7 5.6 5.1
   of which Corporate & Institutional Clients  4.9 0.7 3.7 8.3 6.7
Other effects  (5.0) (1.3) 3.0 (4.0) 10.7
Growth in assets under management  (0.9) 4.1 5.8 2.0 16.0
Growth in assets under management (rolling four-quarter average) (%)  
Net new assets  6.0 5.7 5.3
   of which Wealth Management Clients  5.6 5.4 5.1
   of which Corporate & Institutional Clients  8.3 8.1 6.7
Other effects  (4.0) (2.0) 10.7
Growth in assets under management (rolling four-quarter average)    2.0 3.7 16.0



Performance indicators


Pre-tax income margin (KPI)

Our target over market cycles was a pre-tax income margin above 40%. In 4Q10, the pre-tax income margin was 28.3%, down 0.3 percentage points from 4Q09 and 1.3 percentage points from 3Q10. In 2010, the pre-tax income margin was 29.5%, down 1.8 percentage points from 2009. Going forward, we will target over market cycles a pre-tax income margin above 35%.



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

Our target over market cycles is a growth rate over 6%. Our annualized quarterly growth rate was 4.0% in 4Q10 and our growth rate was 5.6% in 2010.



Initiatives and achievements

In 4Q10, we continued our long-term strategy of organic growth and strengthened our client focus:

For the second consecutive year we received the global award as “Best Private Bank Globally” from Euromoney. The award recognized the strength of our integrated banking business, our global reach and our first-class investment advice and expertise. In addition, Credit Suisse received regional and country awards, including Best Global Private Bank in Western Europe, the Middle East and Central and Eastern Europe, Australia, Egypt, Guernsey, Italy, Lebanon, Russia, Singapore, Switzerland and the United Arab Emirates.

We were recognized as “Outstanding Global Private Bank” at the 20th Private Banker International Wealth Summit held in Singapore, recognizing the success of our growth strategy, reflected in strong net new assets during the financial crisis. Further, our businesses in Germany and Switzerland were awarded the distinction “Magna cum laude” by Handelsblatt’s Elite Report and our business in Germany maintained its leading position in the Fuchsbriefe “All-time best list” for the third consecutive year.

We pursued IT and operations projects to migrate major Private Banking European locations to a common platform. This supports our growth and client servicing by broadening the products and solutions offering and generating economies of scale and lower costs. As a first major milestone we have migrated the Private Banking Luxembourg business, thereby increasing the product and service offering through this booking platform.

We opened our first Asian family office hub in Singapore as part of our effort to expand our family office services and product offering for UHNW clients. This hub supports UHNW clients with their family office plans by providing networking and education opportunities and assisting clients in family wealth transfer matters, investment policy and governance.

We launched, in collaboration with Asset Management, a new fund focused on megatrends, which we view as long-term, global developments that are independent of events in the financial markets, including demographics and sustainability. Our new fund is an investment solution that systematically invests in a diversified portfolio of equities, ETFs, and products that include identified megatrends.

We launched, in collaboration with Asset Management, the first Swiss real estate fund that invests in diversified hospitality properties throughout Switzerland.


Results detail

The following provides a comparison of our 4Q10 results versus 4Q09 (YoY) and versus 3Q10 (QoQ).


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.

YoY: Down 3% from CHF 3,000 million to CHF 2,914 million
Net interest income decreased 2%, reflecting lower deposit margins on stable average volumes and slightly higher loan margins on higher average volumes. Recurring commissions and fees were down 3%, mainly resulting from lower semi-annual performance fees from Hedging-Griffo. Recurring commission and fees were also impacted by continued cautious investor behavior, investing in lower-margin products, while average assets under management increased.Transaction-based revenues decreased 5%, mainly due to gains on ARS positions in 4Q09, partially offset by higher product issuing fees and lower fair value losses on the Clock Finance transaction.

QoQ: Up 3% from CHF 2,826 million to CHF 2,914 million
Stable net interest income reflected slightly higher loan margins on stable average volumes and stable deposit margins on slightly lower average volumes. A 2% increase in recurring commissions and fees was primarily driven by semi-annual performance fees. Transaction-based revenues increased 10%, mainly from higher brokerage and product issuing fees, due to some recovery from the particularly low client activity in 3Q10, higher revenues from integrated solutions and lower fair value losses on the Clock Finance transaction.


Provision for credit losses

YoY: Down from CHF 26 million to CHF 4 million
New provisions of CHF 77 million and releases of CHF 73 million resulted in provision for credit losses of CHF 4 million. Wealth Management Clients recorded net new provisions of CHF 14 million and Corporate & Institutional Clients recorded net releases of CHF 10 million, despite the high number of corporate insolvencies in Switzerland. A substantial part of the releases was in Corporate & Institutional Clients, while new provisions were recognized in Wealth Management Clients and 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 collateralized by mortgages and securities.

