Credit Suisse - Financial 3rd Quarter 2017
Credit Suisse - Financial 3rd Quarter 2017
Credit Suisse - Financial 3rd Quarter 2017
Financial Report
3Q17
Key metrics
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Net income/(loss) attributable to shareholders 244 303 41 (19) 495 1,143 (91) –
Basic earnings/(loss) per share (CHF) 0.10 0.13 0.02 (23) 400 0.48 (0.04) –
Diluted earnings/(loss) per share (CHF) 0.09 0.13 0.02 (31) 350 0.47 (0.04) –
Return on equity attributable to shareholders (%) 2.2 3.0 0.4 – – 3.6 (0.3) –
Effective tax rate (%) 38.3 47.4 83.3 – – 30.7 (42.9) –
Core Results (CHF million, except where indicated)
Assets under management 1,344.8 1,307.3 1,254.2 2.9 7.2 1,344.8 1,254.2 7.2
CET1 ratio (%) 14.0 14.2 14.1 – – 14.0 14.1 –
Look-through CET1 ratio (%) 13.2 13.3 12.0 – – 13.2 12.0 –
Look-through CET1 leverage ratio (%) 3.8 3.8 3.4 – – 3.8 3.4 –
Look-through Tier 1 leverage ratio (%) 5.2 5.2 4.6 – – 5.2 4.6 –
Share
information
II
Treasury, risk, balance sheet
and off-balance sheet 49
III
Condensed consolidated
financial statements – unaudited 83
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 subsidiar-
ies. The business of Credit Suisse AG, the direct 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 and its consolidated subsidiaries.
Abbreviations are explained in the List of abbreviations in the back of this report.
Publications referenced in this report, whether via website links or otherwise, are not incorporated into this report.
In various tables, use of “–” indicates not meaningful or not applicable.
2
I
Credit Suisse Operating environment 4
Asia Pacific 30
Global Markets 36
Corporate Center 45
Operating environment
Operating environment
Global economic growth appeared to remain robust in 3Q17, while inflation was low. Global equity markets ended the
quarter higher, with European bank stocks in particular performing well, and volatility was low. Major government bond
yields were stable and the US dollar depreciated against most major currencies. Commodities performed strongly.
Yield curves
2 2 2
1 1 1
0 0 0
-1 -1 -1
Years 0 5 10 15 20 25 Years 0 5 10 15 20 25 Years 0 5 10 15 20 25
Equity markets
Global equities ended the quarter higher. Once again European bank stocks outperformed global stocks in general. Volatility remained low.
115 115 25
110 110 20
105 105 15
100 100 10
95 95 5
90 90 0
2017 July August September 2017 July August September 2017 July August September
p Emerging markets Asia p Europe p MSCI World banks p MSCI European banks p VDAX
p Emerging markets Latin America p North America p MSCI World p VIX Index
Source: Datastream, MSCI Barra, Credit Suisse Source: Datastream, MSCI Barra, Credit Suisse Source: Datastream, Credit Suisse
Emerging market hard currency bonds outperformed global high- Credit spreads
yield bonds. In US dollar terms, emerging market local currency
bonds performed even better due to strong currency gains, despite Cash credit spreads slightly tightened. Derivative credit spreads
lower returns towards the end of 3Q17 as the US dollar regained remained relatively stable in 3Q17.
some strength in September.
bp
The US dollar depreciated against most major currencies in
66
3Q17 as weaker-than-anticipated US inflation weighed on inter-
est rate expectations. The euro as well as Norwegian and Swed- 63
ish krona were among the strongest currencies, benefitting from
60
strong European economic growth. The British pound also appre-
ciated. The Swiss franc was among the weakest currencies, 57
depreciating both against the euro and US dollar, partly due to
the reversal of safe-haven flows of capital, reflecting reduced eco- 54
nomic and political risks in the Eurozone. In emerging markets, the
51
South African rand was among the weakest currencies while the
Brazilian real was one of the strongest currencies. 48
The Credit Suisse Commodities Benchmark more than 2017 July August September
reversed the losses suffered in 2Q17, gaining 7.9% in 3Q17.
Energy was the strongest sector followed by base metals, which p European CDS (iTraxx) p North American CDS (CDX) bp: basis points
benefited from improved Chinese industrial activity. Precious met-
Source: Bloomberg, Credit Suisse
als lost some of their initial gains later in the quarter, but ended
the quarter 3.9% higher compared to 2Q17. Agricultural prices
continued to underperform amid favorable crop conditions through
the summer.
6 Credit Suisse results
Operating environment
1
Equity trading volume (17) 4 (20) 10
2
Announced mergers and acquisitions 4 6 (12) 37
2
Completed mergers and acquisitions (3) (6) (29) (15)
2
Equity underwriting (16) (1) (32) 62
Debt underwriting 2 3 (3) (26) (13)
Syndicated lending – investment grade 2 (32) (14) 3 – –
1
London Stock Exchange, Borsa Italiana, Deutsche Börse and BME. Global also includes ICE and NASDAQ.
2
Dealogic.
3
9M17 vs 9M16.
Credit Suisse
In 3Q17, we recorded net income attributable to shareholders of CHF 244 million. Diluted earnings per share were
CHF 0.09 and return on equity attributable to shareholders was 2.2%. As of the end of 3Q17, our BIS CET1 ratio was
13.2% on a look-through basis.
Results
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net interest income 1,622 1,737 1,930 (7) (16) 4,992 5,940 (16)
Commissions and fees 2,762 2,905 2,680 (5) 3 8,713 8,151 7
Trading revenues 320 237 232 35 38 1,131 55 –
Other revenues 268 326 554 (18) (52) 875 996 (12)
Net revenues 4,972 5,205 5,396 (4) (8) 15,711 15,142 4
Provision for credit losses 32 82 55 (61) (42) 167 177 (6)
Compensation and benefits 2,451 2,542 2,674 (4) (8) 7,651 7,890 (3)
General and administrative expenses 1,630 1,580 1,978 3 (18) 4,858 5,586 (13)
Commission expenses 347 350 322 (1) 8 1,065 1,061 0
Restructuring expenses 112 69 145 62 (23) 318 491 (35)
Total other operating expenses 2,089 1,999 2,445 5 (15) 6,241 7,138 (13)
Total operating expenses 4,540 4,541 5,119 0 (11) 13,892 15,028 (8)
Income/(loss) before taxes 400 582 222 (31) 80 1,652 (63) –
Income tax expense 153 276 185 (45) (17) 507 27 –
Net income/(loss) 247 306 37 (19) – 1,145 (90) –
Net income/(loss) attributable to noncontrolling interests 3 3 (4) 0 – 2 1 100
Net income/(loss) attributable to shareholders 244 303 41 (19) 495 1,143 (91) –
Statement of operations metrics (%)
Return on regulatory capital 3.5 5.1 1.8 – – 4.8 (0.2) –
Cost/income ratio 91.3 87.2 94.9 – – 88.4 99.2 –
Effective tax rate 38.3 47.4 83.3 – – 30.7 (42.9) –
Earnings per share (CHF)
Basic earnings/(loss) per share 0.10 0.13 0.02 (23) 400 0.48 (0.04) –
Diluted earnings/(loss) per share 0.09 0.13 0.02 (31) 350 0.47 (0.04) –
Return on equity (%, annualized)
Credit Suisse
Credit Suisse includes the results of our six reporting segments, including the Strategic Resolution Unit, and the Corporate Center. Core Results do
not include revenues and expenses from our Strategic Resolution Unit.
Credit Suisse
Core Results
Overview of Results
Investment
Swiss International
Banking &
Strategic
Universal Wealth
Global Capital Corporate Core Resolution Credit
in / end of Bank Management Asia Pacific Markets Markets Center Results Unit Suisse
Net revenues 1,319 1,262 890 1,262 457 37 5,227 (255) 4,972
Return on regulatory capital (%) 13.2 26.9 16.8 2.0 5.2 – 9.3 – 3.5
Cost/income ratio (%) 66.6 71.6 74.9 93.9 89.7 – 80.5 – 91.3
Total assets 228,647 88,692 95,919 239,910 20,477 65,636 739,281 49,409 788,690
Goodwill 606 1,540 1,485 456 628 0 4,715 0 4,715
Risk-weighted assets 1 64,519 37,217 31,237 55,993 19,486 20,718 229,170 35,842 265,012
Leverage exposure 1 256,207 93,455 106,128 281,531 42,794 63,467 843,582 65,385 908,967
Net revenues 1,405 1,264 848 1,517 511 (66) 5,479 (274) 5,205
Provision for credit losses 36 8 (1) 12 13 1 69 13 82
Compensation and benefits 466 556 387 629 303 107 2,448 94 2,542
Total other operating expenses 401 335 274 619 117 71 1,817 182 1,999
of which general and administrative expenses 327 265 199 460 104 61 1,416 164 1,580
of which restructuring expenses (4) 7 11 32 10 2 58 11 69
Total operating expenses 867 891 661 1,248 420 178 4,265 276 4,541
Income/(loss) before taxes 502 365 188 257 78 (245) 1,145 (563) 582
Return on regulatory capital (%) 15.5 28.3 14.4 7.4 12.0 – 10.9 – 5.1
Cost/income ratio (%) 61.7 70.5 77.9 82.3 82.2 – 77.8 – 87.2
Total assets 235,562 89,163 90,948 228,858 20,973 63,480 728,984 54,427 783,411
Goodwill 602 1,523 1,473 452 623 0 4,673 0 4,673
Risk-weighted assets 1 64,426 36,515 32,293 51,333 18,648 18,021 221,236 38,101 259,337
Leverage exposure 1 260,479 93,107 101,583 276,483 43,073 59,858 834,583 71,611 906,194
Net revenues 1,667 1,081 917 1,357 467 72 5,561 (165) 5,396
Provision for credit losses 30 0 34 (5) (9) 0 50 5 55
Compensation and benefits 474 513 413 642 313 185 2,540 134 2,674
Total other operating expenses 405 323 318 633 124 94 1,897 548 2,445
of which general and administrative expenses 320 256 224 466 109 89 1,464 514 1,978
of which restructuring expenses 19 15 23 52 15 0 124 21 145
Total operating expenses 879 836 731 1,275 437 279 4,437 682 5,119
Income/(loss) before taxes 758 245 152 87 39 (207) 1,074 (852) 222
Return on regulatory capital (%) 24.7 20.5 11.3 2.5 6.1 – 10.4 – 1.8
Cost/income ratio (%) 52.7 77.3 79.7 94.0 93.6 – 79.8 – 94.9
Total assets 222,164 86,457 93,079 245,492 19,931 62,007 729,130 77,581 806,711
Goodwill 607 1,532 1,500 457 629 0 4,725 0 4,725
1
Risk-weighted assets 65,571 33,457 32,264 51,127 18,019 16,756 217,194 53,268 270,462
1
Leverage exposure 246,254 88,899 108,495 286,694 44,240 59,154 833,736 115,008 948,744
1
Disclosed on a look-through basis.
10 Credit Suisse results
Credit Suisse
Net revenues 4,078 3,747 2,619 4,388 1,574 40 16,446 (735) 15,711
Provision for credit losses 60 13 8 23 31 3 138 29 167
Compensation and benefits 1,380 1,655 1,208 1,887 944 310 7,384 267 7,651
Total other operating expenses 1,306 1,068 850 1,833 337 198 5,592 649 6,241
of which general and administrative expenses 1,023 832 614 1,349 304 149 4,271 587 4,858
of which restructuring expenses 61 59 40 79 28 12 279 39 318
Total operating expenses 2,686 2,723 2,058 3,720 1,281 508 12,976 916 13,892
Income/(loss) before taxes 1,332 1,011 553 645 262 (471) 3,332 (1,680) 1,652
Return on regulatory capital (%) 13.8 26.1 13.9 6.1 13.2 – 10.5 – 4.8
Cost/income ratio (%) 65.9 72.7 78.6 84.8 81.4 – 78.9 – 88.4
Net revenues 4,360 3,399 2,735 4,232 1,398 87 16,211 (1,069) 15,142
Return on regulatory capital (%) 18.0 22.2 15.9 0.4 6.4 – 9.1 – (0.2)
Cost/income ratio (%) 61.3 76.3 76.7 99.0 90.6 – 82.1 – 99.2
Adjusted results referred to in this report are non-GAAP financial measures that exclude goodwill impairment and certain other revenues
and expenses included in our reported results. Management believes that adjusted results provide a useful presentation of our operat-
ing results for purposes of assessing our Group and divisional performance consistently over time, on a basis that excludes items that
management does not consider representative of our underlying performance. Provided below is a reconciliation of our adjusted results to
the most directly comparable US GAAP measures.
Investment
Swiss International
Banking &
Strategic
Universal Wealth Asia Global Capital
Corporate Core Resolution Credit
in Bank Management Pacific Markets Markets Center Results Unit Suisse
3Q17
Net revenues 1,319 1,262 890 1,262 457 37 5,227 (255) 4,972
Provision for credit losses 14 3 5 6 12 0 40 (8) 32
Total operating expenses 879 904 667 1,185 410 164 4,209 331 4,540
Restructuring expenses (13) (16) (10) (27) (16) (9) (91) (21) (112)
Major litigation provisions (9) (11) 0 0 0 0 (20) (88) (108)
Total operating expenses adjusted 857 877 657 1,158 394 155 4,098 222 4,320
Income/(loss) before taxes 426 355 218 71 35 (127) 978 (578) 400
Total adjustments 22 27 10 27 16 9 111 109 220
Adjusted income/(loss) before taxes 448 382 228 98 51 (118) 1,089 (469) 620
Adjusted return on regulatory capital (%) 13.9 28.9 17.6 2.8 7.6 – 10.4 – 5.5
2Q17
Net revenues 1,405 1,264 848 1,517 511 (66) 5,479 (274) 5,205
Provision for credit losses 36 8 (1) 12 13 1 69 13 82
Total operating expenses 867 891 661 1,248 420 178 4,265 276 4,541
Restructuring expenses 4 (7) (11) (32) (10) (2) (58) (11) (69)
Major litigation provisions (6) (6) 0 0 0 0 (12) (21) (33)
Total operating expenses adjusted 865 878 650 1,216 410 176 4,195 244 4,439
Income/(loss) before taxes 502 365 188 257 78 (245) 1,145 (563) 582
Total adjustments 2 13 11 32 10 2 70 32 102
Adjusted income/(loss) before taxes 504 378 199 289 88 (243) 1,215 (531) 684
Adjusted return on regulatory capital (%) 15.6 29.3 15.3 8.3 13.5 – 11.5 – 5.9
3Q16
Net revenues 1,667 1,081 917 1,357 467 72 5,561 (165) 5,396
Real estate gains (346) 0 0 0 0 0 (346) 0 (346)
Net revenues adjusted 1,321 1,081 917 1,357 467 72 5,215 (165) 5,050
Provision for credit losses 30 0 34 (5) (9) 0 50 5 55
Total operating expenses 879 836 731 1,275 437 279 4,437 682 5,119
Restructuring expenses (19) (15) (23) (52) (15) 0 (124) (21) (145)
Major litigation provisions 0 19 0 (7) 0 0 12 (318) (306)
Total operating expenses adjusted 860 840 708 1,216 422 279 4,325 343 4,668
Adjusted return on regulatory capital (%) 14.0 20.1 12.9 4.1 8.6 – 8.1 – 2.7
Adjusted return on regulatory capital is calculated using adjusted results, applying the same methodology used to calculate return on regulatory capital.
12 Credit Suisse results
Credit Suisse
Net revenues 4,078 3,747 2,619 4,388 1,574 40 16,446 (735) 15,711
(Gains)/losses on business sales 0 0 0 0 0 23 23 (38) (15)
Net revenues adjusted 4,078 3,747 2,619 4,388 1,574 63 16,469 (773) 15,696
Adjusted return on regulatory capital (%) 14.9 28.0 15.0 6.9 14.6 – 11.7 – 6.3
9M16
Net revenues 4,360 3,399 2,735 4,232 1,398 87 16,211 (1,069) 15,142
Real estate gains (346) 0 0 0 0 0 (346) 0 (346)
(Gains)/losses on business sales 0 0 0 0 0 52 52 4 56
Net revenues adjusted 4,014 3,399 2,735 4,232 1,398 139 15,917 (1,065) 14,852
Provision for credit losses 45 14 15 1 20 (1) 94 83 177
Total operating expenses 2,672 2,595 2,098 4,188 1,266 497 13,316 1,712
15,028
Restructuring expenses (63) (38) (34) (202) (34) 0 (371) (120) (491)
Major litigation provisions 0 19 0 (7) 0 0 12 (318) (306)
Total operating expenses adjusted 2,609 2,576 2,064 3,979 1,232 497 12,957 1,274 14,231
Income/(loss) before taxes 1,643 790 622 43 112 (409) 2,801 (2,864) (63)
Total adjustments (283) 19 34 209 34 52 65 442 507
Adjusted income/(loss) before taxes 1,360 809 656 252 146 (357) 2,866 (2,422) 444
Adjusted return on regulatory capital (%) 14.9 22.7 16.7 2.4 8.3 – 9.3 – 1.2
Adjusted return on regulatory capital is calculated using adjusted results, applying the same methodology used to calculate return on regulatory capital.
Credit Suisse results 13
Credit Suisse
Net revenues 727 870 400 – – – 1,997 2,065 2,188
of which net interest income 421 367 144 – – – 932 929 898
of which recurring 205 300 97 – – – 602 598 556
of which transaction-based 101 203 159 – – – 463 537 389
Provision for credit losses 9 3 (1) – – – 11 13 50
Total operating expenses 512 615 261 – – – 1,388 1,384 1,357
Income before taxes 206 252 140 – – – 598 668 781
Related to corporate & institutional banking
Net revenues 592 – – – – – 592 672 614
of which net interest income 303 – – – – – 303 309 311
of which recurring 149 – – – – – 149 161 156
of which transaction-based 161 – – – – – 161 207 160
Provision for credit losses 5 – – – – – 5 25 18
Total operating expenses 367 – – – – – 367 367 364
Income before taxes 220 – – – – – 220 280 232
Related to investment banking
Related to corporate center
Net revenues – – – – – 37 37 (66) 72
Provision for credit losses – – – – – 0 0 1 0
Total operating expenses – – – – – 164 164 178 279
Loss before taxes – – – – – (127) (127) (245) (207)
Total
Net revenues 1,319 1,262 890 1,262 457 37 5,227 5,479 5,561
Provision for credit losses 14 3 5 6 12 0 40 69 50
Total operating expenses 879 904 667 1,185 410 164 4,209 4,265 4,437
Income/(loss) before taxes 426 355 218 71 35 (127) 978 1,145 1,074
Certain transaction-based revenues in Swiss Universal Bank and certain fixed income and equity sales and trading revenues in Asia Pacific and Global Markets relate to the Group’s global
advisory and underwriting business. Refer to “Global advisory and underwriting revenues” in Investment Banking & Capital Markets for further information.
1
Reflects certain financing revenues in Asia Pacific that are not included in the Group’s global advisory and underwriting revenues.
14 Credit Suisse results
Credit Suisse
Net revenues 2,171 2,680 1,216 – – – 6,067 5,964
of which net interest income 1,242 1,069 473 – – –
2,784 2,631
of which recurring 604 892 281 – – –
1,777 1,655
of which transaction-based 324 718 462 – – –
1,504 1,351
Provision for credit losses 32 13 (3) – – –
42 66
Total operating expenses 1,550 1,879 791 – – –
4,220 4,096
Income before taxes 589 788 428 – – – 1,805 1,802
Related to corporate & institutional banking
Net revenues 1,907 – – – – – 1,907 1,851
of which net interest income 925 – – – – – 925 899
of which recurring 475 – – – – – 475 464
of which transaction-based 548 – – – – – 548 525
Provision for credit losses 28 – – – – – 28 16
Total operating expenses 1,136 – – – – – 1,136 1,114
Income before taxes 743 – – – – – 743 721
Related
to investment banking
Net revenues – – – – – 40 40 87
Provision for credit losses – – – – – 3 3 (1)
Total operating expenses – – – – – 508 508 497
Loss before taxes – – – – – (471) (471) (409)
Total
Net revenues 4,078 3,747 2,619 4,388 1,574 40 16,446 16,211
Provision for credit losses 60 13 8 23 31 3 138 94
Total operating expenses 2,686 2,723 2,058 3,720 1,281 508 12,976 13,316
Income/(loss) before taxes 1,332 1,011 553 645 262 (471) 3,332 2,801
Certain transaction-based revenues in Swiss Universal Bank and certain fixed income and equity sales and trading revenues in Asia Pacific and Global Markets relate to the Group’s global
advisory and underwriting business. Refer to “Global advisory and underwriting revenues” in Investment Banking & Capital Markets for further information.
1
Reflects certain financing revenues in Asia Pacific that are not included in the Group’s global advisory and underwriting revenues.
Credit Suisse results 15
Credit Suisse
Credit Suisse
Fair valuations As of the end of 3Q17, our level 3 assets comprised 2% of total
Fair value can be a relevant measurement for financial instruments assets and 6% of total assets measured at fair value, unchanged from
when it aligns the accounting for these instruments with how we 2Q17.
manage our business. The levels of the fair value hierarchy as We believe that the range of any valuation uncertainty, in the
defined by the relevant accounting guidance are not a measure- aggregate, would not be material to our financial condition; however,
ment of economic risk, but rather an indication of the observability it may be material to our operating results for any particular period,
of prices or valuation inputs. depending, in part, upon the operating results for such period.
u Refer to “Note 1 – Summary of significant accounting policies” and “Note 28
– Financial instruments” in III – Condensed consolidated financial statements – EVOLUTION OF LEGAL ENTITY STRUCTURE
unaudited for further information.
The global service company initiative has continued to make progress
in 3Q17 in evolving the legal entity structure of the bank and ensur-
Models were used to value financial instruments for which no prices ing continued provision of critical services for the Group in case of a
are available and which have little or no observable inputs (level 3). resolution event. A branch of Credit Suisse Services AG has been
Models are developed internally and are reviewed by functions registered in Singapore as Credit Suisse Services AG, Singapore
independent of the front office to ensure they are appropriate for Branch, which is expected to become operational in 2018.
current market conditions. The models require subjective assess-
ment and varying degrees of judgment depending on liquidity, con- REGULATORY DEVELOPMENTS AND PROPOSALS
centration, pricing assumptions and risks affecting the specific Government leaders and regulators continued to focus on reform of
instrument. The models consider observable and unobservable the financial services industry, including capital, leverage and liquidity
parameters in calculating the value of these products, including requirements, changes in compensation practices and systemic risk.
certain indices relating to these products. Consideration of these In September 2017, the Fed and the Federal Deposit Insurance
indices is more significant in periods of lower market activity. Corporation each issued final rules that substantially implement their
As of the end of 3Q17, 39% and 25% of our total assets and respective proposed rules designed to improve the resolvability of
total liabilities, respectively, were measured at fair value. US headquartered global systematically important banks (G-SIBs)
The majority of our level 3 assets are recorded in our invest- and the US operations of non-US G-SIBs, such as our US opera-
ment banking businesses. As of the end of 3Q17, total assets tions. Covered “qualified financial contracts” must be conformed to
at fair value recorded as level 3 of CHF 17.6 billion were stable the rules’ requirements starting January 1, 2019, with full compliance
compared to the end of 2Q17, primarily reflecting net settlements, by January 1, 2020. The Office of the Comptroller of the Currency is
mainly in loans and loans held-for-sale, offset by net purchases, expected to issue parallel final rules as well.
mainly in trading assets, and a foreign exchange translation impact, u Refer to “Regulation and supervision” in I – Information on the company in
mainly in trading assets, loans held-for-sale and loans. the Credit Suisse Annual Report 2016 for further information and “Regulatory
framework” and “Regulatory developments and proposals” in II – Treasury, risk,
balance sheet and off-balance sheet – Liquidity and funding management and
Capital management, respectively, for further information.