QoQ: Up from CHF (8) million to CHF 4 million
The increase reflected higher provisions and releases.


Operating expenses

Compensation and benefits
YoY: Stable at CHF 1,201 million
Stable compensation and benefits reflected higher headcount and base salaries, offset by lower performance-related variable compensation.

QoQ: Up 5% from CHF 1,139 million to CHF 1,201 million
The increase primarily reflected higher performance-related variable compensation, based on full-year results.

General and administrative expenses
YoY: Down 6% from CHF 761 million to CHF 712 million
The decrease was mainly due to lower IT expenses and marketing and sales expenses.

QoQ: Stable at CHF 712 million
Increased seasonal travel and entertainment and ongoing IT investments in our client advisory services and international platforms were offset by lower non-credit-related provisions, reflecting the CHF 44 million relating to ARS in 3Q10.


Personnel

Headcount at the end of 4Q10 was 25,600, up 100 from 3Q10. The increase was mainly in IT, reflecting investment in our growth markets, advisory and solutions capabilities and in our multi-shore business model. The number of relationship managers in Wealth Management Clients was stable during 4Q10 in all regions.


Wealth Management Clients


Net revenues

Recurring
YoY: Down 3% from CHF 1,898 million to CHF 1,832 million
The decrease resulted from 2% lower net interest income and 5% lower recurring commissions and fees. Net interest income reflected lower deposit margins on slightly lower average volumes and slightly higher loan margins on higher average volumes. Recurring commissions and fees declined, mainly reflecting lower semi-annual performance fees from Hedging-Griffo. Recurring commission and fees were also impacted by continued cautious investor behavior, investing in lower-margin products, while average assets under management increased 4.3%.

QoQ: Stable at CHF 1,832 million
Stable recurring revenues reflected stable net interest income and slightly higher recurring commissions and fees. Net interest income reflected stable loan and deposit margins on stable average loan volumes and slightly lower average deposit volumes. Slightly higher recurring commissions and fees mainly reflected semi-annual performance fees.

Transaction-based
YoY: Down 6% from CHF 674 million to CHF 632 million
The decrease was mainly related to gains on ARS positions in 4Q09 and lower revenues from integrated solutions, partly offset by higher product issuing fees.

QoQ: Up 12% from CHF 565 million to CHF 632 million
The increase mainly reflected higher brokerage and product issuing fees due to some recovery in client activity from particularly low levels in 3Q10, and higher revenues from integrated solutions.


Gross margin

Our gross margin was 120 basis points in 4Q10, ten basis points lower than 4Q09. The recurring margin decreased seven basis points, due to a 4.3% increase in average assets under management and the 3% decrease in recurring revenues. The transaction-based margin decreased three basis points, reflecting the 6% decrease in transaction-based revenues and the 4.3% increase in average assets under management.

Compared to 3Q10, the gross margin increased two basis points, reflecting the 12% increase in transaction-based revenues and 2.0% higher average assets under management.


Results - Wealth Management Clients
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Statements of operations (CHF million)  
Net revenues  2,464 2,385 2,572 3 (4) 9,829 9,871 0
Provision for credit losses  14 8 9 75 56 70 33 112
Total operating expenses  1,844 1,765 1,871 4 (1) 7,231 6,940 4
Income before taxes  606 612 692 (1) (12) 2,528 2,898 (13)
Statement of operations metrics (%)  
Cost/income ratio  74.8 74.0 72.7 73.6 70.3
Pre-tax income margin  24.6 25.7 26.9 25.7 29.4
Net revenues (CHF million)  
Net interest income  923 929 946 (1) (2) 3,747 3,706 1
Non-interest income  1,541 1,456 1,626 6 (5) 6,082 6,165 (1)
Net revenues  2,464 2,385 2,572 3 (4) 9,829 9,871 0
Net revenue detail (CHF million)  
Recurring  1,832 1,820 1,898 1 (3) 7,426 7,310 2
Transaction-based  632 565 674 12 (6) 2,403 2,561 (6)
Net revenues  2,464 2,385 2,572 3 (4) 9,829 9,871 0
Average assets under management (CHF billion)  
Average assets under management  824.4 808.6 790.7 2.0 4.3 820.9 755.4 8.7
Gross margin (annualized) (bp)  1
Recurring  89 90 96 91 97
Transaction-based  31 28 34 29 34
Gross margin  120 118 130 120 131
1    Net revenues divided by average assets under management.



Corporate & Institutional Clients


Net revenues

Net interest income
YoY: Stable at CHF 301 million
Net interest income reflected slightly higher loan margins on slightly higher average volumes and lower deposit margins on higher average volumes.

QoQ: Up 5% from CHF 288 million to CHF 301 million
The increase reflected slightly higher deposit margins on slightly higher average volumes and higher loan margins on stable average volumes.

Non-interest income
YoY: Up 18% from CHF 126 million to CHF 149 million
The increase reflected lower fair value losses of CHF 16 million on the Clock Finance transaction compared to losses of CHF 30 million in 4Q09. Excluding the fair value losses on the Clock Finance transaction, non-interest income increased 6%, mainly driven by higher recurring commissions and fees, product issuing fees and revenues from integrated solutions.

QoQ: Down 3% from CHF 153 million to CHF 149 million
The decrease was driven by lower transaction-based revenues, partly offset by the impact from lower fair value losses on the Clock Finance transaction of CHF 16 million compared to losses of CHF 21 million in 3Q10. Excluding the fair value losses on the Clock Finance transaction, non-interest income decreased 5%. Recurring commissions and fees were stable.


Return on business volume

Return on business volume measures revenues over average business volume, which is comprised of client assets and net loans.

Return on business volume of 77 basis points was two basis points lower compared to 4Q09, as net revenues increased 5% and the average business volume increased 7.8%, mainly from higher assets under management. Compared to 3Q10, the return on business volume increased one basis point, reflecting the 2% increase in net revenues and a 4.2% increase in net loans.

Excluding the fair value losses on the Clock Finance transaction, return on business volume was 79 basis points in 4Q10, 80 basis points in 3Q10 and 84 basis points in 4Q09. The decrease compared to 4Q09 primarily reflected higher average business volume.


Results - Corporate & Institutional Clients
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Statements of operations (CHF million)  
Net revenues  450 441 428 2 5 1,802 1,791 1
Provision for credit losses  (10) (16) 17 (38) (52) 147
Total operating expenses  242 233 246 4 (2) 956 891 7
Income before taxes  218 224 165 (3) 32 898 753 19
Statement of operations metrics (%)  
Cost/income ratio  53.8 52.8 57.5 53.1 49.7
Pre-tax income margin  48.4 50.8 38.6 49.8 42.0
Net revenue (CHF million)  
Net interest income  301 288 302 5 0 1,184 1,294 (9)
Non-interest income  149 153 126 (3) 18 618 497 24
Net revenues  450 441 428 2 5 1,802 1,791 1
Net revenue detail (CHF million)  
Recurring  412 398 399 4 3 1,610 1,670 (4)
Transaction-based  38 43 29 (12) 31 192 121 59
Net revenues  450 441 428 2 5 1,802 1,791 1
Average business volume (CHF billion)  
Average business volume  234.8 231.4 217.9 1.5 7.8 231.8 208.9 11.0
Business volume (CHF billion)  
Client assets  182.7 181.2 170.0 1 7 182.7 170.0 7
   of which assets under management  124.9 122.0 112.1 2 11 124.9 112.1 11
   of which commercial assets  50.9 52.5 51.1 (3) 0 50.9 51.1 0
   of which custody assets  6.9 6.7 6.8 3 1 6.9 6.8 1
Net loans  52.4 50.3 50.3 4 4 52.4 50.3 4
Business volume  235.1 231.5 220.3 2 7 235.1 220.3 7
Return on business volume (annualized) (bp)  1
Return on business volume  77 76 79 78 86
1    Net revenues divided by average business volume.





Investment Banking

In 4Q10, we reported income before taxes of CHF 558 million and net revenues of CHF 3,478 million. Net revenues reflected strong underwriting and advisory results and solid equity sales and trading results. Our fixed income sales and trading business delivered a resilient performance, despite macroeconomic uncertainties and a seasonal decline in client activity.


Results
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Statements of operations (CHF million)  
Net revenues  3,478 3,421 3,038 2 14 16,214 20,537 (21)
Provision for credit losses  (27) (18) (66) 50 (59) (97) 326
Compensation and benefits  1,823 1,872 870 (3) 110 8,033 8,652 (7)
General and administrative expenses  823 877 915 (6) (10) 3,495 3,559 (2)
Commission expenses  301 295 289 2 4 1,252 1,155 8
Total other operating expenses  1,124 1,172 1,204 (4) (7) 4,747 4,714 1
Total operating expenses  2,947 3,044 2,074 (3) 42 12,780 13,366 (4)
Income before taxes  558 395 1,030 41 (46) 3,531 6,845 (48)
Statement of operations metrics (%)  
Cost/income ratio  84.7 89.0 68.3 78.8 65.1
Pre-tax income margin  16.0 11.5 33.9 21.8 33.3
Utilized economic capital and return  
Average utilized economic capital (CHF million)  18,766 20,883 19,446 (10) (3) 20,364 20,202 1
Pre-tax return on average utilized economic capital (%) 1 12.5 8.2 21.8 18.0 34.5
Number of employees (full-time equivalents)  
Number of employees  20,700 21,200 19,400 (2) 7 20,700 19,400 7
1    Calculated using a return excluding interest costs for allocated goodwill.