Credit Suisse results 17
Swiss Universal Bank
Divisional results
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net revenues 1,319 1,405 1,667 (6) (21) 4,078 4,360 (6)
Provision for credit losses 14 36 30 (61) (53) 60 45 33
Compensation and benefits 462 466 474 (1) (3) 1,380 1,440 (4)
General and administrative expenses 340 327 320 4 6 1,023 959 7
Commission expenses 64 78 66 (18) (3) 222 210 6
Restructuring expenses 13 (4) 19 – (32) 61 63 (3)
Total other operating expenses 417 401 405 4 3 1,306 1,232 6
Total operating expenses 879 867 879 1 0 2,686 2,672 1
Income before taxes 426 502 758 (15) (44) 1,332 1,643 (19)
Statement
of operations metrics (%)
Return on regulatory capital 13.2 15.5 24.7 – – 13.8 18.0 –
Cost/income ratio 66.6 61.7 52.7 – – 65.9 61.3 –
Economic
risk capital and return
Average economic risk capital (CHF million) 5,464 5,651 5,649 (3) (3) 5,602 5,507 2
Pre-tax return on average economic risk capital (%) 31.1 35.5 53.6 – – 31.7 39.8 –
Number
of employees and relationship managers
Number of employees (full-time equivalents) 12,600 12,610 13,440 0 (6) 12,600 13,440 (6)
Number of relationship managers 1,850 1,860 1,980 (1) (7) 1,850 1,980 (7)
18 Credit Suisse results
Net revenue detail (CHF million)
Private Clients 727 733 1,053 (1) (31) 2,171 2,509 (13)
Corporate & Institutional Clients 592 672 614 (12) (4) 1,907 1,851 3
Net revenues 1,319 1,405 1,667 (6) (21) 4,078 4,360 (6)
Net revenue detail (CHF million)
Net interest income 724 717 724 1 0 2,167 2,139 1
Recurring commissions and fees 354 363 361 (2) (2) 1,079 1,068 1
Transaction-based revenues 262 330 249 (21) 5 872 842 4
Other revenues (21) (5) 333 320 – (40) 311 –
Net revenues 1,319 1,405 1,667 (6) (21) 4,078 4,360 (6)
Provision for credit losses (CHF million)
New provisions 36 52 45 (31) (20) 126 104 21
Releases of provisions (22) (16) (15) 38 47 (66) (59) 12
Provision for credit losses 14 36 30 (61) (53) 60 45 33
Balance sheet statistics (CHF million)
Total assets 228,647 235,562 222,164 (3) 3 228,647 222,164 3
Net loans 165,221 165,435 166,910 0 (1) 165,221 166,910 (1)
of which Private Clients 110,729 110,426 109,944 0 1 110,729 109,944 1
Risk-weighted assets 64,519 64,426 65,571 0 (2) 64,519 65,571 (2)
Leverage exposure 256,207 260,479 246,254 (2) 4 256,207 246,254 4
Net interest income includes a term spread credit on stable deposit funding and a term spread charge on loans. Recurring commissions and fees includes investment product management,
discretionary mandate and other asset management-related fees, fees for general banking products and services and revenues from wealth structuring solutions. Transaction-based revenues
arise primarily from brokerage and product issuing fees, fees from foreign exchange client transactions, trading and sales income, equity participations income and other transaction-based
income. Other revenues include fair value gains/(losses) on synthetic securitized loan portfolios and other gains and losses.
Real estate gains 0 0 (346) 0 0 0 0 0 (346)
Adjusted net revenues 727 733 707 592 672 614 1,319 1,405 1,321
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
Credit Suisse results 19
Swiss Universal Bank
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
PRIVATE CLIENTS
Statements of operations (CHF million)
Net revenues 727 733 1,053 (1) (31) 2,171 2,509 (13)
Provision for credit losses 9 11 12 (18) (25) 32 29 10
Compensation and benefits 252 253 277 0 (9) 747 830 (10)
General and administrative expenses 222 213 198 4 12 638 595 7
Commission expenses 29 36 24 (19) 21 111 79 41
Restructuring expenses 9 (2) 16 – (44) 54 54 0
Total other operating expenses 260 247 238 5 9 803 728 10
Total operating expenses 512 500 515 2 (1) 1,550 1,558 (1)
Income before taxes 206 222 526 (7) (61) 589 922 (36)
Statement of operations metrics (%)
Cost/income ratio 70.4 68.2 48.9 – – 71.4 62.1 –
Net revenue detail (CHF million)
Net interest income 421 408 413 3 2 1,242 1,240 0
Recurring commissions and fees 205 202 205 1 0 604 604 0
Transaction-based revenues 101 123 89 (18) 13 324 317 2
Other revenues 0 0 346 – (100) 1 348 (100)
Net revenues 727 733 1,053 (1) (31) 2,171 2,509 (13)
Margins on assets under management (annualized) (bp)
ASSETS UNDER MANAGEMENT mainly driven by favorable market and foreign exchange-related
As of the end of 3Q17, assets under management of CHF 206.1 movements and net new assets of CHF 1.0 billion.
billion were CHF 4.6 billion higher compared to the end of 2Q17,
Assets under management (CHF billion)
Assets under management 206.1 201.5 192.6 2.3 7.0 206.1 192.6 7.0
Average assets under management 204.2 201.4 191.3 1.4 6.7 200.2 189.4 5.7
Assets under management by currency (CHF billion)
USD 30.1 29.8 28.0 1.0 7.5 30.1 28.0 7.5
EUR 21.9 20.8 19.0 5.3 15.3 21.9 19.0 15.3
CHF 144.2 141.9 137.8 1.6 4.6 144.2 137.8 4.6
Other 9.9 9.0 7.8 10.0 26.9 9.9 7.8 26.9
Assets under management 206.1 201.5 192.6 2.3 7.0 206.1 192.6 7.0
Growth
in assets under management (CHF billion)
RESULTS mainly due to lower revenues from trading services, lower rev-
Income before taxes of CHF 220 million decreased 21% com- enues from our Swiss investment banking business, our profit
pared to 2Q17 and 5% compared to 3Q16, primarily due to lower share on the sale of an investment and a regular dividend from
net revenues and stable total operating expenses, partially off- SIX Group in 2Q17. Other revenues decreased CHF 16 million
set by lower provision for credit losses in 3Q17. Adjusted income primarily due to gains from credit hedges in 2Q17. Recurring com-
before taxes of CHF 231 million decreased 18% compared to missions and fees of CHF 149 million were 7% lower, reflecting
2Q17 and was slightly lower compared to 3Q16. lower discretionary mandate management fees, lower investment
product management fees and lower security account and custody
Net revenues services fees, partially offset by higher wealth structuring solu-
Compared to 2Q17, net revenues of CHF 592 million were 12% tion fees. Net interest income of CHF 303 million was slightly
lower with decreased revenues across all revenue categories. lower with stable loan margins on stable average loan volumes and
Transaction-based revenues of CHF 161 million were 22% lower, higher deposit margins on stable average deposit volumes.
22 Credit Suisse results
Compared to 3Q16, net revenues were 4% lower, with slightly fair value losses on synthetic securitized loan portfolios. Recurring
lower net interest income, decreased other revenues and lower commissions and fees decreased 4%, driven by lower discretion-
recurring commissions and fees. Net interest income decreased ary mandate management fees, partially offset by higher invest-
slightly, driven by lower deposit margins on higher average deposit ment product management fees. Transaction-based revenues
volumes and stable loan margins on stable average loan volumes. were stable.
Other revenues decreased CHF 8 million primarily due to higher
Statements of operations (CHF million)
Net revenues 592 672 614 (12) (4) 1,907 1,851 3
Provision for credit losses 5 25 18 (80) (72) 28 16 75
Compensation and benefits 210 213 197 (1) 7 633 610 4
General and administrative expenses 118 114 122 4 (3) 385 364 6
Commission expenses 35 42 42 (17) (17) 111 131 (15)
Restructuring expenses 4 (2) 3 – 33 7 9 (22)
Total other operating expenses 157 154 167 2 (6) 503 504 0
Total operating expenses 367 367 364 0 1 1,136 1,114 2
Income before taxes 220 280 232 (21) (5) 743 721 3
Statement of operations metrics (%)
Cost/income ratio 62.0 54.6 59.3 – – 59.6 60.2 –
Net revenue detail (CHF million)
Net interest income 303 309 311 (2) (3) 925 899 3
Recurring commissions and fees 149 161 156 (7) (4) 475 464 2
Transaction-based revenues 161 207 160 (22) 1 548 525 4
Other revenues (21) (5) (13) 320 62 (41) (37) 11
Net revenues 592 672 614 (12) (4) 1,907 1,851 3
Number of relationship managers
Provision for credit losses Compared to 3Q16, total operating expenses were stable,
The Corporate & Institutional Clients loan portfolio has relatively with higher compensation and benefits, offset by decreased com-
low concentrations and is mainly secured by real estate, securities mission expenses and slightly lower general and administrative
and other financial collateral. expenses. Compensation and benefits increased 7% mainly due to
In 3Q17, Corporate & Institutional Clients recorded provision higher allocated corporate function costs. General and administra-
for credit losses of CHF 5 million compared to CHF 25 million in tive expenses decreased slightly, primarily due to lower allocated
2Q17 and CHF 18 million in 3Q16. The decrease compared to corporate function costs and lower professional services fees.
2Q17 and 3Q16 reflected both lower new provisions and higher Adjusted total operating expenses were stable compared to 3Q16.
releases of provision for credit losses relating to several individual
cases. ASSETS UNDER MANAGEMENT
As of the end of 3Q17, assets under management of CHF 346.7
Total operating expenses billion were CHF 5.8 billion lower compared to the end of 2Q17,
Compared to 2Q17, total operating expenses of CHF 367 mil- mainly driven by net asset outflows of CHF 13.7 billion primarily
lion were stable, with higher restructuring expenses and higher due to redemptions of CHF 13.3 billion from a single public sector
general and administrative expenses, offset by lower commission mandate.
expenses. General and administrative expenses of CHF 118 million
increased 4%, mainly reflecting higher litigation provisions. Com-
pensation and benefits of CHF 210 million were stable. Adjusted
total operating expenses of CHF 356 million decreased slightly
compared to 2Q17.
Credit Suisse results 23
International Wealth Management
RESULTS SUMMARY losses was CHF 3 million compared to zero in 3Q16. Total operat-
3Q17 results ing expenses were 8% higher, mainly driven by higher compensa-
In 3Q17, we reported income before taxes of CHF 355 million tion and benefits and higher general and administrative expenses.
and net revenues of CHF 1,262 million. Compared to 2Q17, net Adjusted income before taxes of CHF 382 million was stable
revenues were stable, with lower transaction- and performance- compared to 2Q17 and increased 59% compared to 3Q16.
based revenues that included the impact of seasonally lower client
activity in Private Banking offset by higher revenues in Asset Man- Capital and leverage metrics
agement. Provision for credit losses was CHF 3 million compared As of the end of 3Q17, we reported risk-weighted assets of
to CHF 8 million in 2Q17. Total operating expenses were stable CHF 37.2 billion, slightly higher compared to the end of 2Q17,
compared to 2Q17, mainly driven by higher general and administra- primarily driven by foreign exchange movements and movements
tive expenses, offset by slightly lower compensation and benefits. in risk levels. Leverage exposure of CHF 93.5 billion was stable
Compared to 3Q16, net revenues increased 17% reflecting compared to the end of 2Q17.
higher revenues across all revenue categories. Provision for credit
Divisional results
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net revenues 1,262 1,264 1,081 0 17 3,747 3,399 10
Provision for credit losses 3 8 0 (63) – 13 14 (7)
Compensation and benefits 543 556 513 (2) 6 1,655 1,554 6
General and administrative expenses 285 265 256 8 11 832 827 1
Commission expenses 60 63 52 (5) 15 177 176 1
Restructuring expenses 16 7 15 129 7 59 38 55
Total other operating expenses 361 335 323 8 12 1,068 1,041 3
Total operating expenses 904 891 836 1 8 2,723 2,595 5
Income before taxes 355 365 245 (3) 45 1,011 790 28
Statement
of operations metrics (%)
Return on regulatory capital 26.9 28.3 20.5 – – 26.1 22.2 –
Cost/income ratio 71.6 70.5 77.3 – – 72.7 76.3 –
Economic
risk capital and return
Average economic risk capital (CHF million) 4,438 4,428 3,958 0 12 4,284 3,777 13
Pre-tax return on average economic risk capital (%) 31.9 33.0 24.8 – – 31.4 27.9 –
Number
of employees (full-time equivalents)
Net revenue detail (CHF million)
Private Banking 870 927 789 (6) 10 2,680 2,453 9
Asset Management 392 337 292 16 34 1,067 946 13
Net revenues 1,262 1,264 1,081 0 17 3,747 3,399 10
Net revenue detail (CHF million)
Net interest income 367 360 326 2 13 1,069 955 12
Recurring commissions and fees 538 531 471 1 14 1,582 1,425 11
Transaction- and performance-based revenues 339 390 291 (13) 16 1,095 1,024 7
Other revenues 18 (17) (7) – – 1 (5) –
Net revenues 1,262 1,264 1,081 0 17 3,747 3,399 10
Provision for credit losses (CHF million)
New provisions 9 12 14 (25) (36) 27 35 (23)
Releases of provisions (6) (4) (14) 50 (57) (14) (21) (33)
Provision for credit losses 3 8 0 (63) – 13 14 (7)
Balance sheet statistics (CHF million)
Total assets 88,692 89,163 86,457 (1) 3 88,692 86,457 3
Net loans 47,531 46,263 42,942 3 11 47,531 42,942 11
of which Private Banking 47,513 46,206 42,876 3 11 47,513 42,876 11
Risk-weighted assets 37,217 36,515 33,457 2 11 37,217 33,457 11
Leverage exposure 93,455 93,107 88,899 0 5 93,455 88,899 5
Restructuring expenses (9) (4) (13) (7) (3) (2) (16) (7) (15)
Major litigation provisions (11) (6) 19 0 0 0 (11) (6) 19
Adjusted total operating expenses 595 612 599 282 266 241 877 878 840
Income before taxes 252 297 196 103 68 49 355 365 245
Total adjustments 20 10 (6) 7 3 2 27 13 (4)
Adjusted income before taxes 272 307 190 110 71 51 382 378 241
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
Credit Suisse results 25
International Wealth Management
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
PRIVATE BANKING
RESULTS slightly with slightly higher loan margins on stable average loan vol-
Income before taxes of CHF 252 million decreased 15% com- umes and slightly lower deposit margins on slightly higher average
pared to 2Q17 mainly reflecting lower net revenues. Compared deposit volumes. Recurring commissions and fees of CHF 300
to 3Q16, income before taxes increased 29%, reflecting higher million were stable.
net revenues, partially offset by higher total operating expenses. Compared to 3Q16, net revenues increased 10%, with higher
Adjusted income before taxes of CHF 272 million decreased 11% net interest income, higher recurring commissions and fees and
compared to 2Q17 and increased 43% compared to 3Q16. slightly higher transaction- and performance-based revenues. Net
interest income increased 13%, with higher loan and deposit mar-
Net revenues gins on higher average loan and deposit volumes. Recurring com-
Compared to 2Q17, net revenues of CHF 870 million were 6% missions and fees increased 12%, mainly driven by higher invest-
lower, mainly driven by lower transaction- and performance-based ment product management fees, including the impact of higher
revenues, partially offset by slightly higher net interest income. average assets under management. Transaction- and perfor-
Transaction- and performance-based revenues of CHF 203 mil- mance-based revenues increased slightly, mainly driven by higher
lion decreased 23%, mainly driven by lower revenues from trad- brokerage and product issuing fees and higher corporate advisory
ing services, lower brokerage and product issuing fees and lower fees related to integrated solutions, partially offset by lower rev-
equity participations income as 2Q17 included a regular dividend enues from trading services.
from SIX Group. Net interest income of CHF 367 million increased
26 Credit Suisse results
Statements of operations (CHF million)
Net revenues 870 927 789 (6) 10 2,680 2,453 9
Provision for credit losses 3 8 0 (63) – 13 14 (7)
Compensation and benefits 375 388 369 (3) 2 1,144 1,081 6
General and administrative expenses 187 182 173 3 8 566 585 (3)
Commission expenses 44 48 38 (8) 16 133 124 7
Restructuring expenses 9 4 13 125 (31) 36 36 0
Total other operating expenses 240 234 224 3 7 735 745 (1)
Total operating expenses 615 622 593 (1) 4 1,879 1,826 3
Income before taxes 252 297 196 (15) 29 788 613 29
Statement of operations metrics (%)
Cost/income ratio 70.7 67.1 75.2 – – 70.1 74.4 –
Net revenue detail (CHF million)
Net interest income 367 360 326 2 13 1,069 955 12
Recurring commissions and fees 300 302 267 (1) 12 892 816 9
Transaction- and performance-based revenues 203 265 197 (23) 3 718 687 5
Other revenues 0 0 (1) – 100 1 (5) –
Net revenues 870 927 789 (6) 10 2,680 2,453 9
Margins on assets under management (annualized) (bp)
Net interest income includes a term spread credit on stable deposit funding and a term spread charge on loans. Recurring commissions and fees includes investment product manage-
ment, discretionary mandate and other asset management-related fees, fees for general banking products and services and revenues from wealth structuring solutions. Transaction- and
performance-based revenues arise primarily from brokerage and product issuing fees, fees from foreign exchange client transactions, trading and sales income, equity participations income
and other transaction- and performance-based income.
1
Net revenues divided by average assets under management.
2
Income before taxes divided by average assets under management.
Provision for credit losses higher litigation provisions, partially offset by lower contractor ser-
In 3Q17, provision for credit losses was CHF 3 million, compared vices fees and lower professional services fees. Adjusted total
to CHF 8 million in 2Q17 and to zero in 3Q16. operating expenses of CHF 595 million were slightly lower com-
pared to 2Q17.
Total operating expenses Compared to 3Q16, total operating expenses increased 4%,
Compared to 2Q17, total operating expenses of CHF 615 million driven by higher general and administrative expenses, slightly
were stable, reflecting slightly lower compensation and benefits higher compensation and benefits and higher commission
and lower commission expenses, offset by higher restructuring expenses, partially offset by lower restructuring expenses. Gen-
expenses and slightly higher general and administrative expenses. eral and administrative expenses were 8% higher, mainly driven
Compensation and benefits of CHF 375 million decreased slightly, by litigation provisions in 3Q17, compared to releases in 3Q16,
mainly driven by lower deferred compensation expenses from partially offset by lower professional services fees. Compensation
prior-year awards and lower allocated corporate function costs. and benefits increased slightly, mainly due to higher allocated cor-
General and administrative expenses of CHF 187 million increased porate function costs, partially offset by lower pension expenses.
slightly, driven by higher allocated corporate function costs and Adjusted total operating expenses were stable compared to 3Q16.
Credit Suisse results 27
International Wealth Management
MARGINS 2.5% higher average assets under management. Our net margin
Gross margin was three basis points higher compared to 3Q16, reflecting higher
Our gross margin was 101 basis points in 3Q17, nine basis points net revenues, partially offset by the 13.8% increase in average
lower compared to 2Q17, mainly reflecting lower transaction- and assets under management and higher total operating expenses.
performance-based revenues and 2.5% higher average assets On the basis of adjusted income before taxes, our net margin was
under management. Our gross margin was three basis points 31 basis points in 3Q17, five basis points lower compared to 2Q17
lower compared to 3Q16, reflecting a 13.8% increase in average and six basis points higher compared to 3Q16.
assets under management, partially offset by higher net interest
income and higher recurring commissions and fees. ASSETS UNDER MANAGEMENT
u Refer to “Assets under management” for further information. As of the end of 3Q17, assets under management of CHF 355.3
billion were CHF 18.9 billion higher compared to the end of 2Q17,
Net margin reflecting favorable foreign exchange-related and market move-
Our net margin was 29 basis points in 3Q17, six basis points lower ments and net new assets. Net new assets of CHF 3.6 billion
compared to 2Q17, mainly reflecting lower net revenues and the reflected solid inflows from emerging markets and Europe.
Assets under management (CHF billion)
Assets under management 355.3 336.4 311.4 5.6 14.1 355.3 311.4 14.1
Average assets under management 346.0 337.4 304.0 2.5 13.8 336.8 295.1 14.1
Assets under management by currency (CHF billion)
USD 159.6 151.1 140.1 5.6 13.9 159.6 140.1 13.9
EUR 105.4 100.6 92.7 4.8 13.7 105.4 92.7 13.7
CHF 22.4 21.8 20.7 2.8 8.2 22.4 20.7 8.2
Other 67.9 62.9 57.9 7.9 17.3 67.9 57.9 17.3
Assets under management 355.3 336.4 311.4 5.6 14.1 355.3 311.4 14.1
Growth
in assets under management (CHF billion)
ASSET MANAGEMENT
Statements of operations (CHF million)
Net revenues 392 337 292 16 34 1,067 946 13
Provision for credit losses 0 0 0 – – 0 0 –
Compensation and benefits 168 168 144 0 17 511 473 8
General and administrative expenses 98 83 83 18 18 266 242 10
Commission expenses 16 15 14 7 14 44 52 (15)
Restructuring expenses 7 3 2 133 250 23 2 –
Total other operating expenses 121 101 99 20 22 333 296 13
Total operating expenses 289 269 243 7 19 844 769 10
Income before taxes 103 68 49 51 110 223 177 26
Statement of operations metrics (%)
Cost/income ratio 73.7 79.8 83.2 – – 79.1 81.3 –
Net revenue detail (CHF million)
Management fees 278 269 218 3 28 801 663 21
Performance and placement revenues 63 32 41 97 54 137 100 37
Investment and partnership income 51 36 33 42 55 129 183 (30)
Net revenues 392 337 292 16 34 1,067 946 13
of which recurring commissions and fees 238 229 204 4 17 690 609 13
of which transaction- and performance-based revenues 136 125 94 9 45 377 337 12
of which other revenues 18 (17) (6) – – 0 0 –
Management fees include fees on assets under management, asset administration revenues and transaction fees related to the acquisition and disposal of investments in the funds being
managed. Performance revenues relate to the performance or return of the funds being managed and includes investment-related gains and losses from proprietary funds. Placement rev-
enues arise from our third-party private equity fundraising activities and secondary private equity market advisory services. Investment and partnership income includes equity participation
income from seed capital returns and from minority investments in third-party asset managers, income from strategic partnerships and distribution agreements, and other revenues.
Compared to 3Q16, total operating expenses were 19% ASSETS UNDER MANAGEMENT
higher, primarily reflecting higher compensation and benefits and As of the end of 3Q17, assets under management of CHF 376.3
higher general and administrative expenses. Compensation and billion were CHF 10.3 billion higher compared to the end of 2Q17,
benefits were 17% higher, mainly driven by higher salary expenses, reflecting favorable foreign exchange-related and market move-
higher discretionary compensation expenses and higher deferred ments and net new assets of CHF 1.1 billion, primarily reflecting
compensation expenses from prior-year awards. General and inflows in alternative investments, partially offset by outflows from
administrative expenses were 18% higher, mainly reflecting higher emerging market joint ventures.
professional services fees and higher allocated corporate function
costs. Adjusted total operating expenses were 17% higher com-
pared to 3Q16.
Assets under management (CHF billion)
Traditional investments 208.7 203.3 163.4 2.7 27.7 208.7 163.4 27.7
Alternative investments 120.6 116.4 117.7 3.6 2.5 120.6 117.7 2.5
Investments and partnerships 47.0 46.3 43.2 1.5 8.8 47.0 43.2 8.8
Assets under management 376.3 366.0 324.3 2.8 16.0 376.3 324.3 16.0
Average assets under management 374.4 366.8 318.6 2.1 17.5 363.2 315.0 15.3
Assets
under management by currency (CHF billion)
Net new assets 1.2 3.1 6.4 – – 7.8 4.1 –
Other effects 10.1 (4.3) 5.5 – – 14.9 (2.9) –
Growth in assets under management 11.3 (1.2) 11.9 – – 22.7 1.2 –
Growth in assets under management (rolling four-quarter average) (%)
Net new assets 4.5 5.8 4.3 – – – – –
Other effects 11.5 10.4 (1.2) – – – – –
Growth in assets under management (rolling
Asia Pacific
Asia Pacific
In 3Q17, we reported income before taxes of CHF 218 million and net revenues of CHF 890 million. Income before taxes
increased 16% compared to 2Q17 and 43% compared to 3Q16.
Divisional results
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net revenues 890 848 917 5 (3) 2,619 2,735 (4)
Provision for credit losses 5 (1) 34 – (85) 8 15 (47)
Compensation and benefits 397 387 413 3 (4) 1,208 1,236 (2)
General and administrative expenses 195 199 224 (2) (13) 614 617 0
Commission expenses 65 64 71 2 (8) 196 211 (7)
Restructuring expenses 10 11 23 (9) (57) 40 34 18
Total other operating expenses 270 274 318 (1) (15) 850 862 (1)
Total operating expenses 667 661 731 1 (9) 2,058 2,098 (2)
Income before taxes 218 188 152 16 43 553 622 (11)
Statement of operations metrics (%)
Return on regulatory capital 16.8 14.4 11.3 – – 13.9 15.9 –
Cost/income ratio 74.9 77.9 79.7 – – 78.6 76.7 –
Economic risk capital and return
Average economic risk capital (CHF million) 3,658 4,067 4,320 (10) (15) 4,000 4,058 (1)
Pre-tax return on average economic risk capital (%) 23.8 18.5 14.1 – – 18.4 20.4 –
Number of employees (full-time equivalents)
Net revenues (CHF million)
Wealth Management & Connected 548 559 481 (2) 14 1,696 1,344 26
Markets 342 289 436 18 (22) 923 1,391 (34)
Net revenues 890 848 917 5 (3) 2,619 2,735 (4)
Provision for credit losses (CHF million)
New provisions 8 5 54 60 (85) 19 58 (67)
Releases of provisions (3) (6) (20) (50) (85) (11) (43) (74)
Provision for credit losses 5 (1) 34 – (85) 8 15 (47)
Balance sheet statistics (CHF million)
Provision for credit losses 5 (1) 34 0 0 0 5 (1) 34
Total operating expenses 370 364 352 297 297 379 667 661 731
Restructuring expenses (5) (2) (7) (5) (9) (16) (10) (11) (23)
Adjusted total operating expenses 365 362 345 292 288 363 657 650 708
Income/(loss) before taxes 173 196 95 45 (8) 57 218 188 152
Total adjustments 5 2 7 5 9 16 10 11 23
Adjusted income before taxes 178 198 102 50 1 73 228 199 175
Wealth Management
& Connected Markets Asia Pacific
in 9M17 9M16 9M17 9M16 9M17 9M16
Adjusted results (CHF million)
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
32 Credit Suisse results
Asia Pacific
Statements of operations (CHF million)
Net revenues 548 559 481 (2) 14 1,696 1,344 26
Provision for credit losses 5 (1) 34 – (85) 8 18 (56)
Compensation and benefits 250 244 240 2 4 761 679 12
General and administrative expenses 98 103 92 (5) 7 300 277 8
Commission expenses 17 15 13 13 31 46 34 35
Restructuring expenses 5 2 7 150 (29) 11 9 22
Total other operating expenses 120 120 112 0 7 357 320 12
Total operating expenses 370 364 352 2 5 1,118 999 12
Income before taxes 173 196 95 (12) 82 570 327 74
of which Private Banking 140 149 59 (6) 137 428 267 60
Statement of operations metrics (%)
Cost/income ratio 67.5 65.1 73.2 – – 65.9 74.3 –
Net revenue detail (CHF million)
Private Banking 400 405 346 (1) 16 1,216 1,002 21
of which net interest income 1 144 161 159 (11) (9) 473 436 8
of which recurring commissions and fees 97 94 84 3 15 281 235 20
of which transaction-based revenues 159 149 103 7 54 462 347 33
of which other revenues 0 1 0 (100) – 0 (16) 100
Advisory, underwriting and financing 148 154 135 (4) 10 480 342 40
Net revenues 548 559 481 (2) 14 1,696 1,344 26
Private Banking margins on assets under management (annualized) (bp)
2
Gross margin 87 91 84 – – 91 86 –
Net margin 3 30 33 14 – – 32 23 –
Number of relationship managers
Number of relationship managers 590 610 650 (3) (9) 590 650 (9)
1
Net interest income includes a term spread credit on stable deposit funding and a term spread charge on loans.