Results (continued)
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Net revenue detail (CHF million)  
Debt underwriting  594 509 401 17 48 2,015 1,141 77
Equity underwriting  297 169 464 76 (36) 901 1,190 (24)
Total underwriting  891 678 865 31 3 2,916 2,331 25
Advisory and other fees  350 212 329 65 6 1,090 793 37
Total underwriting and advisory  1,241 890 1,194 39 4 4,006 3,124 28
Fixed income sales and trading  888 1,458 818 (39) 9 6,446 10,457 (38)
Equity sales and trading  1,387 1,080 1,102 28 26 5,884 7,469 (21)
Total sales and trading  2,275 2,538 1,920 (10) 18 12,330 17,926 (31)
Other  (38) (7) (76) 443 (50) (122) (513) (76)
Net revenues  3,478 3,421 3,038 2 14 16,214 20,537 (21)
Average one-day, 99% Value-at-Risk (CHF million)  1
Interest rate & credit spread  104 122 125 (15) (17) 121 157 (23)
Foreign exchange  19 25 9 (24) 111 19 16 19
Commodity  16 10 18 60 (11) 14 21 (33)
Equity  27 26 39 4 (31) 25 38 (34)
Diversification benefit  (62) (65) (96) (5) (35) (68) (98) (31)
Average one-day, 99% Value-at-Risk  104 118 95 (12) 9 111 134 (17)
Risk-weighted assets (million)  2
Risk-weighted assets (CHF)  136,883 147,545 144,439 (7) (5) 136,883 144,439 (5)
Risk-weighted assets (USD)  146,009 151,026 140,096 (3) 4 146,009 140,096 4
1    As part of the ongoing review to improve risk management approaches and methodologies, the average one-day, 99% VaR measure was revised in 2Q10. For further information on VaR and changes in VaR methodology, refer to IV – Treasury and Risk management – Risk management – Market risk.   2    Includes additional risk-weighted asset equivalents attributable to the segment that are deducted from Group tier 1 capital.


Results overview

In 4Q10, income before taxes was CHF 558 million, down 46% compared to 4Q09, and up 41% from 3Q10. Net revenues increased to CHF 3,478 million, up 14% from 4Q09 and up 2% compared to 3Q10.

In 4Q10, fixed income sales and trading results were stronger compared to a weak 4Q09, but significantly lower than 3Q10, reflecting a challenging environment for the industry, driven by macroeconomic uncertainties, a seasonal decline in client activity and difficult market conditions for our global rates business. Our fixed income sales and trading results in 4Q10 were driven by revenues in US RMBS trading, emerging markets, global rates and foreign exchange, commodities and credit businesses.

Equity sales and trading results were solid and stronger compared to 4Q09 and 3Q10, driven by revenues from cash equities, prime services, derivatives and equity arbitrage trading. Results in these businesses benefited from improved client trading activity during 4Q10 and continued leading franchise positions.

Underwriting and advisory results were strong and in line with industry-wide capital issuance levels and M&A activity. We had strong equity underwriting revenues, driven by higher industry-wide issuance levels, particularly in IPOs, which had record industry-wide issuance levels during the quarter. Revenues in our debt underwriting businesses reflected strong results in leveraged finance, driven by record industry-wide high yield issuance volumes.Advisory revenues reflected improved completed M&A market share.

Our results reflected fair value losses on Credit Suisse vanilla debt of CHF 54 million in 4Q10 compared to net fair value losses of CHF 243 million in 4Q09 and fair value losses of CHF 57 million in 3Q10. Our results also reflected debit valuation adjustment (DVA) gains relating to certain structured note liabilities of CHF 15 million in 4Q10, compared to DVA losses of CHF 91 million in 4Q09 and DVA losses of CHF 172 million in 3Q10. For further information on DVA, refer to Note 25 – Fair Value of financial instruments in V – Condensed consolidated financial statements – unaudited.

Compensation and benefits of CHF 1,823 million in 4Q10 were significantly higher than 4Q09, primarily due to the reversal of performance-related variable compensation accruals in 4Q09, and lower than 3Q10, primarily reflecting the foreign exchange translation impact. In US dollars, compensation and benefits were flat compared to 3Q10, reflecting a slight increase in performance-related variable compensation accruals, mostly offset by a decrease in deferred compensation expense from prior-year share awards. Total other operating expenses were lower compared to 4Q09, primarily reflecting the foreign exchange translation impact and lower litigation charges. Excluding certain litigation charges of CHF 31 million in 4Q09, total other operating expenses in US dollars were flat compared to 4Q09, as an increase in commission expenses was mostly offset by a decrease in general and administrative expenses, driven by reductions across most expense categories. Total other operating expenses were lower compared to 3Q10, primarily reflecting the foreign exchange translation impact and lower litigation charges. Excluding certain litigation charges of CHF 29 million in 3Q10, total other operating expenses increased 3% in US dollars, driven by higher commission expenses and an increase in legal fees and occupancy expenses.

Risk-weighted assets of USD 146 billion decreased USD 5 billion compared to 3Q10. Average one-day, 99% risk management value-at-risk (VaR) of CHF 104 million decreased 12% compared to 3Q10.

Results in 4Q10 were impacted by the weakening of the average rate of the US dollar against the Swiss franc compared to 3Q10 and 4Q09, which adversely affected revenues and favorably impacted expenses. In US dollars, net revenues were 5% higher compared to 3Q10 and 20% higher compared to 4Q09 and total operating expenses were flat compared to 3Q10 and 49% higher compared to 4Q09. For information on foreign exchange translation rates, refer to VI – Investor information.

For 2010, income before taxes was CHF 3,531 million, compared to CHF 6,845 million in 2009. Net revenues were CHF 16,214 million, compared to CHF 20,537 million in 2009. Results in many of our businesses in 2010 reflected lower levels of client trading activity compared to 2009. Our 2010 revenues included strong results in US RMBS trading, cash equities, debt underwriting and prime services. Results in global rates and credit, including leveraged finance trading and investment grade trading, were solid, but reflected the normalization of market conditions from more favorable market conditions in 2009 and market volatility triggered by sovereign debt concerns in Europe in 2010. Results in our underwriting and advisory businesses were strong, reflecting an improvement in issuance volumes and completed M&A activity and improved share of wallet with clients. Our results included 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 DVA losses of CHF 73 million in 2010, compared to DVA losses of CHF 321 million in 2009. Our 2009 results included approximately CHF 1.3 billion of revenues in 1Q09 due to the normalization of market conditions that had been severely dislocated in 4Q08.

Total operating expenses were CHF 12,780 million, down CHF 586 million, or 4%, reflecting the foreign exchange translation impact. In US dollar terms, total operating expenses were flat, as an increase in total other operating expenses was mostly offset by a decrease in compensation and benefits. The decrease in compensation and benefits was primarily due to lower performance-related variable compensation accruals. The 2010 performance-related variable compensation accruals reflected lower risk-adjusted profitability, higher base salaries and a higher proportion of performance-related variable compensation deferred through share-based, restricted cash and other awards. The decrease was offset in part by an increase in salary expense, reflecting the higher base salaries and increased headcount, and higher deferred compensation from prior-year share awards. Excluding certain litigation charges of CHF 461 million in 2009 and CHF 29 million in 2010, total other operating expenses increased 11% from 2009, reflecting higher IT investments costs and commission expenses. Results in 2009 were also impacted by the weakening of the average rate of the US dollar against the Swiss franc, which adversely affected revenues and favorably impacted expenses.


Performance indicators


Pre-tax income margin (KPI)

Our target over market cycles is a pre-tax income margin of 25% or greater. The pre-tax income margin was 16.0% in 4Q10, compared to 33.9% in 4Q09 and 11.5% in 3Q10.


Value-at-Risk

The average one-day, 99% risk management VaR was CHF 104 million in 4Q10, compared to CHF 95 million in 4Q09 and CHF 118 million in 3Q10. For further information on VaR, refer to IV – Treasury and Risk management – Risk management – Market risk.


Pre-tax return on average utilized economic capital

The pre-tax return on average utilized economic capital was 12.5% in 4Q10, compared to 21.8% in 4Q09 and 8.2% in 3Q10.


Risk-weighted assets

Risk-weighted assets decreased to USD 146 billion compared to USD 151 billion in 3Q10, primarily related to a reduction in counterparty credit risk across several businesses, and a decrease in risk-weighted assets in our exit businesses, including a reduction due to the sale on a non-recourse basis of a substantial portion of our commercial mortgage-backed securities (CMBS) exit portfolio in Europe.