2
Net revenues divided by average assets under management.
3
Income before taxes divided by average assets under management.
Credit Suisse results 33
Asia Pacific
Compared to 3Q16, net revenues increased 14%, mainly driven by Compared to 3Q16, total operating expenses increased 5%,
increased transaction-based revenues, higher advisory, underwrit- mainly reflecting higher compensation and benefits, higher general
ing and financing revenues and higher recurring commission and and administrative expenses and higher commission expenses.
fees, partially offset by lower net interest income. Transaction- Compensation and benefits increased 4%, primarily driven by
based revenues increased 54%, primarily reflecting higher bro- higher discretionary compensation expenses, partially offset by
kerage and product issuing fees and a positive impact from the lower salary expenses. General and administrative expenses
accounting reclassification. Advisory, underwriting and financing increased 7%, mainly due to higher compliance support and
revenues increased 10%, mainly due to higher financing and debt risk management expenses. Adjusted total operating expenses
underwriting revenues and higher fees from M&A transactions, increased 6% compared to 3Q16.
partially offset by lower equity underwriting revenues. Recurring
commissions and fees increased 15%, mainly due to higher invest- MARGINS
ment product management fees. Net interest income decreased Margin calculations are aligned with the performance metrics of
9%, mainly due to lower treasury revenues and a negative impact our Private Banking business and its related assets under man-
from the accounting reclassification. agement within the Wealth Management & Connected business.
Asia Pacific
Assets under management (CHF billion)
Assets under management 190.0 177.8 168.0 6.9 13.1 190.0 168.0 13.1
Average assets under management 184.1 178.1 164.5 3.4 11.9 177.7 155.8 14.1
Assets under management by currency (CHF billion)
USD 96.9 90.6 79.0 7.0 22.7 96.9 79.0 22.7
EUR 6.5 5.6 4.5 16.1 44.4 6.5 4.5 44.4
MARKETS
Results – Markets
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net revenues 342 289 436 18 (22) 923 1,391 (34)
Provision for credit losses 0 0 0 – – 0 (3) 100
Compensation and benefits 147 143 173 3 (15) 447 557 (20)
General and administrative expenses 97 96 132 1 (27) 314 340 (8)
Commission expenses 48 49 58 (2) (17) 150 177 (15)
Restructuring expenses 5 9 16 (44) (69) 29 25 16
Total other operating expenses 150 154 206 (3) (27) 493 542 (9)
Total operating expenses 297 297 379 0 (22) 940 1,099 (14)
Income/(loss) before taxes 45 (8) 57 – (21) (17) 295 –
Statement
of operations metrics (%)
Cost/income ratio 86.8 102.8 86.9 – – 101.8 79.0 –
Net
revenue detail (CHF million)
Equity sales and trading 262 188 302 39 (13) 684 892 (23)
Fixed income sales and trading 80 101 134 (21) (40) 239 499 (52)
Net revenues 342 289 436 18 (22) 923 1,391 (34)
Total operating expenses Compared to 3Q16, total operating expenses decreased 22%,
Total operating expenses of CHF 297 million were stable com- reflecting lower expenses across all categories. General and
pared to 2Q17, mainly reflecting slightly higher compensation and administrative expenses decreased 27%, mainly due to lower allo-
benefits, offset by lower restructuring expenses. Compensation cated corporate function costs and lower professional services
and benefits increased slightly to CHF 147 million, primarily driven fees. Compensation and benefits decreased 15%, primarily driven
by higher discretionary compensation expenses, partially offset by by lower deferred compensation expenses from prior-year awards
lower salary expenses. General and administrative expenses were and lower salary expenses. Adjusted total operating expenses
stable at CHF 97 million. Adjusted total operating expenses of decreased 20% compared to 3Q16.
CHF 292 million were stable compared to 2Q17.
36 Credit Suisse results
Global Markets
Global Markets
In 3Q17, Global Markets reported income before taxes of CHF 71 million and net revenues of CHF 1,262 million. Net
revenues decreased 17% compared to 2Q17, as a seasonal decline was exacerbated by persistently low volatility and
decreased trading volumes which led to reduced client activity.
Divisional results
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net revenues 1,262 1,517 1,357 (17) (7) 4,388 4,232 4
Provision for credit losses 6 12 (5) (50) – 23 1 –
Compensation and benefits 568 629 642 (10) (12) 1,887 2,091 (10)
General and administrative expenses 451 460 466 (2) (3) 1,349 1,526 (12)
Commission expenses 139 127 115 9 21 405 369 10
Restructuring expenses 27 32 52 (16) (48) 79 202 (61)
Total other operating expenses 617 619 633 0 (3) 1,833 2,097 (13)
Total operating expenses 1,185 1,248 1,275 (5) (7) 3,720 4,188 (11)
Income before taxes 71 257 87 (72) (18) 645 43 –
Statement of operations metrics (%)
Return on regulatory capital 2.0 7.4 2.5 – – 6.1 0.4 –
Cost/income ratio 93.9 82.3 94.0 – – 84.8 99.0 –
Economic risk capital and return
Average economic risk capital (CHF million) 9,030 8,960 9,311 1 (3) 9,164 10,087 (9)
Pre-tax return on average economic risk capital (%) 3.1 11.5 3.7 – – 9.4 0.6 –
Number of employees (full-time equivalents)
Net revenue detail (CHF million)
Fixed income sales and trading 698 811 770 (14) (9) 2,375 2,033 17
Equity sales and trading 383 501 348 (24) 10 1,372 1,640 (16)
Underwriting 240 249 282 (4) (15) 801 716 12
Other (59) (44) (43) 34 37 (160) (157) 2
Net revenues 1,262 1,517 1,357 (17) (7) 4,388 4,232 4
Balance
sheet statistics (CHF million, except where indicated)
Adjusted return on regulatory capital (%) 2.8 8.3 4.1 6.9 2.4
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
Global Markets
Compared to 3Q16, equity sales and trading revenues Provision for credit losses
increased 10% amid the difficult trading environment. Prime ser- Global markets recorded a provision for credit losses of CHF 6
vices revenues increased, reflecting higher commissions in listed million, including increased provisions reflecting a methodology
derivatives and higher client financing revenues. Equity deriva- change for probable losses inherent in the portfolio relating to
tives revenues increased, albeit from subdued levels, reflecting the period of time expected to identify defaults once they have
improved flow derivatives results, partially offset by lower struc- occurred. This compares to a provision for credit losses of CHF 12
tured derivatives revenues. In addition, cash equities trading rev- million in 2Q17 and a release of provision for credit losses of CHF
enues increased reflecting improved secondary revenues in Latin 5 million in 3Q16.
America. This increase was partially offset by significantly lower
systematic market making revenues, largely due to challenging Total operating expenses
operating conditions in that business and its transition to Interna- In 3Q17, total operating expenses of CHF 1,185 million decreased
tional Wealth Management in 1Q17. 5% compared to 2Q17, reflecting lower compensation and bene-
fits and reduced restructuring costs partially offset by higher com-
Underwriting mission expenses. The decrease in compensation and benefits
In 3Q17, underwriting revenues of CHF 240 million decreased reflected the lower results. During 3Q17, we incurred restructur-
4% compared to 2Q17, reflecting a slowdown in issuance activ- ing costs of CHF 27 million. General and administrative expenses
ity. Equity underwriting revenues declined significantly, consistent were slightly lower, as the lower UK bank levy was partially offset
with a slowdown in primary issuance volumes. This was partially by slightly higher allocated corporate function costs. Adjusted total
offset by higher debt underwriting revenues, reflecting increased operating expenses decreased 5%.
revenues across leveraged finance and investment grade. Compared to 3Q16, total operating expenses decreased
Underwriting revenues decreased 15% compared to strong 7%, reflecting lower compensation and benefits and restructur-
3Q16 results, which benefited from significant client deals, par- ing costs, partially offset by higher commission expenses. The
ticularly in debt underwriting. Debt underwriting revenues declined, decrease in compensation and benefits reflected the lower results.
due to lower investment grade revenues partially offset by higher General and administrative expenses decreased slightly, reflecting
leveraged finance revenues. In addition, we also had lower equity lower allocated corporate functions costs partially offset by higher
underwriting revenues. professional services fees. Adjusted total operating expenses
decreased 5%.
Credit Suisse results 39
Investment Banking & Capital Markets
Divisional results
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net revenues 457 511 467 (11) (2) 1,574 1,398 13
Provision for credit losses 12 13 (9) (8) – 31 20 55
Compensation and benefits 293 303 313 (3) (6) 944 908 4
General and administrative expenses 99 104 109 (5) (9) 304 323 (6)
Commission expenses 2 3 0 (33) – 5 1 400
Restructuring expenses 16 10 15 60 7 28 34 (18)
Total other operating expenses 117 117 124 0 (6) 337 358 (6)
Total operating expenses 410 420 437 (2) (6) 1,281 1,266 1
Income before taxes 35 78 39 (55) (10) 262 112 134
Statement
of operations metrics (%)
Return on regulatory capital 5.2 12.0 6.1 – – 13.2 6.4 –
Cost/income ratio 89.7 82.2 93.6 – – 81.4 90.6 –
Economic
risk capital and return
Average economic risk capital (CHF million) 5,212 5,236 4,762 0 9 5,216 4,536 15
Pre-tax return on average economic risk capital (%) 2.7 6.0 3.2 – – 6.7 3.3 –
Number
of employees (full-time equivalents)
Net revenue detail (CHF million)
Advisory and other fees 180 166 161 8 12 564 581 (3)
Debt underwriting 233 257 239 (9) (3) 781 706 11
Equity underwriting 65 105 74 (38) (12) 273 213 28
Other (21) (17) (7) 24 200 (44) (102) (57)
Net revenues 457 511 467 (11) (2) 1,574 1,398 13
Balance sheet statistics (CHF million, except where indicated)
Restructuring expenses (16) (10) (15) (28) (34)
Adjusted total operating expenses 394 410 422 1,253 1,232
Income before taxes 35 78 39 262 112
Total adjustments 16 10 15 28 34
Adjusted income before taxes 51 88 54 290 146
Adjusted return on regulatory capital (%) 7.6 13.5 8.6 14.6 8.3
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
Total operating expenses Compared to 3Q16, total operating expenses decreased 6%,
Total operating expenses of CHF 410 million decreased 2% com- driven by a lower discretionary compensation accrual, partially off-
pared to 2Q17, driven by lower compensation and benefits and set by higher deferred compensation expenses.
general and administrative expenses, partially offset by higher
restructuring expenses. Compensation and benefits of CHF 293
million decreased 3%, reflecting a lower discretionary compen-
sation accrual and lower deferred compensation from prior year
awards. General and administrative expenses of CHF 99 million
decreased 5% compared to 2Q17.
The Group’s global advisory and underwriting business operates across multiple business divisions that work in close collaboration with
each other to generate these revenues. In order to reflect the global performance and capabilities of this business and for enhanced
comparability versus its peers, the following table aggregates total advisory and underwriting revenues for the Group into a single metric
in US dollar terms before cross-divisional revenue sharing agreements.
in % change in % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Global advisory and underwriting revenues (USD million)
Global advisory and underwriting revenues 950 1,016 945 (6) 1 3,099 2,729 14
of which advisory and other fees 237 192 209 23 13 707 736 (4)
of which debt underwriting 544 582 552 (7) (1) 1,773 1,469 21
of which equity underwriting 169 242 184 (30) (8) 619 524 18
42 Credit Suisse results
RESULTS SUMMARY of CHF 222 million, compared to CHF 244 million in 2Q17 and
3Q17 results CHF 343 million in 3Q16.
In 3Q17, we reported a loss before taxes of CHF 578 million com-
pared to losses of CHF 563 million in 2Q17 and CHF 852 million Capital and leverage metrics
in 3Q16. In 3Q17, we reported an adjusted loss before taxes of As of the end of 3Q17, we reported risk-weighted assets of
CHF 469 million, compared to adjusted losses of CHF 531 million USD 37.0 billion, a decrease of USD 2.7 billion and USD 17.9
in 2Q17 and CHF 513 million in 3Q16. billion compared to the end of 2Q17 and 3Q16, respectively. In
We reported negative net revenues of CHF 255 million in 3Q17, risk-weighted assets reduction was achieved through the
3Q17, primarily driven by overall funding costs, exit losses related sale of legacy asset management positions, sales and restructur-
to the sale of legacy asset management positions and valuation ing in the residual loan portfolio and continued risk reduction in the
adjustments, partially offset by revenues from our legacy cross- derivatives portfolio. Leverage exposure was USD 67.6 billion as
border and small markets businesses. Total operating expenses of the end of 3Q17, reflecting a decrease of USD 7.2 billion and
in 3Q17 were CHF 331 million, including CHF 216 million of gen- USD 51.1 billion compared to the end of 2Q17 and 3Q16, respec-
eral and administrative expenses, of which CHF 100 million were tively. Leverage exposure reduction was achieved through various
litigation provisions, and CHF 85 million of compensation and initiatives, including assets sales and reduction across the deriva-
benefits. In 3Q17, we reported adjusted total operating expenses tives portfolio, including novations and restructurings.
Divisional results
in / end of % change in / end of % change
3Q17 2Q17 3Q16 QoQ YoY 9M17 9M16 YoY
Statements of operations (CHF million)
Net revenues (255) (274) (165) (7) 55 (735) (1,069) (31)
of which from noncontrolling interests
without significant economic interest 9 6 11 50 (18) 16 27 (41)
Provision for credit losses (8) 13 5 – – 29 83 (65)
Compensation and benefits 85 94 134 (10) (37) 267 506 (47)
General and administrative expenses 216 164 514 32 (58) 587 1,036 (43)
of which litigation provisions 100 28 334 257 (70) 209 404 (48)
Commission expenses 9 7 13 29 (31) 23 50 (54)
Restructuring expenses 21 11 21 91 0 39 120 (68)
Total other operating expenses 246 182 548 35 (55) 649 1,206 (46)
Total operating expenses 331 276 682 20 (51) 916 1,712 (46)
of which from noncontrolling interests
without significant economic interest 2 2 7 0 (71) 8 21 (62)
Loss before taxes (578) (563) (852) 3 (32) (1,680) (2,864) (41)
of which from noncontrolling interests
Net revenue detail (CHF million)
Restructuring of select onshore businesses (1) (3) 16 (67) – 31 145 (79)
Legacy cross-border and small markets businesses 26 34 46 (24) (43) 97 153 (37)
Legacy asset management positions (85) 22 2 – – (67) (56) 20
Legacy investment banking portfolio (115) (247) (171) (53) (33) (576) (1,099) (48)
Legacy funding costs (90) (92) (75) (2) 20 (247) (246) 0
Other 1 6 6 (83) (83) 11 7 57
Noncontrolling interests without significant economic interest 9 6 11 50 (18) 16 27 (41)
Net revenues (255) (274) (165) (7) 55 (735) (1,069) (31)
Balance sheet statistics (CHF million)
Total assets 49,409 54,427 77,581 (9) (36) 49,409 77,581 (36)
Risk-weighted assets 35,842 38,101 53,268 (6) (33) 35,842 53,268 (33)
Risk-weighted assets (USD) 37,042 39,786 54,949 (7) (33) 37,042 54,949 (33)
Leverage exposure 65,385 71,611 115,008 (9) (43) 65,385 115,008 (43)
Leverage exposure (USD) 67,574 74,778 118,638 (10) (43) 67,574 118,638 (43)
Adjusted results are non-GAAP financial measures. Refer to “Reconciliation of adjusted results” in Credit Suisse for further information.
RESULTS higher exit losses related to the sale of legacy asset management
Net revenues positions.
We reported negative net revenues of CHF 255 million in 3Q17 Compared to 3Q16, the movement was primarily driven by a
compared to negative net revenues of CHF 274 million in 2Q17 reduction in fee-based revenues as a result of accelerated busi-
and CHF 165 million in 3Q16. Compared to 2Q17, the improve- ness exits and higher exit losses related to the sale of legacy asset
ment was primarily driven by a reduction in overall funding costs management positions. This movement was partially offset by
and lower negative valuation adjustments, partially offset by lower overall funding costs.
44 Credit Suisse results
Provision for credit losses mortgage-related matters. Total operating expenses in 3Q17
In 3Q17, there was a release of provision for credit losses of included costs of CHF 40 million to meet requirements related
CHF 8 million compared to a provision for credit losses of CHF 13 to the settlements with US authorities regarding US cross-border
million in 2Q17 and CHF 5 million in 3Q16. The improvement in matters. Adjusted total operating expenses decreased 9%.
3Q17 was primarily related to improved economics of a single Compared to 3Q16, total operating expenses decreased
financing deal. CHF 351 million, due to lower general and administrative
expenses, including significantly lower litigation provisions mainly
Total operating expenses in connection with mortgage-related matters, and lower compen-
Total operating expenses of CHF 331 million increased CHF 55 sation and benefits as a result of various cost reduction initiatives,
million compared to 2Q17, primarily reflecting higher gen- including the impact of the transfer of our US private banking busi-
eral and administrative expenses, including an increase in liti- ness. Adjusted total operating expenses decreased 35%.
gation provisions by CHF 72 million mainly in connection with
Credit Suisse results 45
Corporate Center
Corporate Center
In 3Q17, Corporate Center recorded a loss before taxes of CHF 127 million compared to a loss of CHF 245 million in
2Q17 and a loss of CHF 207 million in 3Q16.
3Q17 results this change in estimate. Since 2Q17, treasury results also include
Corporate Center includes parent company operations such as additional interest charges from transfer pricing to align funding
Group financing, expenses for projects sponsored by the Group costs to assets held in the Corporate Center. Other revenues
and certain expenses and revenues that have not been allocated to include required elimination adjustments associated with trading
the segments. It also includes consolidation and elimination adjust- in own shares and, beginning in 3Q17, include the cost of certain
ments required to eliminate intercompany revenues and expenses. hedging transactions executed in connection with the Group’s risk-
In 3Q17, Corporate Center recorded a loss before taxes of weighted assets.
CHF 127 million compared to a loss of CHF 245 million in 2Q17, Compensation and benefits mainly reflect fair value adjust-
primarily driven by movements in treasury results, and compared to ments on certain deferred compensation plans not allocated
a loss of CHF 207 million in 3Q16. to the segments and certain deferred compensation retention
Treasury results include the impact of volatility in the valua- awards intended to support the restructuring of the Group relat-
tions of certain central funding transactions such as structured ing to Global Markets and Investment Banking & Capital Markets,
notes issuances and swap transactions. In 3Q17, treasury results predominantly through the end of 2017, and to Asia Pacific pre-
reflected revenues with respect to structured notes volatility of dominantly through the end of 2018. General and administrative
CHF 150 million, compared to CHF 58 million in 3Q16. The 3Q17 expenses primarily reflected costs associated with the evolution of
results included the positive impact of an enhancement to the valu- our legal entity structure to meet developing and future regulatory
ation methodology relating to the instrument-specific credit risk requirements.
on fair value option elected structured notes that were previously As announced in 2Q17, FINMA imposed an add-on to our risk-
recorded in accumulated other comprehensive income and were weighted assets relating to operational risk effective 3Q17. This
transferred to net income during 3Q17. We are in the process of add-on of CHF 5.2 billion was primarily in respect of our RMBS
migrating our structured notes portfolio to a new target operat- settlements. This increase was partially offset by CHF 2.7 bil-
ing model that allows for a more granular and precise valuation of lion movements in risk levels, primarily in credit risk, including the
the individual notes. This migration became sufficiently advanced impact of the hedging transactions executed in connection with
during 3Q17 with respect to the rates sub-portfolio to allow for the Group’s risk-weighted assets.
Statements of operations (CHF million)
Treasury results 45 (91) 68 – (34) (16) (85) (81)
Other (8) 25 4 – – 56 172 (67)
Net revenues 37 (66) 72 – (49) 40 87 (54)
Provision for credit losses 0 1 0 (100) – 3 (1) –
Compensation and benefits 103 107 185 (4) (44) 310 155 100
General and administrative expenses 44 61 89 (28) (51) 149 298 (50)
Commission expenses 8 8 5 0 60 37 44 (16)
Restructuring expenses 9 2 0 350 – 12 0 –
Total other operating expenses 61 71 94 (14) (35) 198 342 (42)
Total operating expenses 164 178 279 (8) (41) 508 497 2
Loss before taxes (127) (245) (207) (48) (39) (471) (409) 15
Balance sheet statistics (CHF million)
Total assets 65,636 63,480 62,007 3 6 65,636 62,007 6
Corporate Center
Expense allocation to divisions (CHF million)
Compensation and benefits 671 679 745 (1) (10) 2,023 1,852 9
General and administrative expenses 603 601 706 0 (15) 1,791 2,207 (19)
Commission expenses 8 8 5 0 60 37 44 (16)
Restructuring expenses 26 28 26 (7) 0 85 142 (40)
Total other operating expenses 637 637 737 0 (14) 1,913 2,393 (20)
Total operating expenses before allocation to divisions 1,308 1,316 1,482 (1) (12) 3,936 4,245 (7)
Net allocation to divisions 1,144 1,138 1,203 1 (5) 3,428 3,748 (9)
of which Swiss Universal Bank 254 238 239 7 6 749 742 1
of which International Wealth Management 192 183 195 5 (2) 573 579 (1)
of which Asia Pacific 183 191 185 (4) (1) 553 508 9
of which Global Markets 374 370 397 1 (6) 1,106 1,288 (14)
of which Investment Banking & Capital Markets 71 80 70 (11) 1 227 207 10
of which Strategic Resolution Unit 70 76 117 (8) (40) 220 424 (48)
Total operating expenses 164 178 279 (8) (41) 508 497 2
Corporate services and business support, including in finance, operations, human resources, legal, compliance, risk management and IT, are provided by corporate functions, and the related
costs are allocated to the segments and the Corporate Center based on their requirements and other relevant measures.