Significant transactions and achievements

We were active in executing or advising on a number of significant closed and pending transactions, reflecting the breadth and diversity of our investment banking franchise:

Debt capital markets: We arranged key financings for a diverse set of clients, including Reynolds and Rank Group Limited (New Zealand packaging company), Weather Investments SpA (Italy-based telecommunications investment company), Precision Drilling (Canadian oil field services provider), Transdigm (US aircraft component manufacturer and supplier) and PPL Corporation (US electricity and natural gas supplier).

Equity capital markets: We executed IPOs for HRT Participacoes em Petroleo (Brazil-based offshore exploration and production company), AIA Group (Asian life insurance business of American International Group) and QR National (Australian rail freight operator), a combined qualified institutional placement and a convertible bond issue for Tata Motors (Indian automobile manufacturer) and a rights offering for BBVA (Spanish banking group).

Mergers and acquisitions: We advised on a number of key transactions, including the sale by Doughty Hanson & Co (UK private equity firm) of Impress Group (global metal packaging company) to Ardagh Glass (Irish packaging manufacturer), the acquisition of King Pharmaceuticals (US specialty pharmaceutical company) by Pfizer (global pharmaceuticals company), the acquisition by Advent International (global private equity firm) and Bain Capital (global private investment firm) of RBS WorldPay (merchant acquiring and processing business of The Royal Bank of Scotland Group) and the sale by Bakrie and Brothers (Indonesia-based group of companies) and Bukit Mutiara (Indonesian coal producer) of stakes in Bumi Resources and Berau Coal Energy (Indonesian coal assets) to Vallar (UK acquisition company).

Industry awards
Awarded “Most Innovative Investment Bank of the Year” by The Banker. We were also awarded “Most Innovative Investment Bank for Equity Linked,” “Most Innovative Investment Bank for Equity Derivatives” and “Most Innovative Investment Bank for Bank Capital.”

Awarded “Best Bank for High Yield Corporate Bonds” for the Americas by Credit magazine, based on a broad survey of buy-side credit market participants. Credit Suisse gained more market share than any other bank and was the only one of the top-three bookrunners to increase market share.

We were also awarded “Best Euro High Yield Bond,” “Best Dollar High Yield Bond,” “Best Asian Local Currency Bond,” “Best Bond from a Supranational or Development Agency Issuer,” “Best Dollar Investment Grade Bond (corporate)” and “Best Euro Investment Grade Bond (financial)” in Credit magazine poll.

Awarded “Credit Derivatives House of the Year” by Risk magazine.

Awarded “Euro Bond of the Year” by the International Financing Review for our work with UniCredit. We were also awarded “EMEA High-Yield Bond of the Year” for our work with Ziggo, “Leveraged Loan of the Year” for our work with the Reynolds Group, “Latin America Loan of the Year” for our work with Americas Mining Corporation, “Emerging Asia Bond of the Year” for our work with the Republic of the Philippines, “SSAR Bond of the Year” for our work with the Canadian government, “Americas Equity Issue of the Year” for our work with the PPL corporation and “Swiss Franc Bond House of the Year.”

We were recognized by Euromoney for the Rabobank contingent convertible note and the Wind refinancing transactions in their European Deals of the Year.

Named “Cash Equities House of the Year” and “Prime Brokerage of the Year” by Financial News in its annual European Investment Banking Awards. We were also named “Financial Institutions Bond House of the Year” and awarded “FIG Investment Banking Team of the Year” in its Awards for Excellence in Investment Banking.

Awarded “Equity Derivatives House of the Year” by AsiaRisk.

Credit Suisse AES was awarded “Best Algorithmic Trading Service” by Financial News’ in its Awards for Excellence in Trading & Technology Europe 2010 and “Best Buy-Side Algorithmic/DMA Product or Service” in WatersTechnology’s Buy-Side Technology Awards 2010. We were named “Best Sell-Side Broker for Trading & Execution (Equities),” “Best in Electronic Trading,” “Best Internal Crossing Engine/Dark Pool” and “Most Innovative Smart Order Routing” in the trading and execution category by AsianInvestor in its 2010 Service Provider Awards. In the Prime Services category, we were awarded “Best Prime Broker for Securities Lending.”

Awarded “Best Foreign Investment Bank, Indonesia” by The Asset for the fifth consecutive year in its Country Awards 2010 Southeast & South Asia. We were also named “Best Debt House, Indonesia” and awarded “Best Deal, Philippines” for our work with the Republic of the Philippines.

Market share momentum
Credit Suisse was ranked third by Thomson in global completed M&A market share for 2010, compared to eighth in 2009.

Credit Suisse was ranked third by Thomson in global high yield market share for 2010, compared to fourth in 2009.

Credit Suisse maintained its #5 global rank in share of wallet for 2010 according to Dealogic, while improving market share to 6.3% compared to 5.9% in 2009.

Credit Suisse improved its share of wallet according to Dealogic in the Americas to fifth in 2010 with 6.4% market share, from sixth in 2009 with 4.8% market share.

Credit Suisse improved to fourth in global M&A in 2010 according to Dealogic with 6.4% share of wallet, compared to seventh in 2009 with 5.4% share of wallet.


Results detail

The following provides a comparison of our 4Q10 results versus 4Q09 (YoY) and versus 3Q10 (QoQ).


Net revenues

Debt underwriting
YoY: Up 48% from CHF 401 million to CHF 594 million
The increase was due to stronger results in leveraged finance, particularly in the US, reflecting a significant increase in industry-wide high yield issuance volumes. The volume of high yield issuance in 4Q10 was the highest for any quarter since Thomson began tracking this data in 1980. The increase was partly offset by lower revenues from investment grade issuance, reflecting a decrease in industry-wide issuance volumes and lower revenues from asset-backed securities (ABS).

QoQ: Up 17% from CHF 509 million to CHF 594 million
The increase reflected stronger results in leveraged finance, due to record industry-wide high yield issuance volumes, and stronger revenues from ABS. This was partly offset by lower revenues from investment grade issuance, reflecting significantly lower industry-wide investment grade issuance volumes. 3Q10 results also included significant structuring and syndication fees relating to a large private financing.

Equity underwriting
YoY: Down 36% from CHF 464 million to CHF 297 million
The decrease was driven by lower revenues from follow-on offerings, despite stable industry-wide follow-on issuances and market share, reflecting higher fee margins on certain large issuances in 4Q09. The decrease was partly offset by higher revenues from IPOs, reflecting record industry-wide IPO volumes and despite lower IPO market share.

QoQ: Up 76% from CHF 169 million to CHF 297 million
The increase reflected significantly higher revenues from IPOs, driven by record industry-wide IPO volumes in 4Q10 and stable market share, and higher revenues from convertible offerings.

Advisory and other fees
YoY: Up 6% from CHF 329 million to CHF 350 million
The increase was due to higher M&A fees driven by higher completed M&A market share. Our 4Q09 results included significant other advisory fees.

QoQ: Up 65% from CHF 212 million to CHF 350 million
The increase reflected an increase in industry-wide completed M&A activity and a significant increase in completed M&A market share.

Fixed income sales and trading
YoY: Up 9% from CHF 818 million to CHF 888 million
The increase was driven by higher revenues from our US RMBS trading, primarily non-agency, corporate lending and commodities businesses. In addition, we had revenues in our longevity risk management and fixed income arbitrage trading businesses compared to losses in 4Q09. The increase was partially offset by lower revenues from our global rates and investment grade trading businesses. Despite solid client flows, we had weaker results in our global rates business as challenging market conditions resulted in lower market-making revenues. Revenues from investment grade trading, particularly in Europe, were adversely affected by renewed market volatility from sovereign debt concerns and widening credit spreads. We had weaker results in several of our exit businesses compared to 4Q09, including special opportunities, our CDO business, certain commodities and residential mortgage businesses, partly offset by realized gains from the sale of a substantial portion of our CMBS exit portfolio. Our results also reflected DVA gains of CHF 5 million in 4Q10, compared to DVA losses of CHF 91 million in 4Q09, relating to structured note liabilities, and fair value losses on Credit Suisse vanilla debt of CHF 49 million compared to net fair value losses of CHF 219 million in 4Q09.

QoQ: Down 39% from CHF 1,458 million to CHF 888 million
The decrease was driven by a significant decline in our global rates business, which was impacted by challenging market conditions. Revenues in US RMBS trading, primarily non-agency, were lower compared to a strong 3Q10, reflecting a seasonal decline in client trading flows. We also had lower revenues in leveraged finance trading and investment grade trading businesses. Revenues from investment grade trading, particularly in Europe, were adversely affected by renewed market volatility from sovereign debt concerns and widening credit spreads. These results were partly offset by gains in several of our exit businesses, including from certain residential mortgage businesses and from the sale of a substantial portion of the CMBS exit portfolio. We also had higher revenues in longevity risk management and commodities. Our results reflected DVA gains of CHF 5 million compared to DVA losses of CHF 54 million in 3Q10, and fair value losses on Credit Suisse vanilla debt of CHF 49 million compared to fair values losses of CHF 51 million in 3Q10.