Credit Suisse results 47
Assets under management
Assets under management participations. Assets from joint ventures and participations are
Assets under management comprise assets that are placed with counted in proportion to our share in the respective entity.
us for investment purposes and include discretionary and advisory
counterparty assets. Net new assets
Discretionary assets are assets for which the client fully trans- Net new assets include individual cash payments, delivery of secu-
fers the discretionary power to a Credit Suisse entity with a man- rities and cash flows resulting from loan increases or repayments.
agement mandate. Discretionary assets are reported in the busi- Interest and dividend income credited to clients and commis-
ness in which the advice is provided as well as in the business in sions, interest and fees charged for banking services as well as
which the investment decisions take place. Assets managed by the changes in assets under management due to currency and mar-
Asset Management business of International Wealth Management ket volatility are not taken into account when calculating net new
for other businesses are reported in each applicable business and assets, as such charges or market movements are not directly
eliminated at the Group level. related to the Group’s success in acquiring assets under manage-
Advisory assets include assets placed with us where the client ment. Similarly structural effects mainly relate to asset inflows and
is provided access to investment advice but retains discretion over outflows due to acquisition or divestiture, exit from businesses or
investment decisions. markets or exits due to new regulatory requirements and are not
Assets under management and net new assets include assets taken into account when calculating net new assets. The Group
managed by consolidated entities, joint ventures and strategic reviews relevant policies regarding client assets on a regular basis.
of which International Wealth Management – Asset Management 9.2 (3.9) 4.4 35.8 (7.0)
of which Asia Pacific – Private Banking 6.4 (4.1) 6.1 7.5 4.7
of which Strategic Resolution Unit (0.3) (0.6) (0.1) (5.8) (3.9)
of which assets managed across businesses 2 (2.8) (1.2) (1.7) (28.0) (2.5)
Growth in assets under management 37.5 3.1 36.5 93.7 40.1
of which Swiss Universal Bank – Private Clients 4.6 3.3 3.0 13.9 2.8
of which Swiss Universal Bank – Corporate & Institutional Clients (5.8) 3.6 3.8 7.4 9.5
of which International Wealth Management – Private Banking 18.9 0.2 12.8 32.1 21.8
of which International Wealth Management – Asset Management 1 10.3 (1.1) 9.4 54.7 3.0
of which Asia Pacific – Private Banking 12.2 0.4 10.4 23.1 17.6
of which Strategic Resolution Unit (0.8) (1.1) (2.0) (7.8) (9.5)
of which assets managed across businesses 2 (1.9) (2.2) (0.9) (29.7) (5.1)
Growth in assets under management (annualized) (%)
Net new assets (0.6) 3.7 3.7 3.7 3.7
of which Swiss Universal Bank – Private Clients 2.0 3.4 1.9 3.3 1.3
of which Swiss Universal Bank – Corporate & Institutional Clients (15.5) 0.0 (2.3) (5.4) 0.7
of which International Wealth Management – Private Banking 4.3 5.5 5.8 5.3 7.0
of which International Wealth Management – Asset Management 1 1.2 3.1 6.4 7.8 4.1
of which Asia Pacific – Private Banking 13.0 10.1 10.9 12.5 11.4
of which Strategic Resolution Unit (29.9) (25.6) (38.4) (19.5) (27.4)
of which assets managed across businesses 2 (2.7) 3.0 (3.4) 2.1 3.8
Other effects 12.1 (2.7) 8.3 6.3 0.7
of which Swiss Universal Bank – Private Clients 7.1 3.3 4.5 6.3 0.7
of which Swiss Universal Bank – Corporate & Institutional Clients 8.9 4.1 6.9 8.3 3.2
of which International Wealth Management – Private Banking 18.2 (5.3) 11.3 7.9 3.0
of which International Wealth Management – Asset Management 10.1 (4.3) 5.5 14.9 (2.9)
of which Asia Pacific – Private Banking 14.4 (9.2) 15.4 6.0 4.2
of which Strategic Resolution Unit (17.9) (30.8) (2.0) (56.4) (19.0)
of which assets managed across businesses 2 8.4 3.7 7.2 35.3 3.6
Growth in assets under management 11.5 1.0 12.0 10.0 4.4
of which Swiss Universal Bank – Private Clients 9.1 6.7 6.4 9.6 2.0
of which Swiss Universal Bank – Corporate & Institutional Clients (6.6) 4.1 4.6 2.9 3.9
of which International Wealth Management – Private Banking 22.5 0.2 17.1 13.2 10.0
1
of which International Wealth Management – Asset Management 11.3 (1.2) 11.9 22.7 1.2
of which Asia Pacific – Private Banking 27.4 0.9 26.3 18.5 15.6
of which Strategic Resolution Unit (47.8) (56.4) (40.4) (75.9) (46.4)
of which assets managed across businesses 2 5.7 6.7 3.8 37.4 7.4
1
Includes outflows for private equity assets reflecting realizations at cost and unfunded commitments on which a fee is no longer earned.
2
Represents assets managed by Asset Management within International Wealth Management for the other businesses.
Credit Suisse results 49
Assets under management
3Q17 results offset by net new assets of CHF 5.8 billion in the Private Banking
As of the end of 3Q17, assets under management of CHF 1,344.8 business of Asia Pacific, primarily reflecting inflows from Greater
billion increased CHF 37.5 billion compared to the end of 2Q17. China and net new assets of CHF 3.6 billion in the Private Bank-
The increase was mainly driven by favorable market and foreign ing business of International Wealth Management, reflecting solid
exchange-related movements, partially offset by net asset outflows inflows from emerging markets and Europe.
of CHF 1.8 billion. u Refer to “Swiss Universal Bank”, “International Wealth Management” and
Net asset outflows of CHF 1.8 billion mainly reflected out- “Asia Pacific” for further information.
flows of CHF 13.7 billion in the Corporate & Institutional Clients u Refer to “Note 38 – Assets under management” in V – Consolidated financial
business of Swiss Universal Bank primarily due to redemptions statements – Credit Suisse Group in the Credit Suisse Annual Report 2016 for
further information.
of CHF 13.3 billion from a single public sector mandate, partially
50 Credit Suisse results
II
Treasury, risk, Liquidity and funding management 52
OVERVIEW The NSFR is defined as the ratio of available stable funding over
Securities for funding and capital purposes have historically been the amount of required stable funding and once implemented by
issued primarily by the Bank, our principal operating subsidiary and national regulators, should always be at least 100%.
a US registrant. In response to regulatory reform, we have focused
our issuance strategy on offering long-term debt securities at the Swiss liquidity requirements
Group level. Proceeds from issuances are lent to operating sub- In 2012, the Swiss Federal Council adopted a liquidity ordinance
sidiaries and affiliates on both a senior and subordinated basis, as (Liquidity Ordinance) that implements Basel III liquidity require-
needed; the latter typically to meet capital requirements and the ments into Swiss law subject, in part, to further rule-making,
former as desired by management to support business initiatives including with respect to the final Basel III LCR rules adopted in
and liquidity needs. 2014. Under the Liquidity Ordinance, as amended, certain Swiss
Our internal liquidity risk management framework is subject to banks became subject to an initial 60% LCR requirement, with
review and monitoring by the FINMA, other regulators and rating incremental increases by 10% per year until January 1, 2019. Sys-
agencies. temically relevant banks like Credit Suisse became subject to an
u Refer to “Treasury management” in III – Treasury, Risk, Balance sheet and Off- initial minimum LCR requirement of 100% beginning on January 1,
balance sheet in the Credit Suisse Annual Report 2016 for further information on 2015 and the associated disclosure requirements. Further, begin-
liquidity and funding management.
ning in May 2015, FINMA required us to maintain a minimum LCR
of 110% at all times.
REGULATORY FRAMEWORK In connection with the implementation of Basel III, regula-
Basel III liquidity framework tory LCR disclosures for the Group and certain subsidiaries are
In 2010, the Basel Committee on Banking Supervision (BCBS) required. Further details on our LCR can be found on our website.
issued the Basel III international framework for liquidity risk mea- u Refer to www.credit-suisse.com/regulatorydisclosures for additional
surement, standards and monitoring. The Basel III framework information.
includes a liquidity coverage ratio (LCR) and a net stable funding FINMA requires us to report the NSFR to FINMA on a monthly
ratio (NSFR). As of January 1, 2013, Basel III was implemented basis. The reporting instructions are generally aligned with the
in Switzerland along with the Swiss “Too Big to Fail” legislation final BCBS NSFR requirements. Following an observation period
and regulations thereunder. Our related disclosures are in accor- that began in 2012, the NSFR will become a minimum standard
dance with our interpretation of such requirements, including rel- in Switzerland on January 1, 2019, at which time banks will be
evant assumptions and estimates. Changes in the interpretation of required to comply with disclosure requirements prescribed by the
these requirements in Switzerland or in any of our interpretations, BCBS and implemented by FINMA.
assumptions or estimates could result in different numbers from Our liquidity principles and our liquidity risk management frame-
those shown in this report. work as agreed with FINMA are in line with the Basel III liquidity
The LCR, which is being phased in from January 1, 2015 framework.
through January 1, 2019, addresses liquidity risk over a 30-day u Refer to “Treasury management” in III – Treasury, Risk, Balance sheet and Off-
period. The LCR aims to ensure that banks have unencumbered balance sheet in the Credit Suisse Annual Report 2016 for further information on
the Basel III liquidity framework and Swiss liquidity requirements.
high-quality liquid assets (HQLA) available to meet short-term
liquidity needs under a severe stress scenario. The LCR is com-
prised of two components, the value of HQLA in stressed con- LIQUIDITY RISK MANAGEMENT FRAMEWORK
ditions and the total net cash outflows calculated according to Our liquidity and funding policy is designed to ensure that fund-
specified scenario parameters. Under the BCBS requirements, the ing is available to meet all obligations in times of stress, whether
ratio of liquid assets over net cash outflows is subject to an initial caused by market events or issues specific to Credit Suisse. We
minimum requirement of 60%, which will increase by 10% per year achieve this through a conservative asset/liability management
until January 1, 2019. strategy aimed at maintaining long-term funding, including stable
The NSFR establishes criteria for a minimum amount of stable deposits, in excess of illiquid assets. To address short-term liquid-
funding based on the liquidity of a bank’s on- and off-balance sheet ity stress, we maintain a liquidity pool, described below, that covers
activities over a one-year horizon. The NSFR is a complementary unexpected outflows in the event of severe market and idiosyn-
measure to the LCR and is structured to ensure that illiquid assets cratic stress. Our liquidity risk parameters reflect various liquidity
are funded with an appropriate amount of stable long-term funds. stress assumptions that we believe are conservative. We manage
Treasury, risk, balance sheet and off-balance sheet 53
Liquidity and funding management
our liquidity profile at a sufficient level such that, in the event we The liquidity pool may be used to meet the liquidity requirements of
are unable to access unsecured funding, we expect to have suf- our operating companies.
ficient liquidity to sustain operations for a period of time in excess As of the end of 3Q17, our liquidity pool managed by Trea-
of our minimum limit. This includes potential currency mismatches, sury had an HQLA value of CHF 166.0 billion. The liquidity pool
which are not deemed to be a major risk but are monitored and consisted of CHF 97.8 billion of cash held at major central banks,
subject to limits, particularly in the significant currencies of euro, primarily the SNB, the Fed and the ECB, and CHF 68.2 billion
Japanese yen, pound sterling, Swiss franc and US dollar. market value of securities issued by governments and government
u Refer to “Treasury management” in III – Treasury, Risk, Balance sheet and Off- agencies, primarily from the US, UK and France.
balance sheet in the Credit Suisse Annual Report 2016 for further information on In addition to the liquidity portfolio managed by Treasury, there
our approach to liquidity risk management, governance and contingency planning.
is also a portfolio of unencumbered liquid assets managed by
various businesses, primarily in the Global Markets and Invest-
LIQUIDITY METRICS ment Banking & Capital Markets divisions. These assets generally
Liquidity pool include high-grade bonds and highly liquid equity securities that
Treasury manages a sizeable portfolio of liquid assets comprised form part of major indices. In coordination with the businesses,
of cash held at central banks and securities. A portion of the liquid- Treasury can access these assets to generate liquidity if required.
ity pool is generated through reverse repurchase agreements with As of the end of 3Q17, the portfolio that is not managed by
top-rated counterparties. We are mindful of potential credit risk and Treasury had a market value of CHF 31.3 billion, consisting of CHF
therefore focus our liquidity holdings strategy on cash held at cen- 8.1 billion of high-grade bonds and CHF 23.2 billion of highly liquid
tral banks and highly rated government bonds and on short-term equity securities. Under our internal model, an average stress-level
reverse repurchase agreements. These government bonds are eli- haircut of 17% is applied to these assets. The haircuts applied to
gible as collateral for liquidity facilities with various central banks these portfolios reflect our assessment of overall market risk at the
including the SNB, the Fed, the ECB and the BoE. Our direct time of measurement, potential monetization capacity taking into
exposure on these bonds is limited to highly liquid, top-rated sov- account increased haircuts, market volatility and the quality of the
ereign entities or fully guaranteed agencies of sovereign entities. relevant securities.
Liquidity Coverage Ratio entities of the Group in certain jurisdictions that may not be read-
Our calculation methodology for the LCR is prescribed by FINMA. ily accessible for use by the Group as a whole. These HQLA eli-
For disclosure purposes, since January 1, 2017, our LCR is cal- gible amounts may be restricted for reasons such as local reg-
culated using a three-month average that is measured using daily ulatory requirements, including large exposure requirements, or
calculations during the quarter. The FINMA calculation of HQLA other binding constraints that could limit the transferability to other
takes into account a cancellation mechanism (post-cancellation Group entities in other jurisdictions.
view) and is therefore not directly comparable to the assets pre- On this basis, the level of our LCR was 181% as of the end of
sented in the financial statements that could potentially be mon- 3Q17, an increase from 165% as of the end of 2Q17, represent-
etized under a severe stress scenario. The cancellation mecha- ing an average HQLA of CHF 167.8 billion and average net cash
nism effectively excludes the impact of certain secured financing outflows of CHF 92.5 billion.
transactions from available HQLA and simultaneously adjusts the A significant part of the increase in the LCR in 3Q17 resulted
level of net cash outflows calculated. Application of the cancella- from an increase in HQLA, which was mainly driven by the
tion mechanism adjusts both the numerator and denominator of increase in the amount of securities held. The remainder of the
the LCR calculation, meaning that the impact is mostly neutral on increase resulted from a reduction in net cash outflows compared
the LCR itself. to the prior quarter, primarily arising from decreased cash outflows
Beginning on March 31, 2017, our HQLA measurement meth- associated with other collateral requirements, credit and liquidity
odology excludes potentially eligible HQLA available for use by facilities and balances related to open and failed trades.
54 Treasury, risk, balance sheet and off-balance sheet
Calculated using a three-month average which since 1Q17 is calculated on a daily basis.
1
Calculated as outstanding balances maturing or callable within 30 days.
2
Calculated after the application of haircuts for high-quality liquid assets or inflow and outflow rates.
3
Consists of cash and eligible securities as prescribed by FINMA and reflects a post-cancellation view.
FUNDING SOURCES AND USES reflecting a small increase in the customer deposit base in our
We fund our balance sheet primarily through core customer private banking and corporate & institutional banking businesses.
deposits, long-term debt, including structured notes, and share- Core customer deposits are from clients with whom we have a
holders’ equity. We monitor the funding sources, including their broad and longstanding relationship. Core customer deposits
concentrations against certain limits, according to their counter- exclude deposits from banks and certificates of deposit. We place
party, currency, tenor, geography and maturity, and whether they a priority on maintaining and growing customer deposits, as they
are secured or unsecured. have proven to be a stable and resilient source of funding even in
A substantial portion of our balance sheet is match funded difficult market conditions. Our core customer deposit funding is
and requires no unsecured funding. Match funded balance sheet supplemented by the issuance of long-term debt.
items consist of assets and liabilities with close to equal liquidity u Refer to the chart “Balance sheet funding structure” and “Balance sheet” in
durations and values so that the liquidity and funding generated or Balance sheet, and off-balance sheet for further information.
required by the positions are substantially equivalent.
Cash and due from banks and reverse repurchase agreements DEBT ISSUANCES AND REDEMPTIONS
are highly liquid. A significant part of our assets, principally unen- Our long-term debt includes senior, senior bail-in and subordinated
cumbered trading assets that support the securities business, is debt issued in US-registered offerings and medium-term note pro-
comprised of securities inventories and collateralized receivables grams, euro market medium-term note programs, stand-alone offer-
that fluctuate and are generally liquid. These liquid assets are ings, structured note programs, covered bond programs, Australian
available to settle short-term liabilities. dollar domestic medium-term note programs and a Samurai shelf
Loans, which comprise the largest component of our illiquid registration statement in Japan. As a global bank, we have access to
assets, are funded by our core customer deposits, with an excess multiple markets worldwide and our major funding centers are New
coverage of 18% as of the end of 3Q17, compared to 19% as of York, London, Zurich and Tokyo.
the end of 2Q17, primarily reflecting a small increase in deposits Our covered bond funding is in the form of mortgage-backed
and loans. We fund other illiquid assets, including real estate, pri- loans funded by domestic covered bonds issued through Pfandbrief-
vate equity and other long-term investments as well as the haircut bank Schweizerischer Hypothekarinstitute, one of two institutions
for the illiquid portion of securities, with long-term debt and equity, established by a 1930 act of the Swiss Parliament to centralize the
in which we try to maintain a substantial funding buffer. issuance of covered bonds, or historically from our own international
Our core customer deposits totaled CHF 327 billion as of the covered bond program.
end of 3Q17, compared to CHF 323 billion as of the end of 2Q17,
Treasury, risk, balance sheet and off-balance sheet 55
Liquidity and funding management
Balance sheet funding structure As of the end of 3Q17, the weighted average maturity of long-term
debt was 5.9 years (including certificates of deposit with a maturity
as of September 30, 2017 (CHF billion) of one year or longer, but excluding structured notes, and assum-
ing callable securities are redeemed at final maturity, or in 2030
Reverse repurchase Repurchase for instruments without a stated final maturity).
agreements59 69agreements Short-term borrowings decreased to CHF 16.2 billion as of
Encumbered
trading assets 39 Match 29 Short positions the end of 3Q17 compared to CHF 17.2 billion as of the end of
funded
2Q17, mainly due to the maturity of outstanding notes and lower
Funding-neutral Funding-neutral
assets167 67liabilities1 issuances.
The following table provides information on long-term debt
11 Other short-term liabilities2 issuances, maturities and redemptions in 3Q17, excluding struc-
45 Due to banks tured notes.
Cash & due from banks 106
16 Short-term borrowings
Debt issuances and redemptions
time91
Senior Sub- Long-term
in 3Q17 Senior bail-in ordinated debt
Unencumbered
liquid assets3132 Long-term debt (CHF billion, notional value)
327 Deposits5 demand143 of which unsecured 0.0 4.0 0.0 4.0
of which secured 1 0.1 0.0 0.0 0.1
118% Maturities / Redemptions 2.7 0.0 0.0 2.7
coverage
of which unsecured 2.7 0.0 0.0 2.7
savings64 of which secured 1 0.0 0.0 0.0 0.0
Loans4276
fiduciary 29 Excludes structured notes.
1
Includes covered bonds.
CREDIT RATINGS
181 Long-term debt The maximum impact of a simultaneous one, two or three-notch
downgrade by all three major rating agencies in the Bank’s long-
Other illiquid assets 110
term debt ratings would result in additional collateral requirements
or assumed termination payments under certain derivative instru-
44 Total equity
ments of CHF 0.4 billion, CHF 1.7 billion and CHF 2.4 billion,
Assets789 789 Liabilities and Equity
respectively, as of the end of 3Q17, and would not be material
to our liquidity and funding planning. If the downgrade does not
1
Primarily includes brokerage receivables/payables, positive/negative replacement values
and cash collateral. involve all three rating agencies, the impact may be smaller.
2
Primarily includes excess of funding neutral liabilities (brokerage payables) over corre- Potential cash outflows on these derivative contracts associ-
sponding assets.
ated with a downgrade of our long-term debt credit ratings, such
3
Primarily includes unencumbered trading assets, unencumbered investment securities and
excess reverse repurchase agreements, after haircuts. as the requirement to post additional collateral to the counterparty,
4
Excludes loans with banks. the loss of re-hypothecation rights on any collateral received and
5
Excludes due to banks and certificates of deposit.
impacts arising from additional termination events are monitored
and taken into account in the calculation of our liquidity require-
ments. There are additional derivative related risks that do not
As of the end of 3Q17, we had outstanding long-term debt of relate to the downgrade of our long term debt credit ratings and
CHF 180.3 billion, which included senior and subordinated instru- which may impact our liquidity position, including risks relating to
ments. We had CHF 57.0 billion and CHF 18.7 billion of struc- holdings of derivatives collateral or potential movements in the
tured notes and covered bonds outstanding, respectively, as of the valuation of derivatives positions. The potential outflows resulting
end of 3Q17 compared to CHF 57.7 billion and CHF 18.4 billion, across all derivative product types are monitored as part of the
respectively, as of the end of 2Q17. LCR scenario parameters and the internal liquidity reporting.
u Refer to “Issuances and redemptions” in Capital management for information u Refer to “Credit ratings” in III – Treasury, Risk, Balance sheet and Off-balance
on capital issuances, including buffer and progressive capital notes. sheet in the Credit Suisse Annual Report 2016 for further information.
56 Treasury, risk, balance sheet and off-balance sheet
Capital management
Capital management
As of the end of 3Q17, our BIS CET1 ratio was 14.0% and 13.2% on a look-through basis. Our BIS tier 1 leverage ratio
was 5.7% and 5.2% on a look-through basis.
REGULATORY CAPITAL FRAMEWORK A progressive buffer between 1% and 2.5% (with a possible
Effective January 1, 2013, the Basel III framework was imple- additional 1% surcharge) of CET1, depending on a bank’s sys-
mented in Switzerland along with the Swiss “Too Big to Fail” legis- temic importance, is an additional capital requirement for G-SIB.
lation and regulations thereunder (Swiss Requirements). Together The Financial Stability Board has identified Credit Suisse as a
with the related implementing ordinances, the legislation includes G-SIB and currently requires Credit Suisse to maintain a 1.5%
capital, liquidity, leverage and large exposure requirements and progressive buffer.
rules for emergency plans designed to maintain systemically rel- In addition to the CET1 requirements, there is also a require-
evant functions in the event of threatened insolvency. Our related ment for 1.5% of additional tier 1 capital and 2% of tier 2 capital.
disclosures are in accordance with our current interpretation of These requirements may also be met with CET1 capital.
such requirements, including relevant assumptions. Changes in the
interpretation of these requirements in Switzerland or in any of our Basel III capital frameworks for Credit Suisse
assumptions or estimates could result in different numbers from
those shown in this report. Also, our capital metrics fluctuate dur- BIS Requirements Swiss Requirements
ing any reporting period in the ordinary course of business. Countercyclical buffer up to Countercyclical buffer up to
References to phase-in and look-through included herein refer 2.5% CET1 2.5% CET1
to Basel III capital requirements and Swiss Requirements. Phase-
in reflects that, for the years 2014 – 2018, there will be a five-year 28.6%
(20% per annum) phase-in of goodwill, other intangible assets and
other capital deductions (e.g., certain deferred tax assets) and the
phase-out of an adjustment for the accounting treatment of pen-
sion plans and, for the years 2013 – 2022, there will be a phase-
Gone concern
out of certain capital instruments. Look-through assumes the full 14.3%1
phase-in of goodwill and other intangible assets and other regula- Bail-in debt instruments
14.3%
BIS REQUIREMENTS
The BCBS, the standard setting committee within the BIS, issued 12% 4.3%
the Basel III framework, with higher minimum capital require- 2% Tier 2
Additional tier 1
ments and conservation and countercyclical buffers, revised risk-
10% 10%
based capital measures, a leverage ratio and liquidity standards.
Going concern
the form of common equity. The new capital standards are being 1.5% Progressive buffer 5.5% CET1
Buffer component
phased in from 2013 through 2018 and become fully effective on 2.5%
Capital conservation buffer
January 1, 2019 for those countries that have adopted Basel III.
u Refer to the table “BIS phase-in requirements for Credit Suisse” for capital 4.5% CET1
requirements and applicable effective dates during the phase-in period. 4.5% CET1
Minimum component
Under Basel III, the minimum CET1 requirement is 4.5% of risk- Does not include any rebates for resolvability and for certain tier 2 low-trigger instruments
1
BIS phase-in requirements for Credit Suisse Ordinance came into effect on July 1, 2016, subject to phase-in and
For 2017 2018 2019 grandfathering provisions for certain outstanding instruments, and
Capital ratios
has to be fully applied by January 1, 2020.
CET1 4.5% 4.5% 4.5%
Capital conservation buffer 1.250%1 1.875% 1 2.5% Going concern requirement
Progressive buffer for G-SIB 0.750% 1.125% 1 1.5%
1
The going concern requirement applicable in 2020 for a G-SIB con-
Total CET1 6.5% 7.5% 8.5% sists of (i) a base requirement of 12.86% of RWA and 4.5% of lever-
Additional tier 1 1.5% 1.5% 1.5% age exposure; and (ii) a surcharge, which reflects the G-SIB’s sys-
Tier 1 8.0% 9.0% 10.0% temic importance. For Credit Suisse, this currently translates into a
Tier 2 2.0% 2.0% 2.0% going concern requirement of 14.3% of RWA, of which the mini-
Total capital 10.0% 11.0% 12.0% mum CET1 component is 10%, with the remainder to be met with
Phase-in deductions from CET1 2 80.0%1 100.0% 100.0% a maximum of 4.3% additional tier 1 capital, which includes high-
Capital instruments
Phased out over a 10-year horizon trigger capital instruments that would be converted into common
subject to phase-out beginning 2013 through 2022 equity or written down if the CET1 ratio falls below 7%. Under the
1
Indicates phase-in period. going concern requirement, the Swiss leverage ratio must be 5%,
2
Includes goodwill, other intangible assets and certain deferred tax assets. of which the minimum CET1 component is 3.5%, with the remain-
der to be met with a maximum of 1.5% additional tier 1 capital,
To qualify as additional tier 1 under Basel III, capital instruments which includes high-trigger capital instruments.
must provide for principal loss absorption through a conversion into
common equity or a write-down of principal feature. The trigger Gone concern requirement
for such conversion or write-down must include a CET1 ratio of at The gone concern requirement of a G-SIB is equal to its total going
least 5.125% as well as a trigger at the point of non-viability. concern requirement, which in 2020, consists of a base requirement
Basel III further provides for a countercyclical buffer that could of 12.86% of RWA and 4.5% of leverage exposure, plus any sur-
require banks to hold up to 2.5% of CET1. This requirement is charges applicable to the relevant G-SIB. The gone concern require-
imposed by national regulators where credit growth is deemed to ment does not include any countercyclical buffers. Credit Suisse is
be excessive and leading to the build-up of system-wide risk. currently subject to a gone concern requirement of 14.3% of RWA
Capital instruments that do not meet the strict criteria for inclu- and a 5% Swiss leverage ratio and is subject to potential capital
sion in CET1 are excluded. Capital instruments that would no lon- rebates for resolvability and for certain tier 2 low-trigger instruments
ger qualify as tier 1 or tier 2 capital will be phased out. In addition, recognized as gone concern capital.
instruments with an incentive to redeem prior to their stated matu- The gone concern requirement should primarily be fulfilled with
rity, if any, are phased out at their effective maturity date, which is bail-in debt instruments that are designed to absorb losses after the
generally the date of the first step-up coupon. write-down or conversion into equity of regulatory capital of a G-SIB
Banks are required to maintain a tier 1 leverage ratio of 3% in a restructuring scenario, but before the write-down or conversion
beginning on January 1, 2018. into equity of other senior obligations of the G-SIB. Bail-in debt instru-
ments do not feature capital triggers that may lead to a write-down
SWISS REQUIREMENTS and/or a conversion into equity outside of restructuring, but only begin
The legislation implementing the Basel III framework in Switzerland to bear losses once the G-SIB is formally in restructuring proceedings
in respect of capital requirements for systemically relevant banks, and FINMA orders capital measures (i.e., a write-down and/or a con-
including Credit Suisse, goes beyond the Basel III minimum stan- version into equity) in the restructuring plan.
dards for systemically relevant banks. According to the amended Capital Adequacy Ordinance, bail-in
In May 2016, the Swiss Federal Council amended the Capi- debt instruments must fulfill certain criteria in order to qualify under
tal Adequacy Ordinance applicable to Swiss banks. The amend- the gone concern requirement, including FINMA approval. In addition
ment recalibrates and expands the existing “Too Big to Fail” regime to bail-in debt instruments, the gone concern requirement may fur-
in Switzerland. Under the amended regime, systemically important ther be fulfilled with other capital instruments, including CET1, addi-
banks operating internationally, such as Credit Suisse, will be subject tional tier 1 capital instruments or tier 2 capital instruments.
to two different minimum requirements for loss-absorbing capacity:
G-SIBs must hold sufficient capital that absorbs current operating Grandfathering provisions
losses to ensure continuity of service (going concern requirement) The Capital Adequacy Ordinance provides for a number of grandfa-
and they must issue sufficient debt instruments to fund restructuring thering provisions with regard to the qualification of previously issued
without recourse to public resources (gone concern requirement). additional tier 1 capital instruments and tier 2 capital instruments:
Going concern capital and gone concern capital together form our p Additional tier 1 capital instruments with a low trigger qualify as
total loss-absorbing capacity (TLAC). The going concern and gone going concern capital until their first call date. Additional tier 1
concern requirements are generally aligned with the FSB’s total capital instruments that no longer qualify as going concern capi-
loss-absorbing capacity standard. The amended Capital Adequacy tal pursuant to this provision qualify as gone concern capital;
58 Treasury, risk, balance sheet and off-balance sheet
Capital management
Gone concern
14.3
11.6
8.9
6.2
4.3
3.9
3.4
3.0
Gone concern
Going concern
5.0
4.0
3.0
9.46 9.68 10.0
9.0 2.0 1.5
Going concern
1.3
1.1
0.9
p Bail-in debt instruments
p Additional tier 1 2.9 3.2 3.5
2.6
p CET1
Effective as of January 1, for the applicable year 2017 2018 2019 2020 2017 2018 2019 2020
Capital components (%)
CET1 – minimum 5.8 5.4 4.9 4.5 2.1 1.9 1.7 1.5
Additional tier 1 – maximum 2.2 2.6 3.1 3.5 0.9 1.1 1.3 1.5
Minimum component 8.0 8.0 8.0 8.0 3.0 3.0 3.0 3.0
CET1 – minimum 3.2 4.06 4.78 5.5 0.5 1.0 1.5 2.0
Additional tier 1 – maximum 0.8 0.8 0.8 0.8 0.0 0.0 0.0 0.0
Buffer component 4.0 4.86 5.58 6.3 0.5 1.0 1.5 2.0
Going concern 12.0 12.86 13.58 14.3 3.5 4.0 4.5 5.0
of which base requirement 12.0 12.86 12.86 12.86 3.5 4.0 4.5 4.5
of which surcharge 0.0 0.0 0.72 1.44 0.0 0.0 0.0 0.5
Gone concern 6.2 8.9 11.6 14.3 2.0 3.0 4.0 5.0
of which base requirement 5.84 8.18 10.52 12.86 1.875 2.75 3.625 4.5
of which surcharge 0.36 0.72 1.08 1.44 0.125 0.25 0.375 0.5
Total loss-absorbing capacity 18.2 21.76 25.18 28.6 5.5 7.0 8.5 10.0
Does not include the effects of the countercyclical buffers and any rebates for resolvability and for certain tier 2 low-trigger instruments recognized in gone concern capital.
As of the end of 3Q17, the Swiss countercyclical buffer for the Group and the Bank was CHF 432 million, which is equivalent to 0.2% of CET1 capital, and the required extended countercy-
clical buffer was insignificant. As of the end of 3Q17, the rebate for resolvability relating to the Group and the Bank’s capital ratios was 0.868%, resulting in a gone concern requirement of
5.332%, and 0.28% relating to the leverage ratios, resulting in a gone concern leverage requirement of 1.72%.
Treasury, risk, balance sheet and off-balance sheet 59
Capital management
p Tier 2 capital instruments with a high trigger qualify as going every regulatory VaR backtesting exception over four in the prior
concern capital until the earlier of (i) their maturity date or first rolling 12-month period. In 3Q17, our market risk capital multiplier
call date; and (ii) December 31, 2019. Tier 2 capital instru- remained at FINMA and BIS minimum levels and we did not expe-
ments that no longer qualify as going concern capital pursuant rience an increase in market risk capital.
to this provision qualify as gone concern capital until one year u Refer to “Market risk review” in Risk management for further information.
before their final maturity; and
p Tier 2 capital instruments with a low trigger also qualify as REGULATORY DEVELOPMENTS AND PROPOSALS
going concern capital until the earlier of (i) their maturity date Partial replacement of the 2013 FINMA Decree
or first call date; and (ii) December 31, 2019. Tier 2 capital In October 2017, FINMA issued an additional decree with respect
instruments that no longer qualify as going concern capital to the regulatory capital requirements of the Bank parent company
pursuant to this provision qualify as gone concern capital until (2017 FINMA Decree), specifying the treatment of investments in
one year before their final maturity. subsidiaries for capital adequacy purposes. This decree partially
replaces certain aspects of the 2013 FINMA Decree, but all other
Furthermore, to be eligible as gone concern capital, outstanding aspects of that decree remain in force. The 2017 FINMA Decree
bail-in debt instruments issued before July 1, 2016 and bail-in debt is effective retroactively as of July 1, 2017. The changes aim to
instruments issued by a (Swiss or foreign) special purpose vehicle create a capital adequacy framework for the Bank parent com-
before January 1, 2017 must have been approved by FINMA. pany that is more comparable to relevant international frameworks
Both the going concern and the gone concern requirements are and does not rely on exemptions from, or corrections of, the basic
subject to a phase-in with gradually increasing requirements and framework applicable to all Swiss banks. The changes only apply
have to be fully applied by January 1, 2020. to the going concern capital requirements for the Bank parent
company, which, as of July 1, 2017, amount to 14.3% of RWA, of
Other requirements which the minimum CET1 component is 10%, with the remainder
Effective July 1, 2016, Switzerland implemented an extended coun- to be met with a maximum of 4.3% additional tier 1 capital, which
tercyclical buffer, which is based on the BIS countercyclical buffer includes high-trigger capital instruments. Additional effects from
that could require banks to hold up to 2.5% of RWA in the form countercyclical buffers impact the CET1 minimum requirement.
of CET1 capital. The extended countercyclical buffer relates to a Under the going concern requirement, the Swiss leverage ratio
requirement that can be imposed by national regulators when credit must be 5%, of which the minimum CET1 component is 3.5%,
growth is deemed to be excessive and leading to the build-up of with the remainder to be met with a maximum of 1.5% additional
system-wide risk. tier 1 capital, which includes high-trigger capital instruments.
The Swiss Federal Council has not activated the BIS countercy- The new rules will require the Bank parent company to risk-
clical buffer for Switzerland but instead requires banks to hold CET1 weight both direct and indirect investments in subsidiaries, with
capital in the amount of 2% of their RWA pertaining to mortgage the initial risk-weight set at 200%. Beginning in 2019, these risk-
loans that finance residential property in Switzerland (Swiss coun- weights will gradually increase over 10 years to 250% for partici-
tercyclical buffer). pations in subsidiaries in Switzerland and to 400% for participa-
In 2013, FINMA introduced increased capital charges for tions in subsidiaries abroad. This replaces the existing framework
mortgages that finance owner occupied residential property in that, for systemically relevant banks, provided exemptions to the
Switzerland (mortgage multiplier) to be phased in through Janu- general rule of capital deduction with respect to investments in
ary 1, 2019. The mortgage multiplier applies for purposes of both subsidiaries to avoid unintended effects from the existing “Too
BIS and FINMA requirements. Big to Fail” legislation and capital requirements thereunder. Fur-
In December 2013, FINMA issued a decree (2013 FINMA thermore, the Swiss administration plans to amend the Capital
Decree) specifying capital adequacy requirements for the Bank, Adequacy Ordinance accordingly so that these new rules will apply
on a stand-alone basis (Bank parent company), and the Bank and to all banks in Switzerland.
the Group, each on a consolidated basis, as systemically relevant The 2017 FINMA Decree also applies an adjustment (referred
institutions. to as a regulatory filter) to any impact on CET1 capital arising from
u Refer to “Regulatory developments and proposals” below and in III – Treasury, the upcoming accounting change under applicable Swiss banking
Risk, Balance sheet and Off-balance sheet – Capital management in the Credit rules for the Bank parent company’s investments in subsidiaries
Suisse Annual Report 2016 for further information on the FINMA Decree.
from the current portfolio valuation method to the individual valua-
tion method by 2020. The regulatory filter allows for the measure-
Within the Basel framework for FINMA regulatory capital pur- ment of the regulatory capital position as if the Bank parent com-
poses, we implemented risk measurement models, including an pany had maintained the portfolio valuation method, which results
incremental risk charge, stressed Value-at-Risk (VaR), risks not in in higher total participation values subject to risk weighting.
VaR and advanced credit valuation adjustment (CVA). u Refer to www.credit-suisse.com/regulatorydisclosures for the Bank parent
For capital purposes, FINMA, in line with BIS requirements, company’s regulatory disclosures.
uses a multiplier to impose an increase in market risk capital for
60 Treasury, risk, balance sheet and off-balance sheet
Capital management
Other developments notes due 2027 and JPY 10 billion 1.269% callable senior notes due
In October 2017, the BCBS published final guidelines on the iden- 2033.
tification and management of step-in risk. Step-in risk refers to the All of the above-mentioned issuances count as bail-in instruments.
risk that a bank decides to provide financial support to an uncon-
solidated entity that is facing financial stress in the absence of, Higher Trigger Capital Amount
or in excess of, any contractual obligations or equity ties to actu- The capital ratio write-down triggers for certain of our outstanding
ally provide such support, in particular to avoid reputational risks. capital instruments take into account the fact that other outstanding
The guidelines do not prescribe any automatic liquidity or capital capital instruments that contain relatively higher capital ratios as part
charge, but rather rely on existing prudential measures to mitigate of their trigger feature are expected to convert into equity or be written
significant step-in risk through identification and management of down prior to the write-down of such capital instruments. The amount
step-in risks and a supervisory process built on reporting. The of additional capital that is expected to be contributed by such con-
BCBS expects the guidelines to be implemented in member juris- version into equity or write-down is referred to as the Higher Trigger
dictions by 2020. Capital Amount.
In October 2017, FINMA announced its re-assessment of With respect to the capital instruments that specify a trigger event
rebates for resolvability relating to the gone concern requirement. if the CET1 ratio were to fall below 5.125%, the Higher Trigger Capital
The eligibility for the rebates for resolvability is assessed on an Amount was CHF 7.5 billion and the Higher Trigger Capital Ratio (i.e.,
annual basis. Effective July 1, 2017, our capital ratio rebate is the ratio of the Higher Trigger Capital Amount to the aggregate of all
0.868% and our leverage ratio rebate is 0.28%. RWA of the Group) was 2.8%, both as of the end of 3Q17.
With respect to the capital instruments that specify a trigger
ISSUANCES AND REDEMPTIONS event if the CET1 ratio were to fall below 5%, the Higher Trigger
Issuances Capital Amount was CHF 12.4 billion and the Higher Trigger Capi-
In July 2017, the Group issued EUR 1.5 billion 1.25% senior notes tal Ratio was 4.6%, both as of the end of 3Q17.
due 2025. u Refer to the table “BIS capital metrics – Group” for further information on the
In September 2017, the Group issued GBP 750 million 2.125% BIS metrics used to calculate such measures.
senior notes due 2025, USD 1,000 million 2.997% senior notes due u Refer to “Higher Trigger Capital Amount” in III – Treasury, Risk, Balance sheet
2023 and USD 500 million floating rate senior notes due 2023. and Off-balance sheet – Capital management – Issuances and redemptions in
the Credit Suisse Annual Report 2016 for further information on the Higher Trig-
In October 2017, the Group issued JPY 38.7 billion 0.553% call- ger Capital Amount.
able senior notes due 2023, JPY 8.3 billion 0.904% callable senior
BIS CAPITAL METRICS of a dividend accrual and the net regulatory impact of losses on
Our CET1 ratio was 14.0% as of the end of 3Q17 compared to fair-valued financial liabilities due to changes in own credit risk.
14.2% as of the end of 2Q17, reflecting a slight increase in CET1 Additional tier 1 capital increased to CHF 14.5 billion as of the
capital and higher RWA. Our tier 1 ratio was 19.4% as of the end end of 3Q17 compared to CHF 14.2 billion as of the end of 2Q17,
of 3Q17 compared to 19.6% as of the end of 2Q17. Our total capi- mainly reflecting a positive foreign exchange impact and the impact
tal ratio was 21.5% as of the end of 3Q17 compared to 21.7% as of the prescribed amortization of issuance fees as instruments move
of the end of 2Q17. closer to their maturity date.
CET1 capital was CHF 37.3 billion as of the end of 3Q17, Tier 2 capital increased slightly to CHF 5.4 billion as of the
a slight increase compared to CHF 37.0 billion as of the end of end of 3Q17 compared to CHF 5.3 billion as of the end of 2Q17,
2Q17, mainly reflecting a positive foreign exchange impact and net mainly reflecting a positive foreign exchange impact.
income attributable to shareholders, partially offset by the impact
Treasury, risk, balance sheet and off-balance sheet 61
Capital management
Accounting treatment of defined benefit pension plans 590 600 1,246 (2) – – – –
Common share capital issued by subsidiaries
Deferred tax assets that rely on future profitability (2,133) (2,230) (2,120) (4) (2,666) (2,787) (3,534) (4)
Shortfall of provisions to expected losses (375) (396) (299) (5) (469) (496)
(498) (5)
Gains/(losses) due to changes in own credit
Total eligible capital was CHF 57.2 billion as of the end of 3Q17 of 3Q17, the look-through total capital ratio was 19.4% compared
compared to CHF 56.5 billion as of the end of 2Q17. to 19.6% as of the end of 2Q17.
As of the end of 3Q17, the look-through CET1 ratio was
13.2% compared to 13.3% as of the end of 2Q17. As of the end
62 Treasury, risk, balance sheet and off-balance sheet
Capital management
Capital movement – Group deducted from CET1 capital and the amount below the threshold
Look- is risk-weighted. RWA subject to such threshold adjustments are
3Q17 Phase-in through included in credit risk RWA. Market risk RWA reflect the capital
CET1 capital (CHF million) requirements of potential changes in the fair values of financial
Balance at beginning of period 37,011 34,467 instruments in response to market movements inherent in both
Net income attributable to shareholders 244 244 balance sheet and off-balance sheet items. Operational risk RWA
Foreign exchange impact 257 1 232 reflect the capital requirements for the risk of loss resulting from
Other (181) 2 (83) inadequate or failed internal processes, people and systems or
Balance at end of period 37,331 34,860
from external events.
Additional tier 1 capital (CHF million) RWA increased 2% to CHF 266.6 billion as of the end of 3Q17
Balance at beginning of period 14,249 12,220 compared to CHF 260.9 billion as of the end of 2Q17, primarily
Foreign exchange impact 115 94 driven by methodology and policy changes in operational risk and
Other 153 3 36 credit risk and a foreign exchange impact. These increases were
Balance at end of period 14,517 12,350 partially offset by decreases resulting from movements in risk lev-
Tier 2 capital (CHF million) els in credit risk.
Balance at beginning of period 5,266 4,034 Excluding the foreign exchange impact, the decrease in credit
Foreign exchange impact 116 96 risk was primarily driven by movements in risk levels attributable to
Other (22) (18) book size, partially offset by increases related to methodology and
Balance at end of period 5,360 4,112
policy changes. The decrease in risk levels attributable to book
Eligible capital (CHF million) size in the Corporate Center mainly reflected the impact of hedging
Balance at end of period 57,208 51,322 transactions executed in connection with managing the Group’s
1
Includes US GAAP cumulative translation adjustments and the foreign exchange impact on risk-weighted asset position. The decrease in risk levels attribut-
2
regulatory CET1 adjustments. able to book size in the Strategic Resolution Unit was partially
Includes the impact of a dividend accrual, the net effect of share-based compensation and
pensions and a change in other regulatory adjustments (e.g., the net regulatory impact of
related to the sale of legacy asset management positions, and
gains/(losses) on fair-valued financial liabilities due to changes in own credit risk and cer- the decrease in Asia Pacific was partially due to the securitization
tain deferred tax assets). of certain lending exposures. Risk levels attributable to book size
3
Includes the impact of the prescribed amortization of issuance fees as instruments move
closer to their maturity date and the net regulatory impact of gains/(losses) on fair-valued
were also impacted by reductions in advanced CVA resulting from
financial liabilities due to changes in own credit risk, which will be deducted from CET1 decreased exposures in the Strategic Resolution Unit and Swiss
once Basel III is fully implemented. Universal Bank. These decreases were partially offset by the expi-
ration of a credit risk hedge and increases in derivative exposures
RISK-WEIGHTED ASSETS primarily in Global Markets. The increase relating to methodology
Our balance sheet positions and off-balance sheet exposures and policy changes was mainly due to an additional phase-in of the
translate into RWA that are categorized as credit, market and multiplier on income producing real estate exposures within Swiss
operational risk RWA. When assessing RWA, it is not the nominal Universal Bank and an additional phase-in of a multiplier on certain
size, but rather the nature (including risk mitigation such as collat- investment banking corporate exposures in Investment Banking &
eral or hedges) of the balance sheet positions or off-balance sheet Capital Markets, Global Markets and Asia Pacific.
exposures that determines the RWA. Credit risk RWA reflect the Excluding the foreign exchange impact, the increase in market
capital requirements for the possibility of a loss being incurred as risk was primarily driven by movements in risk levels in Global
the result of a borrower or counterparty failing to meet its financial Markets, partially offset by a decrease relating to movements in
obligations or as a result of a deterioration in the credit quality of risk levels primarily in Asia Pacific.
the borrower or counterparty. Capital requirements for premises The increase in operational risk was driven by methodol-
and equipment are also included in credit risk. Under Basel III, ogy and policy changes reflecting the FINMA-imposed add-on of
certain regulatory capital adjustments are dependent on the level CHF 5.2 billion primarily in respect of our RMBS settlements.
of CET1 capital (thresholds). The amount above the threshold is
Treasury, risk, balance sheet and off-balance sheet 63
Capital management
Credit risk
Balance at beginning of period 51,497 22,907 20,464 30,131 15,985 16,523 19,379 176,886
Foreign exchange impact 241 400 263 445 339 223 168 2,079
Movements in risk levels (457) 313 (786) 2,425 239 (2,639) (2,935)
(3,840)
of which credit risk – book size 1 (610) 457 (902) 2,612 575 (2,882) (2,908) (3,658)
of which credit risk – book quality 2 153 (144) 116 (187) (336) 243 (27) (182)
Model and parameter updates 3 40 (217) (7) 88 55 48 26 33
Methodology and policy changes 4 464 (37) 97 383 222 46 2 1,177
Balance at end of period – phase-in 51,785 23,366 20,031 33,472 16,840 14,201 16,640 176,335
Market risk
Balance at beginning of period 861 1,085 5,993 7,881 88 1,918 223 18,049
Foreign exchange impact 19 26 139 161 2 44 5 396
Movements in risk levels (205) 109 (843) 1,408 (20) 0 258 707
Model and parameter updates 3 0 117 81 (268) 1 19 (22) (72)
Balance at end of period – phase-in 675 1,337 5,370 9,182 71 1,981 464 19,080
Operational risk
Balance at beginning of period 12,068 12,523 5,836 13,321 2,575 19,660 0 65,983
Movements in risk levels (9) (9) 0 18 0 0 0 0
Methodology and policy changes 0 0 0 0 0 0 5,190 5,190
4
Balance at end of period – phase-in 12,059 12,514 5,836 13,339 2,575 19,660 5,190 71,173
Total
Balance at beginning of period 64,426 36,515 32,293 51,333 18,648 38,101 19,602 260,918
Foreign exchange impact 260 426 402 606 341 267 173 2,475
Movements in risk levels (671) 413 (1,629) 3,851 219 (2,639) (2,677) (3,133)
Model and parameter updates 3 40 (100) 74 (180) 56 67 4 (39)
Methodology and policy changes 4 464 (37) 97 383 222 46 5,192 6,367
Balance at end of period – phase-in 64,519 37,217 31,237 55,993 19,486 35,842 22,294 266,588
Look-through adjustment 5 – – – – – – (1,576) (1,576)
Balance at end of period – look-through 64,519 37,217 31,237 55,993 19,486 35,842 20,718 265,012
1
Represents changes in portfolio size.
2
Represents changes in average risk weighting across credit risk classes.
3
Represents movements arising from updates to models and recalibrations of parameters and internal changes impacting how exposures are treated.
4
Represents externally prescribed regulatory changes impacting how exposures are treated.
5
The look-through adjustment impacts only credit risk within the Corporate Center. The difference between phase-in and look-through risk-weighted assets relates to transitional arrange-
ments such as the impact from pension assets and deferred tax assets not deducted from CET1 during the phase-in period and the transitional impact from threshold-related risk-weighted
assets.
64 Treasury, risk, balance sheet and off-balance sheet
Capital management
Risk-weighted assets – phase-in 64,519 37,217 31,237 55,993 19,486 35,842 22,294 266,588
Look-through adjustment – – – – – – (1,576) (1,576)
Risk-weighted assets – look-through 64,519 37,217 31,237 55,993 19,486 35,842 20,718 265,012
4Q16 (CHF million)
Credit risk 52,713 21,737 19,961 29,565 15,280 22,214 20,599 182,069
Market risk 888 992 8,808 8,755 172 3,567 66 23,248
Operational risk 12,068 12,523 5,836 13,393 2,575 19,660 0 66,055
Risk-weighted assets – phase-in 65,669 35,252 34,605 51,713 18,027 45,441 20,665 271,372
19.6 19.4
18.3 18.0 18.3
12.7
14.1 14.2 14.0
13.5
300
273.8 271.4 265.3 266.6
260.9
250
200
150
100
50
0
3Q 16 4Q 16 1Q 17 2Q17 3Q17
p Risk-weighted assets (in CHF billion) p CET1 ratio (in %) p Tier 1 ratio (in %)
Treasury, risk, balance sheet and off-balance sheet 65
Capital management
age amounts are calculated based on our interpretation of, and Asia Pacific 106,128 101,583 108,926
assumptions and estimates related to, the BIS requirements as Global Markets
281,531
276,483 284,143
implemented in Switzerland by FINMA. Changes in the interpreta- Investment Banking & Capital Markets 42,794 43,073 45,571
tion of these requirements in Switzerland or in any of our interpre- Strategic Resolution Unit 65,385 71,611 105,768
tations, assumptions or estimates could result in different numbers Corporate Center 63,467
59,858 59,374
Capital management
SWISS CAPITAL AND LEVERAGE METRICS Swiss capital and leverage ratios for Credit Suisse
Swiss capital metrics
u Refer to “Swiss Requirements” for further information on Swiss regulatory Capital ratio Leverage ratio
requirements.
30.3%
28.6%
As of the end of 3Q17, our Swiss CET1 ratio was 13.9%, our
going concern capital ratio was 20.1%, our gone concern capital
ratio was 12.7% and our TLAC ratio was 32.8%.
On a look-through basis, as of the end of 3Q17, our Swiss
CET1 capital was CHF 34.7 billion and our Swiss CET1 ratio was 12.6%
Gone concern
13.1%. Our going concern capital was CHF 47.1 billion and our 14.3%
going concern capital ratio was 17.7%. Our gone concern capi-
tal was CHF 33.5 billion and our gone concern capital ratio was
12.6%. Our total loss-absorbing capacity was CHF 80.6 billion
and our TLAC ratio was 30.3%.
4.6%
4.3%
10%
8.9%
3.8% 3.5%
Swiss additional tier 1 capital 16,462 16,253 15,975 1 12,350 12,219 11,794 1
Rounding differences may occur.
Swiss leverage metrics concern leverage ratio was 3.7% and our TLAC leverage ratio was
The leverage exposure used in the Swiss leverage ratio is mea- 9.6%.
sured on the same period-end basis as the leverage exposure for On a look-through basis, as of the end of 3Q17, our Swiss
the BIS leverage ratio. CET1 leverage ratio was 3.8%, our going concern leverage ratio
As of the end of 3Q17, our Swiss CET1 leverage ratio was was 5.2%, our gone concern leverage ratio was 3.7% and our
4.1%, our going concern leverage ratio was 5.9%, our gone TLAC leverage ratio was 8.9%.