Equity sales and trading
YoY: Up 26% from CHF 1,102 million to CHF 1,387 million
The increase was driven by higher revenues in derivatives, reflecting higher client trading volumes, particularly in emerging markets. We also had higher revenues in prime services, reflecting higher client balances and activity. 4Q09 results in prime services had been impacted by weak levels of client activity, especially among hedge fund clients. In addition, the increase reflected higher revenues in equity arbitrage trading and convertibles. Revenues from cash equities were solid. Our results reflected fair value losses on Credit Suisse vanilla debt of CHF 5 million, compared to net fair value losses of CHF 24 million in 4Q09, and DVA gains of CHF 10 million compared to none in 4Q09.

QoQ: Up 28% from CHF 1,080 million to CHF 1,387 million
The increase was driven by higher revenues in derivatives, reflecting higher client trading volumes, particularly in emerging markets, and equity arbitrage trading. We also had higher revenues in cash equities, driven by an increase in industry-wide volumes, improved revenues from electronic trading and higher revenues in prime services. Our results reflected fair value losses on Credit Suisse vanilla debt of CHF 5 million compared to fair value losses of CHF 6 million in 3Q10, and DVA gains of CHF 10 million compared to DVA losses of CHF 118 million in 3Q10.


Provision for credit losses

YoY: From CHF (66) million to CHF (27) million
The provision release reflected lower releases, including against a guarantee provided in a prior year to a third-party bank, and lower recoveries.

QoQ: From CHF (18) million to CHF (27) million
The provision release reflected a release in 4Q10 compared to provisions in 3Q10 against a guarantee provided in a prior year to a third-party bank and lower provisions, releases and recoveries against other loans.


Operating expenses

Compensation and benefits
YoY: Up 110% from CHF 870 million to CHF 1,823 million
The increase reflected the reversal of previously accrued performance-related variable compensation in 4Q09, resulting in a negative accrual for that quarter. The increase was also driven by higher salary expense, reflecting higher base salaries and increased headcount, and higher deferred compensation from prior-year share awards.

QoQ: Down 3% from CHF 1,872 million to CHF 1,823 million
The decrease primarily reflected the foreign exchange translation impact and lower deferred compensation expense from prior-year share awards. In US dollars, compensation expenses were stable.

General and administrative expenses
YoY: Down 10% from CHF 915 million to CHF 823 million
The decrease primarily reflected the foreign exchange translation impact, lower litigation charges and reductions across most expense categories, including advertising, travel and entertainment and legal expenses.

QoQ: Down 6% from CHF 877 million to CHF 823 million
The decrease reflected the foreign exchange translation impact and lower litigation charges. Excluding certain litigation charges of CHF 29 million in 3Q10, general and administrative expenses increased in US dollars, driven by higher legal and occupancy expenses, partly offset by lower advertising and recruitment expenses.


Personnel

Headcount at the end of 4Q10 was 20,700, down 500 from 3Q10, driven by a selective reduction of front office headcount across businesses, reflecting current market conditions, and a reduction in IT professionals.









Asset Management

In 4Q10, we reported income before taxes of CHF 180 million and net revenues of CHF 617 million. Higher performance, placement and transaction fees and gains from equity participations were partially offset by lower investment-related gains and asset management fees. We recorded net new assets of CHF 4.5 billion, maintaining a positive trend in asset inflows. Net new assets for 2010 were CHF 20.6 billion, up substantially from CHF 0.4 billion in 2009.


Results
  in / end of % change in / end of % change
4Q10 3Q10 4Q09 QoQ YoY 2010 2009 YoY
Statements of operations (CHF million)  
Net revenues  617 582 637 6 (3) 2,332 1,842 27
Provision for credit losses  0 0 0 0 0
Compensation and benefits  250 261 264 (4) (5) 1,082 1,090 (1)
General and administrative expenses  147 150 160 (2) (8) 583 557 5
Commission expenses  40 36 54 11 (26) 164 160 2
Total other operating expenses  187 186 214 1 (13) 747 717 4
Total operating expenses  437 447 478 (2) (9) 1,829 1,807 1
Income/(loss) before taxes  180 135 159 33 13 503 35
Statement of operations metrics (%)  
Cost/income ratio  70.8 76.8 75.0 78.4 98.1
Pre-tax income margin  29.2 23.2 25.0 21.6 1.9
Utilized economic capital and return  
Average utilized economic capital (CHF million)  3,426 3,595 3,358 (5) 2 3,439 3,388 2
Pre-tax return on average utilized economic capital (%) 1 22.1 16.0 20.0 15.7 2.1
Number of employees (full-time equivalents)  
Number of employees  2,900 2,900 3,100 0 (6)