68 Treasury, risk, balance sheet and off-balance sheet
Capital management
Difference in scope of consolidation and tier 1 capital deductions 1 (12,535) (12,103) (10,639) 4
Derivative financial instruments 86,050 87,176 88,975 (1)
Securities financing transactions (25,298) (23,787) (22,766) 6
Off-balance sheet exposures 75,276 74,700 80,661 1
Total adjustments 123,493 125,986 136,231 (2)
Capital management
Common shares 102 102 84 0
Common shares issued 2,556.0 2,556.0 2,089.9 0
Risk management
Risk management
In 3Q17, our available economic capital increased CHF 0.8 billion to CHF 50.0 billion, economic risk capital increased
CHF 0.7 billion to CHF 32.4 billion and average risk management VaR decreased 4% to USD 26 million. Gross impaired
loans of CHF 2.2 billion decreased slightly on a gross loan portfolio of CHF 276.9 billion.
Available economic capital (CHF million)
BIS look-through CET1 capital (Basel III) 34,860 34,467 30,783 1 13
Economic adjustments 15,123 14,733 15,166 3 0
1
2
Fixed income trading 778 652 1,270 19 (39)
Position risk (99% confidence level for risk management purposes) 10,025 10,034 11,339 0 (12)
Economic risk capital (CHF million)
Position risk (99.97% confidence level) 17,913 17,879 20,299 0 (12)
Operational risk 8,237 7,635 7,720 8 7
Other risks 5 6,271 6,218 6,628 1 (5)
Economic risk capital 32,421 31,732 34,647 2 (6)
Economic risk capital coverage ratio (%) 6
Available economic capital trends shareholders and a positive foreign exchange impact. Economic
As of the end of 3Q17, our available economic capital for the adjustments increased CHF 0.4 billion, mainly reflecting a positive
Group was CHF 50.0 billion, an increase of CHF 0.8 billion foreign exchange impact on contingent capital instruments and an
from the end of 2Q17. BIS look-through CET1 capital increased increase in dividend accruals.
CHF 0.4 billion, mainly reflecting net income attributable to
Economic
risk capital by division (CHF million)
Swiss Universal Bank 5,320 5,608 5,789 (5) (8) 5,464 5,651 5,763 (3) (5)
International Wealth Management 4,462 4,414 3,816 1 17 4,438 4,428 3,976 0 12
Asia Pacific 3,363 3,953 4,504 (15) (25) 3,658 4,067 4,453 (10) (18)
Global Markets 9,440 8,621 9,295 10 2 9,030 8,960 9,030 1 0
Investment Banking & Capital Markets 5,276 5,149 5,117 2 3 5,212 5,236 5,030 0 4
Strategic Resolution Unit 3,194 3,390 5,145 (6) (38) 3,292 3,619 5,015 (9) (34)
1
Corporate Center 1,366 597 981 129 39
982 744 1,105 32 (11)
Economic risk capital – Group 32,421 31,732 34,647 2 (6) 32,076 32,704 34,372 (2) (7)
1
Includes primarily expense risk, operational risk, diversification benefits from the divisions and foreign exchange risk between available economic capital and economic risk capital.
74 Treasury, risk, balance sheet and off-balance sheet
Risk management
The tables entitled “Average one-day, 98% risk management VaR were translated into Swiss francs using daily foreign exchange
by division” and “One-day, 98% risk management VaR” show our translation rates. VaR estimates are computed separately for each
trading-related market risk exposure, as measured by one-day, risk type and for the whole portfolio using the historical simula-
98% risk management VaR in Swiss francs and US dollars. As tion methodology. The different risk types are grouped into five
we measure trading book VaR for internal risk management pur- categories including interest rate, credit spread, foreign exchange,
poses using the US dollar as the base currency, the VaR figures commodity and equity.
3Q17
Average 14 18 6 3 9 (25) 25
Minimum 11 16 4 2 8 – 1 21
Maximum 17 20 9 6 12 – 1 31
Average 17 19 6 2 10 (28) 26
Minimum 12 17 4 1 8 – 1 23
Maximum 23 21 9 3 12 – 1 30
End of period 12 17 7 3 10 (26) 23
4Q16
Average 13 23 6 2 13 (30) 27
Minimum 10 21 4 1 10 – 1 24
Maximum 19 24 9 3 16 – 1 31
End of period 15 21 7 1 13 (28) 29
Risk
management VaR (USD million)
3Q17
Average 14 19 7 3 10 (27) 26
Minimum 11 17 4 2 8 – 1 22
Maximum 18 21 9 7 12 – 1 33
2Q17
Average 18 19 6 2 10 (28) 27
Minimum 12 18 4 1 8 – 1 24
Maximum 23 20 9 3 12 – 1 30
End of period 12 18 7 3 10 (26) 24
4Q16
Average 13 23 6 2 13 (30) 27
Minimum 10 21 3 1 10 – 1 23
Maximum 19 24 9 3 17 – 1 32
End of period 15 21 6 1 13 (28) 28
Risk management
3Q17 0 4 12 20 5 (16) 25
2Q17 0 4 13 22 7 (20) 26
4Q16 0 5 15 21 7 (21) 27
Average risk management VaR (USD million)
3Q17 0 4 12 21 5 (16) 26
2Q17 0 4 13 22 7 (19) 27
4Q16 0 5 15 21 7 (21) 27
Excludes risks associated with counterparty and own credit exposures. Investment Banking & Capital Markets has only banking book positions.
1
Difference between the sum of the standalone VaR for each division and the VaR for the Group.
We measure VaR in US dollars, as the majority of our trading activ- Actual daily trading revenues
ities are conducted in US dollars.
Days
Average risk management VaR decreased 4% to USD 26 mil-
40
lion from 2Q17, mainly driven by decreased interest rate derivatives
36
exposures in Europe, primarily reflected in the Strategic Resolution
32
29
30
Unit. For Global Markets, the decrease in average risk manage-
28
28
27
ment VaR was mainly driven by lower credit spread risk from com-
mercial mortgage-backed securities (CMBS) in the US. 20
5
5
2
2
reduced exposures in CMBS in the US.
1
0
< (100)
(100) – (75)
(75) – (50)
(50) – (25)
(25) – 0
0 – 25
25 – 50
50 – 75
75 – 100
100 – 125
125 – 150
> 150
The chart entitled “Daily risk management VaR” shows the
CHF
aggregated market risk in our trading book on a consolidated basis. million
60
VaR backtesting
50 Various techniques are used to assess the accuracy of the VaR
40 methodology used for risk management and regulatory purposes
30 and to assess if our regulatory capital is sufficient to absorb actual
20 losses. Our VaR backtesting process is used to assess the accu-
10 racy and performance of our regulatory VaR model and to encour-
0 age developments to our VaR model. Backtesting involves compar-
4Q16 1Q17 2Q17 3Q17 ing the results produced from the VaR model with the daily trading
j One-day risk management VaR (98%)
revenues. A backtesting exception occurs when a trading loss
Excludes risks associated with counterparty and own credit exposures. exceeds the daily VaR estimate. For capital purposes, FINMA, in
line with BIS requirements, uses a multiplier to impose an increase
in market risk capital for every regulatory VaR backtesting excep-
The histogram entitled “Actual daily trading revenues” compares tion over four in the prior rolling 12-month period calculated using
the actual daily trading revenues for 3Q17 with those for 2Q17 and a subset of the actual daily trading revenues also referred to as
4Q16. The dispersion of trading revenues indicates the day-to-day “hypothetical” trading revenues under the Basel framework. In the
volatility in our trading activities. We had no trading loss days in rolling 12-month period through the end of 3Q17, we had no back-
3Q17 and 2Q17 and two trading loss days in 4Q16. testing exceptions in our regulatory VaR model calculated using
the subset of actual daily trading revenues. Since there were fewer
than five backtesting exceptions in the rolling 12-month period
Treasury, risk, balance sheet and off-balance sheet 77
Risk management
u Refer to “Note 16 – Loans, allowance for loan losses and credit quality” and
through the end of 3Q17, in line with BIS industry guidelines, the “Note 28 – Financial instruments” in III – Condensed consolidated financial state-
VaR model is deemed to be statistically valid. ments – unaudited for further information on loans and impaired loans and coun-
u Refer to “Market risk” in III – Treasury, Risk, Balance sheet and Off-balance terparty credit risk, respectively.
sheet – Risk management – Risk coverage and management in the Credit Suisse
Annual Report 2016 for further information on VaR backtesting.
Loans
u Refer to “Other requirements” in Capital management – Swiss requirements Compared to the end of 2Q17, gross loans increased CHF 2.0
for further information on the use of our regulatory VaR model in the calculation billion to CHF 276.9 billion as of the end of 3Q17, mainly driven
of trading book market risk capital requirements.
by higher loans collateralized by securities, higher mortgages,
increased loans to the real estate sector and higher loans to finan-
Banking book cial institutions and the translation impact from the US dollar and
Market risks from our banking book primarily relate to asset and the euro. These increases were partially offset by lower commer-
liability mismatch exposures, equity participations and investments cial and industrial loans and a decrease in consumer finance loans.
in bonds and money market instruments. Our businesses and The net increase of CHF 1.6 billion in loans collateralized by secu-
the Corporate Center have non-trading portfolios that carry mar- rities was mainly driven by Asia Pacific and International Wealth
ket risks, mainly related to changes in interest rates but also to Management. The net increase of CHF 0.5 billion in mortgages
changes in foreign exchange rates, equity prices and, to a lesser was mainly driven by increases in International Wealth Manage-
extent, commodity prices. ment and Swiss Universal Bank. Loans to the real estate sec-
Interest rate risk on banking book positions is measured by tor increased CHF 0.3 billion, primarily in Asia Pacific and Inter-
estimating the impact resulting from a one basis point parallel national Wealth Management. Loans to financial institutions
increase in yield curves on the fair value of interest rate-sensitive increased CHF 0.3 billion, primarily in International Wealth Man-
banking book positions. As of the end of 3Q17, the interest rate agement and Global Markets, partially offset by a decrease in the
sensitivity of a one basis point parallel increase in yield curves Strategic Resolution Unit. The net decrease of CHF 0.4 billion in
would have been positive CHF 5.5 million, compared to positive commercial and industrial loans primarily reflected decreases in
CHF 4.1 million as of the end of 2Q17. the Strategic Resolution Unit, Swiss Universal Bank and Invest-
ment Banking & Capital Markets, partially offset by an increase in
CREDIT RISK REVIEW Global Markets. The net decrease of CHF 0.2 billion in consumer
All transactions that are exposed to potential losses due to a coun- finance loans was mainly driven by Swiss Universal Bank.
terparty failing to meet an obligation are subject to credit risk expo- On a divisional level, increases in gross loans of CHF 1.5 billion
sure measurement and management. The majority of our credit in Asia Pacific, CHF 1.3 billion in International Wealth Manage-
risk is concentrated in the private banking, corporate and institu- ment and CHF 0.5 billion in Global Markets were partially offset by
tional businesses and in the investment banking businesses. decreases in gross loans of CHF 0.8 billion in the Strategic Reso-
u Refer to “Credit risk” in III – Treasury, Risk, Balance sheet and Off-balance lution Unit, CHF 0.2 billion in Swiss Universal Bank and CHF 0.2
sheet – Risk management – Risk coverage and management in the Credit Suisse billion in Investment Banking & Capital Markets.
Annual Report 2016 for further information on credit risk.
78 Treasury, risk, balance sheet and off-balance sheet
Risk management
Loans
Investment
Swiss International
Banking & Strategic
Universal Wealth Asia Global Capital Resolution Credit
end of Bank Management Pacific Markets Markets Unit Suisse 1
Mortgages 100,440 4,027 1,282 0 0 140 105,889
Loans collateralized by securities 7,200 18,532 14,769 0 1,282 93 41,876
Consumer finance 3,215 519 10 17 0 86 3,847
Consumer 110,855 23,078 16,061 17 1,282 319 151,612
Real estate 23,178 1,859 813 227 292 53 26,422
Commercial and industrial loans 27,099 20,650 23,077 3,791 2,889 2,479 80,007
Financial institutions 3,756 1,935 2,189 5,072 468 1,181 14,829
Governments and public institutions 745 221 1,008 1,379 0 659 4,012
2 3
Corporate & institutional 54,778 24,665 27,087 4 10,469 3,649 4,372 125,270
Gross loans 165,633 47,743 43,148 10,486 4,931 4,691 276,882
of which held at fair value 43 161 4,642 6,119 1,805 2,592 15,362
Net (unearned income) / deferred expenses 52 (113) (21) (14) (10) (1) (107)
Allowance for loan losses 5 (464) (99) (61) (37) (51) (210) (922)
Net loans 165,221 47,531 43,066 10,435 4,870 4,480 275,853
2Q17 (CHF million)
Allowance for loan losses 5 (461) (89) (60) (36) (46) (225) (917)
Net loans 165,435 46,263 41,607 9,931 5,060 5,296 273,865
Commercial and industrial loans 28,460 19,618 23,405 3,788 4,441 4,008 83,740
Financial institutions 3,657 2,077 2,320 4,351 465 4,878 17,921
Governments and public institutions 801 223 1,135 1,070 0 1,044 4,273
Corporate & institutional 56,579 2 23,301 3 27,359 4 9,369 5,120 10,029 131,950
Gross loans 166,109 45,153 40,232 9,387 5,393 10,576 277,043
of which held at fair value 38 397 5,377 6,711 2,545 4,460 19,528
Net (unearned income) / deferred expenses 38 (99) (27) (8) (8) (25) (129)
5
Allowance for loan losses (462) (89) (71) (19) (24) (273)
(938)
Net loans 165,685 44,965 40,134 9,360 5,361 10,278 275,976
1
Includes the Corporate Center, in addition to the divisions disclosed.
2
The values of financial collateral and mortgages related to secured loans, considered up to the amount of the related loans, were CHF 11,155 million and CHF 32,638 million, respectively,
as of the end of 3Q17, CHF 10,818 million and CHF 32,855 million, respectively, as of the end of 2Q17, and CHF 11,266 million and CHF 33,515 million, respectively, as of the end of
4Q16.
3
The values of financial collateral and mortgages related to secured loans, considered up to the amount of the related loans, were CHF 19,538 million and CHF 1,648 million, respectively,
as of the end of 3Q17, CHF 18,567 million and CHF 1,519 million, respectively, as of the end of 2Q17, and CHF 18,084 million and CHF 1,165 million, respectively, as of the end of 4Q16.
4
The values of financial collateral and mortgages related to secured loans, considered up to the amount of the related loans, were CHF 19,561 million and CHF 136 million, respectively, as
of the end of 3Q17, CHF 19,275 million and CHF 164 million, respectively, as of the end of 2Q17, and CHF 21,135 million and CHF 175 million, respectively, as of the end of 4Q16.
5
Allowance for loan losses are only based on loans that are not carried at fair value.
Treasury, risk, balance sheet and off-balance sheet 79
Risk management
Impaired loans
Investment
Swiss International
Banking & Strategic
Universal Wealth Asia Global Capital Resolution Credit
end of Bank Management Pacific Markets Markets Unit Suisse 1
Non-performing loans 427 307 93 28 35 174 1,064
Non-interest-earning loans 168 17 0 0 0 45 230
2Q17
(CHF million)
Non-performing loans 388 256 124 29 33 199 1,029
of which loans with a specific allowance 682 210 121 38 33 711 1,795
of which loans without a specific allowance 111 235 20 0 0 79 445
4Q16
(CHF million)
Non-performing loans 341 179 242 8 0 466 1,236
of which loans with a specific allowance 674 170 239 17 0 985 2,085
of which loans without a specific allowance 79 154 27 0 0 127 387
1
Includes the Corporate Center, in addition to the divisions disclosed.
2
Impaired loans are only based on loans that are not carried at fair value.
Risk management
Net write-offs (67) (13) (2) 6 8 (83) (151)
Provisions for interest 5 3 (7) 1 1 3 6
Foreign currency translation impact and other adjustments, net (3) 4 (5) 0 2 (13) (15)
Allowance for loan losses at end of period 2 464 99 61 37 51 210 922
of which individually evaluated for impairment 339 67 45 23 27 205 706
of which collectively evaluated for impairment 125 32 16 14 24 5 216
1
Includes the Corporate Center, in addition to the divisions disclosed.
2
Allowance for loan losses are only based on loans that are not carried at fair value.
Treasury, risk, balance sheet and off-balance sheet 81
Risk management
Loan metrics
Investment
Swiss International
Banking & Strategic
Universal Wealth Asia Global Capital Resolution Credit
end of Bank Management Pacific Markets Markets Unit Suisse 1
3Q17 (%)
Non-performing and
non-interest-earning loans / Gross loans 0.4 0.7 0.2 0.6 1.1 10.4 0.5
Gross impaired loans / Gross loans 0.5 1.0 0.3 0.8 1.1 34.4 0.8
Allowance for loan losses / Gross loans 0.3 0.2 0.2 0.8 1.6 10.0 0.4
Specific allowance for loan losses / Gross impaired loans 41.9 14.0 40.9 62.2 77.1 28.4 32.2
2Q17
(%)
non-interest-earning loans / Gross loans 0.3 0.6 0.3 0.8 1.1 10.2 0.5
Gross impaired loans / Gross loans 0.5 1.0 0.4 1.0 1.1 34.0 0.9
Allowance for loan losses / Gross loans 0.3 0.2 0.2 1.0 1.6 9.7 0.4
Specific allowance for loan losses / Gross impaired loans 42.1 12.4 34.8 71.1 84.8 27.7 31.8
4Q16
(%)
Non-performing and
non-interest-earning loans / Gross loans 0.3 0.4 0.7 0.3 0.0 8.9 0.6
Gross impaired loans / Gross loans 0.5 0.7 0.8 0.6 0.0 18.2 1.0
Allowance for loan losses / Gross loans 0.3 0.2 0.2 0.7 0.8 4.5 0.4
Specific allowance for loan losses / Gross impaired loans 41.7 17.3 23.3 52.9 – 23.3 28.3
Gross loans and gross impaired loans exclude loans carried at fair value and the allowance for loan losses is only based on loans that are not carried at fair value.
1
Includes the Corporate Center, in addition to the divisions disclosed.
SELECTED EUROPEAN CREDIT RISK EXPOSURES Development of selected European credit risk exposures
The scope of our disclosure of European credit risk exposure On a gross basis, before taking into account risk mitigation, our
includes all countries of the EU which are rated below AA or its risk-based sovereign credit risk exposure to Cyprus, Croatia,
equivalent by at least one of the three major rating agencies and Greece, Ireland, Italy, Malta, Portugal and Spain increased 4% to
where our gross exposure exceeds our quantitative threshold of EUR 3,237 million as of the end of 3Q17, compared to EUR 3,124
EUR 0.5 billion. million as of the end of 2Q17. Our net exposure to these sovereigns
u Refer to “Selected European credit risk exposures” in III – Treasury, Risk, Bal- was EUR 1,314 million, 9% higher compared to EUR 1,207 mil-
ance sheet and Off-balance sheet – Risk management – Risk review and results lion as of the end of 2Q17. Our non-sovereign risk-based credit
in the Credit Suisse Annual Report 2016 for further information on selected
European credit risk exposures.
risk exposure in these countries as of the end of 3Q17 included
net exposure to financial institutions of EUR 1,824 million and to
corporates and other counterparties of EUR 2,225 million, 6%
Monitoring of selected European credit risk exposures higher compared to EUR 1,726 million and 3% higher compared to
Our credit risk exposure to these European countries is managed EUR 2,162 million, respectively, as of the end of 2Q17.
as part of our overall risk management process. The Group makes u Refer to “Selected European credit risk exposures” in III – Treasury, Risk, Bal-
use of country limits and performs scenario analyses on a regular ance sheet and Off-balance sheet – Risk management – Risk review and results
in the Credit Suisse Annual Report 2016 for further information on the presenta-
basis, which include analyses of our indirect sovereign credit risk tion of selected European credit risk exposures.
exposures from our exposures to selected European financial insti-
tutions. This assessment of indirect sovereign credit risk exposures
includes analysis of publicly available disclosures of counterparties’ Sovereign debt rating developments
exposures to the European countries within the defined scope of In 3Q17, the long-term sovereign debt ratings of the countries
our disclosure. We monitor the concentration of collateral under- listed in the table changed as follows: Standard & Poor’s increased
pinning our over-the-counter (OTC) derivative and reverse repur- its rating for Portugal from BB+ to BBB-, Fitch increased its rating
chase agreement exposures through monthly reporting. We also for Greece from CCC to B- and Moody’s increased its rating for
monitor the impact of sovereign rating downgrades on collateral Cyprus from B1 to Ba3.
eligibility. Strict limits on sovereign collateral from G7 and non-G7
countries are monitored monthly. Similar disclosure is part of our
regular risk reporting to regulators.
82 Treasury, risk, balance sheet and off-balance sheet
Risk management
Cash and due from banks 105,779 110,332 121,161 (4) (13)
Total liabilities were CHF 744.6 billion as of the end of 3Q17, an OFF-BALANCE SHEET
increase of CHF 5.0 billion, or 1%, from the end of 2Q17, reflect- We enter into off-balance sheet arrangements in the normal
ing the foreign exchange translation impact and lower operating course of business. Off-balance sheet arrangements are transac-
activities. Excluding the foreign exchange translation impact, total tions or other contractual arrangements with, or for the benefit of,
liabilities decreased CHF 0.8 billion. an entity that is not consolidated. These transactions include deriv-
Compared to the end of 2Q17, long-term debt increased ative instruments, guarantees and similar arrangements, retained
CHF 3.6 billion, or 2%, primarily reflecting issuances of senior or contingent interests in assets transferred to an unconsolidated
debt, the foreign exchange translation impact and valuation adjust- entity in connection with our involvement with special purpose enti-
ments, partially offset by maturities of senior debt. Central bank ties (SPEs), and obligations and liabilities (including contingent
funds purchased, securities sold under repurchase agreements obligations and liabilities) under variable interests in unconsolidated
and securities lending transactions increased CHF 2.4 billion, or entities that provide financing, liquidity, credit and other support.
8%, primarily due to an increase in repurchase transactions with u Refer to “Balance sheet, off-balance sheet and other contractual obligations”
customers. Due to banks, customer deposits and trading liabili- in III – Treasury, Risk, Balance sheet and Off-balance sheet in the Credit Suisse
Annual Report 2016 and “Note 26 – Guarantees and commitments” and “Note
ties were stable. Brokerage payables decreased CHF 1.1 billion, 30 – Litigation” in III – Condensed consolidated financial statements – unaudited
or 3%, mainly due to decreases in failed settlements. All other for further information.
liabilities increased CHF 2.2 billion, or 3%, reflecting increases of
CHF 2.5 billion, or 8%, in obligation to return securities received
as collateral and CHF 0.7 billion, or 2%, in other liabilities, par-
tially offset by a decrease of CHF 1.0 billion, or 6%, in short-term
borrowings.
u Refer to “Funding sources and uses” in Liquidity and funding management and
“Capital management” for further information, including our funding of the bal-
ance sheet and the leverage ratio.
Condensed consolidated financial statements – unaudited 85
III
Condensed Report of Independent Registered
Public Accounting Firm 87
consolidated
financial statements – Condensed consolidated
financial statements – unaudited 89
unaudited
Notes to the condensed consolidated
financial statements – unaudited 97
We have reviewed the accompanying condensed consolidated balance sheet of Credit Suisse Group AG
and subsidiaries (“the Group”) as of September 30, 2017, the related condensed consolidated statements
of operations, comprehensive income, and changes in equity for the three and nine-month periods ended
September 30, 2017 and 2016, and the related condensed consolidated statements of cash flows for the
nine-month periods ended September 30, 2017 and 2016. These condensed consolidated financial
statements are the responsibility of the Group’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight
Board (United States). A review of interim financial information consists principally of applying analytical
procedures and making inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the condensed
consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted
accounting principles.
We have previously audited, in accordance with standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheet of the Group as of December 31, 2016, and the
related consolidated statements of operations, comprehensive income, changes in equity, and cash flows
for the year then ended (not presented herein); and in our report dated March 24, 2017, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it has been derived.
KPMG AG
Zurich, Switzerland
November 2, 2017
1
KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich 1
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss legal entity. All rights reserved.
88 Condensed consolidated financial statements – unaudited
Condensed consolidated
financial statements – unaudited
Consolidated statements of operations (unaudited)
in 3Q17 2Q17 3Q16 9M17 9M16
Consolidated statements of operations (CHF million)
Interest and dividend income 4,273 4,602 4,222 12,917 13,564
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
90 Condensed consolidated financial statements – unaudited
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
Condensed consolidated financial statements – unaudited 91
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
92 Condensed consolidated financial statements – unaudited
Accumu-
lated other
compre- Total
Additional
Treasury hensive share- Non-
Common paid-in Retained shares, income/
holders’ controlling
Total
shares capital earnings at cost (loss) equity interests equity
3Q17 (CHF million)
Balance at beginning of period 102 35,465 26,855 (40) (18,889) 43,493 343 43,836
Purchase of subsidiary shares from non-
Change in scope of consolidation, net – – – – – – (122) (122)
Balance at end of period 102 35,527 27,099 (17) (18,853) 43,858 223
44,081
1
Distributions to owners in funds include the return of original capital invested and any related dividends.
2
Transactions with and without ownership changes related to fund activity are all displayed under “not changing ownership”.
3
Includes certain call options the Group purchased on its own shares to economically hedge share-based compensation awards. In accordance with US GAAP, these call options were des-
ignated as equity instruments and, as such, were initially recognized in shareholders’ equity at their fair values and not subsequently remeasured.
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
Condensed consolidated financial statements – unaudited 93
Accumu-
lated other
compre- Total
Additional
Treasury hensive share- Non-
Common paid-in Retained shares, income/
holders’ controlling
Total
shares capital earnings at cost (loss) equity interests equity
2Q17 (CHF million)
Balance at beginning of period 84 32,388 26,552 (99) (17,223) 41,702 377 42,079
Purchase of subsidiary shares from non-
Other – (168) – – – (168) (5) (173)
Balance at end of period 102 35,465 26,855 (40) (18,889) 43,493 343 43,836
3Q16
(CHF million)
Balance at beginning of period 84 31,702 28,532 (94) (15,262) 44,962 367 45,329
Purchase of subsidiary shares from non-
Sale of treasury shares – 19 – 4,091
– 4,110 – 4,110
Repurchase of treasury shares – – – (4,031) – (4,031) – (4,031)
Share-based compensation, net of tax – 241 – 16 – 257 – 257
Financial instruments indexed to own shares – (37) – – – (37) – (37)
Change in scope of consolidation, net – – – – – – 114 114
Balance at end of period 84 31,925 28,573 (18) (16,288) 44,276 481 44,757
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
94 Condensed consolidated financial statements – unaudited
Accumu-
lated other
compre- Total
Additional
Treasury hensive share- Non-
Common paid-in Retained shares, income/
holders’ controlling
Total
shares capital earnings at cost (loss) equity interests equity
9M17 (CHF million)
Changes in scope of consolidation, net – – – – – – (142) (142)
Other – (168) – – – (168) (12) (180)
Balance at end of period 102 35,527 27,099 (17) (18,853) 43,858 223 44,081
9M16 (CHF million)
Balance at beginning of period 78 31,925 29,139 (125) (16,635) 44,382 636 45,018
Purchase of subsidiary shares from non-
Other – (22) – – – (22) (29) (51)
Balance at end of period 84 31,925 28,573 (18) (16,288) 44,276 481 44,757
1
Distributions to owners in funds include the return of original capital invested and any related dividends.
2
Transactions with and without ownership changes related to fund activity are all displayed under “not changing ownership”.
3
Includes certain call options the Group purchased on its own shares to economically hedge share-based compensation awards. In accordance with US GAAP, these call options were des-
ignated as equity instruments and, as such, were initially recognized in shareholders’ equity at their fair values and not subsequently remeasured.
4
Paid out of capital contribution reserves.
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
Condensed consolidated financial statements – unaudited 95
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
96 Condensed consolidated financial statements – unaudited
The accompanying notes to the condensed consolidated financial statements – unaudited are an integral part of these statements.
Condensed consolidated financial statements – unaudited 97
Recently adopted accounting standards transactions, including the income tax consequences, classifica-
The following provides the most relevant recently adopted account- tion of awards as either equity or liabilities, and classification on
ing standards. the statement of cash flows. The adoption of ASU 2016-09 on
u Refer to “Note 2 – Recently issued accounting standards” in V – Consolidated January 1, 2017 resulted in the recognition of previously unrecorded
financial statements – Credit Suisse Group in the Credit Suisse Annual Report deferred tax asset net operating loss balances which arose due to
2016 for a description of accounting standards adopted in 2016.
prior tax windfalls that did not immediately result in cash tax sav-
ings. The adjustment resulted in an increase in retained earnings of
ASC Topic 350 – Intangibles – Goodwill and Other CHF 85 million upon adoption.
In January 2017, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU) 2017-04, “Simplify- ASC Topic 740 – Income Taxes
ing the Test for Goodwill Impairment” (ASU 2017-04), an update In October 2016, the FASB issued ASU 2016-16, “Intra-Entity
to Accounting Standards Codification (ASC) Topic 805 – Business Transfers of Assets Other Than Inventory” (ASU 2016-16), an
Combinations. ASU 2017-04 simplifies the subsequent measure- update to ASC Topic 740 – Income Taxes. The amendments in
ment of goodwill by eliminating step two from the goodwill impair- ASU 2016-16 eliminate the exception for an intra-entity transfer
ment test. ASU 2017-04 is effective for annual reporting periods of an asset other than inventory. ASU 2016-16 is required to be
beginning after December 15, 2019, and for the interim periods applied on a modified retrospective basis through a cumulative-
within those annual reporting periods. Early adoption is permitted effect adjustment directly to retained earnings as of the beginning of
for interim or annual goodwill impairment tests performed on test- the period of adoption. ASU 2016-16 is effective for annual report-
ing dates after January 1, 2017. ASU 2017-04 is to be applied on ing periods beginning after December 15, 2017, and for the interim
a prospective basis. The Group elected to early adopt ASU 2017- periods within those annual reporting periods. Early adoption is per-
04 on January 1, 2017, which did not have a material impact on the mitted. The Group elected to early adopt ASU 2016-16 on Janu-
Group’s financial position, results of operations or cash flows. ary 1, 2017, which resulted in a reclassification from other assets to
deferred tax assets. The net impact upon adoption was a reduction
ASC Topic 718 – Compensation – Stock Compensation in retained earnings of CHF 81 million.
In March 2016, the FASB issued ASU 2016-09, “Improvements to
Employee Share-Based Payment Accounting” (ASU 2016-09), an ASC Topic 825 – Financial Instruments – Overall
update to ASC Topic 718 – Compensation—Stock Compensation. In January 2016, the FASB issued ASU 2016-01, “Recogni-
The amendments in ASU 2016-09 provide simplification updates tion and Measurement of Financial Assets and Financial Liabili-
for several aspects of the accounting for share-based payment ties” (ASU 2016-01), an update to ASC Topic 825 – Financial
98 Condensed consolidated financial statements – unaudited
Instruments – Overall. The amendments in ASU 2016-01 address recognizing credit losses. Instead, ASU 2016-13 requires the mea-
certain aspects of recognition, measurement, presentation and surement of all expected credit losses for financial assets held at the
disclosure of financial instruments. The amendments primarily reporting date based on historical experience, current conditions,
affect the accounting for equity investments, financial liabilities and reasonable and supportable forecasts. The Group will incorpo-
under the fair value option and the presentation and disclosure rate forward-looking information and macroeconomic factors into its
requirements for financial instruments. ASU 2016-01 is effective credit loss estimates. ASU 2016-13 requires enhanced disclosures
for annual reporting periods beginning after December 15, 2017, to help investors and other financial statement users to better under-
and for the interim periods within those annual reporting periods. stand significant estimates and judgments used in estimating credit
Early adoption of the full standard is not permitted; however, cer- losses, as well as the credit quality and underwriting standards of
tain sections of ASU 2016-01 relating to fair value option-elected an organization’s portfolio. As the Group is a US Securities and
financial liabilities can be early adopted in isolation. These amend- Exchange Commission (SEC) filer, ASU 2016-13 is effective for
ments to ASU 2016-01 require the changes in fair value relating to annual reporting periods beginning after December 15, 2019, and
instrument-specific credit risk of fair value option elected financial for the interim periods within those annual reporting periods. Early
liabilities to be presented separately in accumulated other com- application will be permitted for annual reporting periods and for
prehensive income (AOCI). The Group has early adopted these the interim periods within those annual reporting periods, beginning
sections of the update on January 1, 2016. As a result of adop- after December 15, 2018.
tion, a reclassification of a gain from retained earnings to AOCI of The Group has established a cross-functional implementation
CHF 475 million, net of tax, was recorded. The Group is currently team and governance structure for the project. The Group has
evaluating the impact of the adoption of the remaining sections of decided on a current expected credit loss (CECL) methodology
ASU 2016-01 on the Group’s financial position, results of opera- while it is adjusting for key interpretive issues. Furthermore, the
tions and cash flows. Group will continue to monitor the initial scope assessment, as
a basis to determine the requirements and data sourcing of the
Standards to be adopted in future periods CECL models, and to design, build and test the models until the
ASC Topic 230 – Statement of Cash Flows effective date.
In August 2016, the FASB issued ASU 2016-15, “Classification The Group expects that the new CECL methodology would
of Certain Cash Receipts and Cash Payments (a consensus of generally result in increased and more volatile allowance for loan
the Emerging Issues Task Force)” (ASU 2016-15), an update to losses. The main impact drivers include:
ASC Topic 230 – Statement of Cash Flows. The amendments p the remaining life of the loans measured at amortized cost and
in ASU 2016-15 provide guidance regarding classification of the off-balance sheet credit exposures at the adoption date
certain cash receipts and payments where diversity in practice and subsequent reporting dates because of the new require-
was observed. ASU 2016-15 is required to be applied retrospec- ment to measure lifetime expected credit losses;
tively to all periods presented beginning in the year of adoption. p the point of time in the economic cycle at the adoption date
ASU 2016-15 is effective for annual reporting periods beginning and subsequent reporting dates because of the new require-
after December 15, 2017, and for the interim periods within those ment to incorporate reasonable and supportable forward-look-
annual reporting periods. Early adoption is permitted, including ing information and macroeconomic factors; and
adoption in an interim period. The Group is currently evaluating the p the credit quality of the loans measured at amortized cost and
impact of the adoption of ASU 2016-15 on the Group’s financial the off-balance sheet credit exposures at the adoption date
position, results of operations and cash flows. and subsequent reporting dates.
ASC Topic 326 – Financial Instruments – Credit Losses Upon adoption of the standard, the Group expects an adjustment to
In June 2016, the FASB issued ASU 2016-13, “Measurement be posted to retained earnings for any changes in loan losses. As
of Credit Losses on Financial Instruments” (ASU 2016-13), cre- the implementation progresses, the Group will continue to evaluate
ating ASC Topic 326 – Financial Instruments – Credit Losses. the extent of the impact of the adoption of ASU 2016-13 on the
ASU 2016-13 is intended to improve financial reporting by requir- Group’s financial position, results of operations and cash flows.
ing timelier recording of credit losses on financial assets measured
at amortized cost basis (including, but not limited to loans), net ASC Topic 606 – Revenue from Contracts with Customers
investments in leases recognized as lessor and off-balance sheet In May 2014, the FASB issued ASU 2014-09, “Revenue from
credit exposures. ASU 2016-13 eliminates the probable initial rec- Contracts with Customers” (ASU 2014-09), an update to
ognition threshold under the current incurred loss methodology for ASC Topic 606 – Revenue from Contracts with Customers. The
Condensed consolidated financial statements – unaudited 99
core principle of the guidance is that an entity should recognize ASC Topic 815 – Derivatives and Hedging
revenue to depict the transfer of promised goods or services to In August 2017, the FASB issued ASU 2017-12, “Targeted
customers in an amount that reflects the consideration to which Improvements to Accounting Hedging Activities” (ASU 2017-
the entity expects to be entitled in exchange for those goods or 12), an update to ASC Topic 815 – Derivatives and Hedging.
services. The ASU outlines key steps that an entity should follow ASU 2017-12 makes changes to the hedge accounting model
to achieve the core principle. ASU 2014-09 and its subsequent intended to facilitate financial reporting that more closely reflects
amendments are effective for the annual reporting period begin- an entity’s risk management activities and to simplify application
ning after December 15, 2017, and for the interim periods within of hedge accounting. The amendments in ASU 2017-12 provide
those annual reporting periods. more hedging strategies that will be eligible for hedge accounting,
The Group has established a cross-functional implementa- ease the documentation and effectiveness assessment require-
tion team and governance structure for the project. The Group’s ments and result in changes to the presentation and disclosure
implementation efforts include the identification of revenue and requirements of hedge accounting activities.
costs within the scope of the guidance, as well as the evaluation ASU 2017-12 is effective for annual reporting periods begin-
of revenue contracts under the new guidance and related account- ning after December 15, 2018, and for the interim periods within
ing policies. The guidance does not apply to revenue associated those annual reporting periods. Early adoption is permitted in any
with financial instruments, including loans and securities that are interim period after issuance. The Group is currently evaluating the
accounted for under other US GAAP guidance. To date, the rec- impact of the adoption of ASU 2017-12 on the Group’s financial
ognition and timing impacts that the Group has identified relate to position, results of operations and cash flows.
the timing of certain fees. The new guidance eliminates industry
specific guidance and as a result will have an impact on the gross ASC Topic 842 – Leases
versus net presentation of certain income and expenses, for exam- In February 2016, the FASB issued ASU 2016-02, “Leases”
ple a change from net to gross reporting of underwriting expenses (ASU 2016-02), creating ASC Topic 842 – Leases. ASU 2016-
and reimbursed costs from advisory activities. The changes iden- 02 sets out the principles for the recognition, measurement, pre-
tified thus far are not expected to have a material impact on the sentation and disclosure of leases for both lessees and lessors.
Group’s financial position, results of operations or cash flows; how- ASU 2016-02 also includes disclosure requirements to provide
ever, the evaluation remains ongoing. more information about the amount, timing and uncertainty of
cash flows arising from leases. Lessor accounting is substantially
ASC Topic 715 – Compensation – Retirement Benefits unchanged compared to the current accounting guidance. Under
In March 2017, the FASB issued ASU 2017-07, “Improving the current lessee accounting model, the Group is required to dis-
the Presentation of Net Periodic Pension Cost and Net Peri- tinguish between finance leases, which are recognized on the bal-
odic Postretirement Benefit Cost” (ASU 2017-07), an update ance sheet, and operating leases, which are not. ASU 2016-02 will
to ASC Topic 715 – Compensation – Retirement Benefits. The require lessees to present a right-of-use asset and a corresponding
amendments in ASU 2017-07 require that the service cost com- lease liability on the balance sheet for all leases with a lease term
ponent of the net periodic benefit cost be presented in the same of greater than twelve months. ASU 2016-02 is effective for annual
income statement line item(s) as other employee compensation reporting periods beginning after December 15, 2018, and for the
costs arising from services rendered during the period. Other com- interim periods within those annual reporting periods.
ponents of the net periodic benefit cost should be reported sepa- The Group has established a cross-functional implementation
rately from the line item(s) that includes the service cost and out- team and governance structure for the project. The Group is cur-
side of any subtotal of operating income. ASU 2017-07 is effective rently reviewing its existing contracts to determine the impact of
for annual reporting periods beginning after December 15, 2017, the adoption of ASU 2016-02. The Group expects an increase in
and for the interim periods within those annual reporting periods. total assets and total liabilities as a result of recognizing right-of-
Early adoption is permitted. The Group is currently evaluating the use assets and lease liabilities for all leases under the new guid-
impact of the adoption of ASU 2017-07 on the Group’s financial ance. The Group does not expect a material change to the timing
position, results of operations and cash flows. of expense recognition and is currently evaluating the impact of the
adoption of ASU 2016-02 on the Group’s results of operations and
cash flows.
3 Business developments
4 Segment information
The Group is a global financial services company domiciled in positions that do not fit with the strategic direction. The segment
Switzerland and serves its clients through three regionally focused information reflects the Group’s six reportable segments and the
divisions: Swiss Universal Bank, International Wealth Manage- Corporate Center, which are managed and reported on a pre-tax
ment and Asia Pacific. These regional businesses are supported basis.
by two other divisions specialized in investment banking capabili- u Refer to “Note 5 – Segment information” in V – Consolidated financial state-
ties: Global Markets and Investment Banking & Capital Markets. ments – Credit Suisse Group in the Credit Suisse Annual Report 2016 for further
information on segment information, revenue sharing and cost allocation and
The Strategic Resolution Unit consolidates the remaining portfolios funding.
from the former non-strategic units plus additional businesses and
Total assets
end of 3Q17 2Q17 4Q16
Total assets (CHF million)
Swiss Universal Bank 228,647 235,562 228,363
resale agreements and securities borrowing transactions 643 632 693 1,882 2,107
Other 473 471 334 1,290 1,088
Interest and dividend income 4,273 4,602 4,222 12,917 13,564
Deposits (348) (328) (255) (981) (757)
Short-term borrowings (43) (40) (18) (116) (56)
Trading liabilities (891) (1,178) (738) (2,857) (2,964)
Central bank funds purchased, securities sold under
repurchase agreements and securities lending transactions (319) (324) (363) (896) (1,116)
Long-term debt (933) (893) (871) (2,779) (2,583)
Other (117) (102) (47) (296) (148)
Interest expense (2,651) (2,865) (2,292) (7,925) (7,624)
Net interest income 1,622 1,737 1,930 4,992 5,940
7 Trading revenues
Represents revenues on a product basis which are not representative of business results within segments, as segment results utilize financial instruments across various product types.
8 Other revenues
12 Restructuring expenses
In connection with the strategic review of the Group, restructur- expenses primarily include termination costs, expenses in connec-
ing expenses of CHF 112 million, CHF 69 million, CHF 145 mil- tion with the acceleration of certain deferred compensation awards
lion, CHF 318 million and CHF 491 million were recognized in and real estate contract termination costs.
3Q17, 2Q17, 3Q16, 9M17 and 9M16, respectively. Restructuring
Restructuring provision
3Q17 2Q17 3Q16
Compen- General and
Compen- General and
Compen- General and
sation and administrative
sation and administrative
sation and administrative
benefits expenses Total benefits expenses
Total benefits expenses
Total
Restructuring provision (CHF million)
Balance at beginning of period 181 83 264 220 89 309 189 110 299
Net additional charges 1 59 10 69 24 9 33 65 22 87
Utilization (50) (10) (60) (63) (15) (78) (38) (40) (78)
Balance at end of period 190 83 273 181 83 264 216 92 308
1
The following items for which expense accretion was accelerated in 3Q17, 2Q17 and 3Q16 due to the restructuring of the Group are not included in the restructuring provision: unsettled
share-based compensation of CHF 22 million, CHF 12 million and CHF 42 million, respectively; unsettled pension obligations of CHF 12 million, CHF 9 million and CHF 6 million, respec-
tively, which remain classified as a component of total shareholders’ equity; unsettled cash-based deferred compensation of CHF 6 million, CHF 5 million and CHF 10 million, respectively,
which remain classified as compensation liabilities; and accelerated accumulated depreciation and impairment of CHF 3 million, CHF 10 million and CHF 0 million, respectively, which
remain classified as premises and equipment. The settlement date for the unsettled share-based compensation remains unchanged at three years.
104 Condensed consolidated financial statements – unaudited
Net income/(loss) attributable to shareholders for basic earnings per share 244 303 41 1,143 (91)
Available for common shares 244 303 41 1,143 (94)
earnings per share available for common shares 2,565.5 2,309.6 2,181.0 2,363.1 2,119.0
Dilutive share options and warrants 1.8 4.2 2.8 3.2 0.0
Dilutive share awards 58.8 40.3 52.9 51.4 0.0
Weighted-average shares outstanding for diluted
earnings per share available for common shares 1 2,626.1 2,354.1 2,236.7 2,417.7 2,119.0 2
Weighted-average shares outstanding for basic/diluted earnings
per share available for unvested share-based payment awards 0.1 0.1 0.2 0.1 3.9
Earnings/(loss) per share available for common shares (CHF)
Basic earnings/(loss) per share available for common shares 0.10 0.13 0.02 0.48 (0.04)
Diluted earnings/(loss) per share available for common shares 0.09 0.13 0.02 0.47 (0.04)
Prior periods have been adjusted to reflect the increase in the number of shares outstanding as a result of the discount element in the 2017 rights issue and scrip dividend, as required under
US GAAP.
1
Weighted-average potential common shares relating to instruments that were not dilutive for the respective periods (and therefore not included in the diluted earnings per share calcula-
tion above) but could potentially dilute earnings per share in the future were 10.7 million, 10.4 million, 13.4 million, 9.6 million and 11.0 million for 3Q17, 2Q17, 3Q16, 9M17 and 9M16,
respectively.
2
Due to the net loss in 9M16, 2.9 million of weighted-average share options and warrants outstanding and 49.9 million of weighted-average share awards outstanding were excluded from
the diluted earnings per share calculation, as the effect would be antidilutive.
Condensed consolidated financial statements – unaudited 105
15 Investment securities
Proceeds from sales, realized gains and realized losses Amortized cost, fair value and average yield of debt
from available-for-sale securities securities
in
9M17 9M16
Debt securities
available-for-sale
Debt Equity Debt Equity
securities securities securities securities Average
Amortized Fair yield
Additional information (CHF million)
end of cost value (in %)
Proceeds from sales 6 6 9 2
3Q17 (CHF million, except where indicated)
u Refer to “Note 19 – Loans, allowance for loan losses and credit quality” in V
– Consolidated financial statements – Credit Suisse Group in the Credit Suisse
Annual Report 2016 for further information on loans, allowance for loan losses,
credit quality, value of collateral and impaired loans.
Loans
end of 3Q17 2Q17 4Q16
Loans (CHF million)
Mortgages 105,889 105,433 104,335
of which collectively evaluated for impairment 42 174 216 43 162 205 46 191 237
Gross loans held at amortized cost (CHF million)
Balance at end of period 151,596 109,924 261,520 149,718 108,550 258,268 145,716 109,976 255,692
of which individually evaluated for impairment 1 611 1,583 2,194 607 1,633 2,240 713 1,589 2,302
of which collectively evaluated for impairment 150,985 108,341 259,326 149,111 106,917 256,028 145,003 108,387 253,390
9M17 9M16
Corporate &
Corporate &
Consumer institutional Total Consumer institutional Total
Allowance for loan losses (CHF million)
Balance at beginning of period 216 722 938 216 650 866
Net movements recognized in statements of operations 42 102 144 53 122 175
1
Purchases 0 727 727 0 734 734 30 500 530
Reclassifications from loans held-for-sale 2 0 11 11 0 0 0 0 0 0
Reclassifications to loans held-for-sale 3 0 1,040 1,040 0 705 705 0 256 256
Sales 3 0 1,013 1,013 0 907 907 0 275 275
1
Includes drawdowns under purchased loan commitments.
2
Includes loans previously reclassified to held-for-sale that were not sold and were reclassified back to loans held-to-maturity.
3
All loans held at amortized cost which are sold are reclassified to loans held-for-sale on or prior to the date of the sale.
Condensed consolidated financial statements – unaudited 109
1
Purchases 0 2,385 2,385 30 1,915 1,945
Reclassifications from loans held-for-sale 2 0 11 11 0 125 125
Reclassifications to loans held-for-sale 3 0 4,849 4,849 1,632 920 2,552
Sales 3 0 4,709 4,709 0 305 305
1
Includes drawdowns under purchased loan commitments.
2
Includes loans previously reclassified to held-for-sale that were not sold and were reclassified back to loans held-to-maturity.
3
All loans held at amortized cost which are sold are reclassified to loans held-for-sale on or prior to the date of the sale.
1
Includes the value of collateral up to the amount of the outstanding related loans. For mortgages, the value of collateral is determined at the time of granting the loan and thereafter regularly
reviewed according to the Group’s risk management policies and directives, with maximum review periods determined by property type, market liquidity and market transparency.
110 Condensed consolidated financial statements – unaudited
of which corporate & institutional 1,583 1,539 531 1,810 1,767 528
112 Condensed consolidated financial statements – unaudited
In 3Q17, 2Q17, 3Q16, 9M17 and 9M16, the Group did not experi- In 9M17, the loan modifications of the Group included extended
ence a default on any loan that had been restructured within the loan repayment terms, including the suspension of quarterly and
previous 12 months. annual loan amortizations, modifications of covenants and a waiver
of a loan termination.
114 Condensed consolidated financial statements – unaudited
17 Goodwill
Goodwill
Investment
Swiss International
Banking & Strategic Credit
Universal Wealth Asia Global Capital Resolution Suisse
3Q17 Bank Management Pacific Markets Markets Unit Group
Gross amount of goodwill (CHF million)
Balance at beginning of period 602 1,523 2,245 3,171 1,011 12 8,564
9M17
Gross amount of goodwill (CHF million)
Balance at beginning of period 623 1,612 2,318 3,195 1,044 12 8,804
Foreign currency translation impact (17) (68) (61) (20) (28) 0 (194)
Other 0 (4) 0 0 0 0 (4)
Balance at end of period 606 1,540 2,257 3,175 1,016 12 8,606
Accumulated impairment (CHF million)
Balance at beginning of period 0 0 772 2,719 388 12 3,891
Balance at end of period 0 0 772 2,719 388 12 3,891
Net book value (CHF million)
Net book value 606 1,540 1,485 456 628 0 4,715
In accordance with US GAAP, the Group continually assesses equity, after considering the total of these elements, is allocated to
whether or not there has been a triggering event requiring a review the reporting units on a pro-rata basis.
of goodwill. There was no triggering event in 3Q17. As of Septem- In estimating the fair value of its reporting units, the Group
ber 30, 2017, the Group’s market capitalization was below book applied a combination of the market approach and the income
value. approach. Under the market approach, consideration was given
On December 7, 2016, and on February 14, 2017, the Group to price to projected earnings multiples or price to book value
announced a reorganization and change to financial reporting multiples for similarly traded companies and prices paid in recent
affecting its Swiss Universal Bank and Asia Pacific segments. transactions that have occurred in its industry or in related indus-
During 1Q17, these measures were implemented. The Group tries. Under the income approach, a discount rate was applied that
determined that these changes constituted triggering events. The reflects the risk and uncertainty related to the reporting unit’s pro-
Group’s reporting units as a result of these measures are defined jected cash flows, which are determined from the Group’s financial
as follows: Swiss Universal Bank – Private Clients (formerly Private plan.
Banking), Swiss Universal Bank – Corporate & Institutional Clients In determining the estimated fair value, the Group relied upon
(formerly Corporate & Institutional Banking), International Wealth its updated five-year strategic business plan which included signifi-
Management – Private Banking, International Wealth Management cant management assumptions and estimates based on its view of
– Asset Management, Asia Pacific – Wealth Management & Con- current and future economic conditions and regulatory changes.
nected (formerly Private Banking), Asia Pacific – Markets (formerly Goodwill is tested for impairment before and immediately after
Investment Banking), Global Markets, Investment Banking & Capi- a reorganization or restructuring of reporting units. As a result, the
tal Markets and the Strategic Resolution Unit. goodwill impairment test was performed during 1Q17 under the
The carrying value of each reporting unit for the purpose of the old business structure and then again under the modified structure
goodwill impairment test is determined by considering the report- according to the measures implemented in connection with the
ing units’ risk-weighted assets usage, leverage ratio exposure, announcements on December 7, 2016 and on February 14, 2017.
deferred tax assets, goodwill and intangible assets. Any residual
Condensed consolidated financial statements – unaudited 115
The Group concluded that the estimated fair value for all of its in the underlying parameters used in the valuation process. If
reporting units impacted by the measures implemented in connec- actual outcomes adversely differ by a significant margin from its
tion with the December 7, 2016 and February 14, 2017 announce- best estimates of the key economic assumptions and associated
ments substantially exceeded their related carrying values and that cash flows applied in the valuation of the reporting unit, the Group
no impairment was necessary. could potentially incur material impairment charges in the future.
The results of the impairment evaluation of each reporting
unit’s goodwill would be significantly impacted by adverse changes
19 Long-term debt
9M17 (CHF million)
Balance at beginning of period (35) (12,095) 61 (4,278) 643 (568) (16,272)
Increase/(decrease) (13) (1,262) (7) 11 0 (1,663) (2,934)
Increase/(decrease) due to equity method investments 1 0 0 0 0 0 1
Reclassification adjustments, included in net income/(loss) 13 23 0 242 (94) 168 352
Total increase/(decrease) 1 (1,239) (7) 253 (94) (1,495) (2,581)
Balance at end of period (34) (13,334) 54 (4,025) 549 (2,063) (18,853)
9M16
(CHF million)
Balance at beginning of period (15) (12,615) 60 (4,672) 607 – (16,635)
Increase/(decrease) 45 (778) 6 35 0 345 (347)
Amortization of recognized prior service credit/(cost) 2 (34) (36) (30) (120) (98)
Tax expense 7 8 6 26 21
Net of tax (27) (28) (24) (94) (77)
Gains/(losses) on liabilities relating to credit risk
3
Reclassification adjustments 170 (2) 0 168 0
1
Includes net releases of CHF 23 million on the sale of Credit Suisse (Monaco) S.A.M. in 1Q17 and net releases of CHF 2 million, CHF 3 million and CHF 52 million on the sale of Credit
Suisse (Gibraltar) Limited in 3Q16, 2Q16 and 1Q16, respectively. These were reclassified from cumulative translation adjustments and included in net income in other revenues.
2
These components are included in the computation of total benefit costs. Refer to “Note 24 – Pension and other post-retirement benefits” for further information.
3
Includes the positive impact of an enhancement to the valuation methodology relating to the instrument-specific credit risk on fair value option elected structured notes that were previously
recorded in accumulated other comprehensive income and were transferred to net income (trading revenues). Refer to “Note 28 – Financial instruments” for further information.
The disclosures set out in the tables below include derivatives, derivatives may also be subject to collateral agreements which
reverse repurchase and repurchase agreements, and securities restrict the use of financial collateral.
lending and borrowing transactions that: For derivatives transacted with exchanges (exchange-traded
p are offset in the Group’s consolidated balance sheets; or derivatives) and central clearing counterparties (OTC-cleared
p are subject to an enforceable master netting agreement or derivatives), positive and negative replacement values (PRV/NRV)
similar agreement (enforceable master netting agreements), and related cash collateral may be offset if the terms of the rules
irrespective of whether they are offset in the Group’s consoli- and regulations governing these exchanges and central clearing
dated balance sheets. counterparties permit such netting and offset.
Where no such agreements exist, fair values are recorded on
Similar agreements include derivative clearing agreements, global a gross basis.
master repurchase agreements and global master securities lend- Exchange-traded derivatives or OTC-cleared derivatives, that
ing agreements. are fully margined and for which the daily margin payments con-
stitute settlement of the outstanding exposure, are not included in
Derivatives the offsetting disclosures because they are not subject to offset-
The Group transacts bilateral OTC derivatives mainly under the ting due to the daily settlement. The daily margin payments, which
International Swaps and Derivatives Association (ISDA) Master are not settled until the next settlement cycle is conducted, are
Agreements and Swiss Master Agreements for OTC derivative presented in brokerage receivables or brokerage payables. The
instruments. These agreements provide for the net settlement of notional amount for these daily settled derivatives is included in the
all transactions under the agreement through a single payment fair value of derivative instruments table in “Note 25 – Derivatives
in the event of default or termination under the agreement. They and hedging activities”.
allow the Group to offset balances from derivative assets and lia- Under US GAAP, the Group elected to account for substan-
bilities as well as the receivables and payables to related cash col- tially all financial instruments with an embedded derivative that
lateral transacted with the same counterparty. Collateral for OTC is not considered clearly and closely related to the host contract
derivatives is received and provided in the form of cash and mar- at fair value. There is an exception for a bifurcatable hybrid debt
ketable securities. Such collateral may be subject to the standard instrument which the Group did not elect to account for at fair
industry terms of an ISDA Credit Support Annex. The terms of an value. However, this bifurcated embedded derivative is not subject
ISDA Credit Support Annex provide that securities received or pro- to an enforceable master netting agreement and is not recorded as
vided as collateral may be pledged or sold during the term of the a derivative instrument under trading assets and liabilities or other
transactions and must be returned upon maturity of the transac- assets and other liabilities. Information on this bifurcated embed-
tion. These terms also give each counterparty the right to termi- ded derivative has therefore not been included in the offsetting
nate the related transactions upon the other counterparty’s failure disclosures.
to post collateral. Financial collateral received or pledged for OTC
120 Condensed consolidated financial statements – unaudited
The following table presents the gross amount of derivatives derivatives not subject to enforceable master netting agreements
subject to enforceable master netting agreements by contract and the net amount presented in the consolidated balance sheets.
and transaction type, the amount of offsetting, the amount of
Offsetting of derivatives
end of
3Q17 4Q16
Derivative
Derivative Derivative Derivative
assets liabilities assets liabilities
Total net derivatives presented in the consolidated balance sheets 20.9 14.6 26.9 20.4
of which recorded in trading assets and trading liabilities 20.9 14.6 26.8 20.4
of which recorded in other assets and other liabilities 0.0 0.0 0.1 0.0
1
Represents derivatives where a legal opinion supporting the enforceability of netting in the event of default or termination under the agreement is not in place.
Condensed consolidated financial statements – unaudited 121
Reverse repurchase and repurchase agreements and meet the criterion of having the same settlement date specified at
securities lending and borrowing transactions inception of the transaction, and therefore they are not eligible for
Reverse repurchase and repurchase agreements are generally netting in the consolidated balance sheets. However, securities
covered by global master repurchase agreements with netting lending and borrowing transactions with explicit maturity dates may
terms similar to ISDA Master Agreements. In certain situations, for be eligible for netting in the consolidated balance sheets.
example in the event of default, all contracts under the agreements Reverse repurchase and repurchase agreements are collater-
are terminated and are settled net in one single payment. Transac- alized principally by government securities, money market instru-
tions under such agreements are netted in the consolidated bal- ments and corporate bonds and have terms ranging from overnight
ance sheets if they are with the same counterparty, have the same to a longer or unspecified period of time. In the event of coun-
maturity date, settle through the same clearing institution and are terparty default, the reverse repurchase agreement or securities
subject to the same master netting agreement. The amounts off- lending agreement provides the Group with the right to liquidate
set are measured on the same basis as the underlying transaction the collateral held. In certain circumstances, financial collateral
(i.e., on an accrual basis or fair value basis). received may be restricted during the term of the agreement (e.g.,
Securities lending and borrowing transactions are generally in tri-party arrangements).
executed under global master securities lending agreements with The following table presents the gross amount of securities
netting terms similar to ISDA Master Agreements. In certain sit- purchased under resale agreements and securities borrowing
uations, for example in the event of default, all contracts under transactions subject to enforceable master netting agreements,
the agreement are terminated and are settled net in one single the amount of offsetting, the amount of securities purchased
payment. Transactions under these agreements are netted in the under resale agreements and securities borrowing transactions
consolidated balance sheets if they meet the same right of offset not subject to enforceable master netting agreements and the net
criteria as for reverse repurchase and repurchase agreements. In amount presented in the consolidated balance sheets.
general, most securities lending and borrowing transactions do not
Offsetting of securities purchased under resale agreements and securities borrowing transactions
end of 3Q17 4Q16
Net Net
Gross Offsetting book value Gross Offsetting book value
Securities purchased under resale agreements 106.5 (24.1) 82.4 99.9 (26.9) 73.0
The following table presents the gross amount of securities sold agreements and securities lending transactions not subject to
under repurchase agreements and securities lending transactions enforceable master netting agreements and the net amount pre-
subject to enforceable master netting agreements, the amount sented in the consolidated balance sheets.
of offsetting, the amount of securities sold under repurchase
122 Condensed consolidated financial statements – unaudited
Offsetting of securities sold under repurchase agreements and securities lending transactions
end of 3Q17 4Q16
Net Net
Gross Offsetting book value Gross Offsetting book value
Securities sold under repurchase agreements 47.7 (26.5) 21.2 51.3 (29.0) 22.3
The following table presents the net amount presented in the con- borrowing transactions not subject to enforceable master netting
solidated balance sheets of financial assets and liabilities subject agreements where a legal opinion supporting the enforceability of
to enforceable master netting agreements and the gross amount netting in the event of default or termination under the agreement
of financial instruments and cash collateral not offset in the con- is not in place. Net exposure reflects risk mitigation in the form of
solidated balance sheets. The table excludes derivatives, reverse collateral.
repurchase and repurchase agreements and securities lending and
Securities purchased under resale agreements 82.4 82.4 0.0 0.0 73.0 73.0 0.0 0.0
Securities borrowing transactions 13.8 13.5 0.0 0.3 19.5 18.6 0.0 0.9
Total financial assets subject to enforceable
master netting agreements 112.6 101.5 0.0 11.1 113.8 97.9 0.0 15.9
Financial liabilities subject to enforceable master
master netting agreements 68.7 59.0 0.0 9.7 74.1 61.7 0.0 12.4
1
The total amount reported in financial instruments (recognized financial assets and financial liabilities and non-cash financial collateral) and cash collateral is limited to the amount of the
related instruments presented in the consolidated balance sheets and therefore any over-collateralization of these positions is not included.
Net exposure is subject to further credit mitigation through the Therefore, the net exposure presented in the table above is not
transfer of the exposure to other market counterparties by the representative of the Group’s counterparty exposure.
use of credit default swaps (CDS) and credit insurance contracts.
Condensed consolidated financial statements – unaudited 123
22 Tax
The 3Q17 income tax expense of CHF 153 million includes the Tax expense reconciliation
impact of the continuous reassessment of the estimated annual in 3Q17
effective tax rate as well as the impact of items that need to be
CHF million
recorded in the specific interim period in which they occur. Further Income tax expense computed
details are outlined in the tax expense reconciliation below. at the Swiss statutory tax rate of 22% 88
Net deferred tax assets related to net operating losses, net Increase/(decrease) in income taxes resulting from
deferred tax assets on temporary differences and net deferred tax Foreign tax rate differential 22
liabilities are presented in the following manner. Nettable gross Other non-deductible expenses (89)
deferred tax liabilities are allocated on a pro-rata basis to gross Changes in deferred tax valuation allowance 40
deferred tax assets on net operating losses and gross deferred Lower taxed income (20)
tax assets on temporary differences. This approach is aligned with (Windfall tax benefits)/shortfall tax charges on
share-based compensation 1
the underlying treatment of netting gross deferred tax assets and
Other 111
liabilities under the Basel III framework. Valuation allowances have
Income tax expense 153
been allocated against such deferred tax assets on net operat-
ing losses first with any remainder allocated to such deferred tax
assets on temporary differences. This presentation is considered
the most appropriate disclosure given the underlying nature of the Foreign tax rate differential
gross deferred tax balances. 3Q17 included a foreign tax expense of CHF 22 million in respect
As of September 30, 2017, the Group had accumulated undis- of earnings in higher tax jurisdictions, such as Brazil, as well as
tributed earnings from foreign subsidiaries of CHF 5.1 billion which earnings in lower tax jurisdictions, such as Singapore.
are considered indefinitely reinvested. The Group would need to
accrue and pay taxes on these undistributed earnings if such earn- Other non-deductible expenses
ings were repatriated. No deferred tax liability was recorded in 3Q17 included the reversal of non-deductible interest expenses
respect of those amounts as these earnings are considered indefi- of CHF 201 million arising from the reassessment of a previously
nitely reinvested. It is not practicable to estimate the amount of taken tax position relating to the deductibility of such costs, par-
unrecognized deferred tax liabilities for these undistributed foreign tially offset by a tax expense of CHF 106 million relating to the
earnings. non-deductible interest expenses and a tax expense of CHF 6
The Group is currently subject to ongoing tax audits, inquiries million in respect of non-deductible bank levy costs and other non-
and litigation with the tax authorities in a number of jurisdictions, deductible expenses.
including Brazil, the Netherlands, the US, the UK and Switzerland.
Although the timing of completion is uncertain, it is reasonably Changes in deferred tax valuation allowance
possible that some of these will be resolved within 12 months of 3Q17 included the impact of the increase of valuation allowances
the reporting date. It is reasonably possible that there will be a of CHF 92 million mainly in respect of three of the Group’s operat-
decrease between zero and CHF 70 million in unrecognized tax ing entities, two in the UK and one in Switzerland, and a decrease
benefits within 12 months of the reporting date. of valuation allowances of CHF 52 million mainly in respect of two
The Group remains open to examination from federal, state, of the Group’s operating entities, one in the UK and one in Swit-
provincial or similar local jurisdictions from the following years zerland, related to estimated current year earnings.
onward in these major countries: Brazil – 2012; Japan – 2012;
Switzerland – 2011; the US – 2010; the UK – 2009; and the Lower taxed income
Netherlands – 2006. 3Q17 included the impacts of CHF 6 million related to non-tax-
able life insurance income, a beneficial earnings mix in one of the
Effective tax rate Group’s operating entities in Switzerland of CHF 14 million, and
in 3Q17 2Q17 3Q16 9M17 9M16 various smaller items.
Effective tax rate (%) 38.3 47.4 83.3 30.7 (42.9)
124 Condensed consolidated financial statements – unaudited
land, a tax expense of CHF 55 million relating to the increase of Deferred tax assets 7,503 7,542
tax contingency accruals and a tax expense of CHF 11 million of which net operating losses 2,666 2,787
from prior year adjustments, partially offset by a tax benefit of of which deductible temporary differences 4,837 4,755
CHF 49 million from a favorable court decision and a tax benefit of Deferred tax liabilities (271) (231)
CHF 20 million from own-credit revaluation losses. The remaining Net deferred tax assets 7,232 7,311
balance included various smaller items.
The Group’s current and previous deferred compensation plans The following tables show the compensation expense for deferred
include share awards, performance share awards, Contingent compensation awards recognized in the consolidated statements
Capital Awards, Capital Opportunity Facility awards, Plus Bond of operations, the estimated unrecognized expense for deferred
awards, 2008 Partner Asset Facilities awards and other cash compensation awards granted in 3Q17 and prior periods and the
awards. remaining requisite service period over which the unrecognized
u Refer to “Note 29 – Employee deferred compensation” in V – Consolidated expense will be recognized. The estimated unrecognized compen-
financial statements – Credit Suisse Group in the Credit Suisse Annual Report sation expense was based on the fair value of each award on the
2016 for further information.
grant date and included the current estimated outcome of relevant
performance criteria and estimated future forfeitures but no esti-
mate for future mark-to-market adjustments.
The Group expects to contribute CHF 442 million to the Swiss defined benefit plans in 2017. As of the end of 3Q17, CHF 343
and international defined benefit plans and other post-retirement million of contributions have been made.
u Refer to “Note 32 – Derivatives and hedging activities” in V – Consolidated relationship. Notional amounts have also been provided as an indi-
financial statements – Credit Suisse Group in the Credit Suisse Annual Report cation of the volume of derivative activity within the Group.
2016 for further information.
Information on bifurcated embedded derivatives has not been
included in these tables. Under US GAAP, the Group elected to
Fair value of derivative instruments account for substantially all financial instruments with an embed-
The tables below present gross derivative replacement values ded derivative that is not considered clearly and closely related to
by type of contract and balance sheet location and whether the the host contract at fair value.
derivative is used for trading purposes or in a qualifying hedging u Refer to “Note 28 – Financial instruments” for further information.
Forwards and forward rate agreements 8,372.3 0.8 0.9 0.0 0.0 0.0
Swaps 12,592.4 63.3 57.8 45.0 0.1 0.2
Options bought and sold (OTC) 2,129.5 27.3 26.1 0.0 0.0 0.0
Futures 559.1 0.0 0.0 0.0 0.0 0.0
Options bought and sold (exchange-traded) 481.6 0.2 0.2 0.0 0.0 0.0
Interest rate products 24,134.9 91.6 85.0 45.0 0.1 0.2
Forwards 1,286.5 12.8 12.7 13.7 0.1 0.0
Swaps 624.4 16.3 22.0 0.0 0.0 0.0
Options bought and sold (OTC) 452.2 5.1 5.2 2.0 0.0 0.0
Futures 21.2 0.0 0.0 0.0 0.0 0.0
Options bought and sold (exchange-traded) 5.8 0.0 0.0 0.0 0.0 0.0
Foreign exchange products 2,390.1 34.2 39.9 15.7 0.1 0.0
Forwards 1.3 0.0 0.1 0.0 0.0 0.0
The notional amount, PRV and NRV (trading and hedging) was CHF 28,062.1 billion, CHF 160.1 billion and CHF 162.0 billion, respectively, as of September 30, 2017.
1
Relates to derivative contracts that qualify for hedge accounting under US GAAP.
2
Primarily credit default swaps.
3
Primarily precious metals, commodity and energy products.
Condensed consolidated financial statements – unaudited 127
Forwards and forward rate agreements 8,321.9 3.3 3.2 0.0 0.0 0.0
Swaps 13,190.0 91.0 85.5 47.5 1.0 1.0
Options bought and sold (OTC) 2,164.4 43.1 41.1 0.0 0.0 0.0
Futures 522.1 0.0 0.0 0.0 0.0 0.0
Options bought and sold (exchange-traded) 468.0 0.2 0.2 0.0 0.0 0.0
Interest rate products 24,666.4 137.6 130.0 47.5 1.0 1.0
Forwards 1,211.6 19.2 20.8 11.0 0.1 0.0
Swaps 819.4 34.5 42.0 0.0 0.0 0.0
Options bought and sold (OTC) 416.8 8.1 8.4 4.8 0.0 0.0
Futures 17.8 0.0 0.0 0.0 0.0 0.0
Options bought and sold (exchange-traded) 4.1 0.0 0.0 0.0 0.0 0.0
Foreign exchange products 2,469.7 61.8 71.2 15.8 0.1 0.0
Forwards 1.3 0.0 0.0 0.0 0.0 0.0
The notional amount, PRV and NRV (trading and hedging) was CHF 28,619.5 billion, CHF 235.1 billion and CHF 239.2 billion, respectively, as of December 31, 2016.
1
Relates to derivative contracts that qualify for hedge accounting under US GAAP.
2
Primarily credit default swaps.
3
Primarily precious metals, commodity and energy products.
Foreign exchange products 10 2,3 (16) 2,3 (3) 3,4 (10) 2, 3 (14) 2,3,4
Total 8 (18) 7 (14) 12
Details of cash flow hedges (CHF million)
As of the end of 3Q17, the maximum length of time over which the The net loss associated with cash flow hedges expected to
Group hedged its exposure to the variability in future cash flows for be reclassified from AOCI within the next 12 months is CHF 21
forecasted transactions, excluding those forecasted transactions million.
related to the payment of variable interest on existing financial
instruments, was five years.
The Group includes all derivative instruments not included in hedge The following table provides the Group’s current net exposure
accounting relationships in its trading activities. from contingent credit risk relating to derivative contracts with bilat-
u Refer to “Note 7 – Trading revenues” for gains and losses on trading activities eral counterparties and SPEs that include credit support agree-
by product type. ments, the related collateral posted and the additional collateral
required in a one-notch, two-notch and a three-notch downgrade
Disclosures relating to contingent credit risk event, respectively. The table also includes derivative contracts
Certain of the Group’s derivative instruments contain provisions with contingent credit risk features without credit support agree-
that require it to maintain a specified credit rating from each of ments that have accelerated termination event conditions. The cur-
the major credit rating agencies. If the ratings fall below the level rent net exposure for derivative contracts with bilateral counterpar-
specified in the contract, the counterparties to the agreements ties and contracts with accelerated termination event conditions is
could request payment of additional collateral on those derivative the aggregate fair value of derivative instruments that were in a net
instruments that are in a net liability position. Certain of the deriva- liability position. For SPEs, the current net exposure is the contrac-
tive contracts also provide for termination of the contract, gener- tual amount that is used to determine the collateral payable in the
ally upon a downgrade of either the Group or the counterparty, at event of a downgrade. The contractual amount could include both
the existing mark-to-market replacement value of the derivative the NRV and a percentage of the notional value of the derivative.
contract.
Condensed consolidated financial statements – unaudited 129
Contingent credit risk (CHF billion)
Current net exposure 5.7 0.1 1.1 6.9 10.5 0.2 1.1 11.8
Collateral posted 4.6 0.1 – 4.7 9.5 0.2 – 9.7
Impact of a one-notch downgrade event 0.2 0.1 0.1 0.4 0.3 0.2 0.0 0.5
Impact of a two-notch downgrade event 1.0 0.2 0.5 1.7 1.3 0.4 0.5 2.2
Impact of a three-notch downgrade event 1.1 0.6 0.7 2.4 1.5 0.7 0.7
2.9
The impact of a downgrade event reflects the amount of additional collateral required for bilateral counterparties and special purpose entities and the amount of additional termination
expenses for accelerated terminations, respectively.
Credit derivatives underlyings are related to the credit risk of a specified entity (or a
u Refer to “Note 32 – Derivatives and hedging activities” in V – Consolidated group of entities) or an index based on the credit risk of a group of
financial statements – Credit Suisse Group in the Credit Suisse Annual Report entities and (b) that exposes the seller to potential loss from credit
2016 for further information on credit derivatives.
risk-related events specified in the contract.
Total return swaps (TRS) of CHF 6.4 billion and CHF 7.8 billion
Credit protection sold/purchased as of the end of 3Q17 and 4Q16, respectively, were also excluded
The following tables do not include all credit derivatives and differ because a TRS does not expose the seller to potential loss from
from the credit derivatives in the “Fair value of derivative instru- credit risk-related events specified in the contract. A TRS only
ments” tables. This is due to the exclusion of certain credit deriva- provides protection against a loss in asset value and not against
tive instruments under US GAAP, which defines a credit deriv- additional amounts as a result of specific credit events.
ative as a derivative instrument (a) in which one or more of its
Single-name
instruments (CHF billion)
Investment grade (63.7) 59.7 (4.0) 12.1 0.9 (72.4) 67.4 (5.0) 14.3 0.7
2
Non-investment grade (31.0) 28.1 (2.9) 16.1 (0.3) (30.3) 28.1 (2.2) 18.1 (1.0)
Total single-name instruments (94.7) 87.8 (6.9) 28.2 0.6 (102.7) 95.5 (7.2) 32.4 (0.3)
of which sovereign (23.0) 20.8 (2.2) 5.6 (0.6) (27.7) 25.6 (2.1) 6.5 (0.9)
of which non-sovereign (71.7) 67.0 (4.7) 22.6 1.2 (75.0) 69.9 (5.1) 25.9 0.6
Multi-name
instruments (CHF billion)
Investment grade 2 (121.4) 115.2 (6.2) 34.2 0.3 (115.0) 113.9 (1.1) 41.2 0.0
Non-investment grade (26.8) 25.8 3 (1.0) 10.9 1.3 (20.9) 19.5 3 (1.4) 9.8 0.3
Total multi-name instruments (148.2) 141.0 (7.2) 45.1 1.6 (135.9) 133.4 (2.5) 51.0 0.3
of which sovereign (0.2) 0.2 0.0 0.4 0.0 (0.3) 0.2 (0.1) 0.7 0.1
of which non-sovereign (148.0) 140.8 (7.2) 44.7 1.6 (135.6) 133.2 (2.4) 50.3 0.2
Total instruments (CHF billion)
Investment grade (185.1) 174.9 (10.2) 46.3 1.2 (187.4) 181.3 (6.1) 55.5 0.7
2
Non-investment grade (57.8) 53.9 (3.9) 27.0 1.0 (51.2) 47.6 (3.6) 27.9 (0.7)
Total instruments (242.9) 228.8 (14.1) 73.3 2.2 (238.6) 228.9 (9.7) 83.4 0.0
of which sovereign (23.2) 21.0 (2.2) 6.0 (0.6) (28.0) 25.8 (2.2) 7.2 (0.8)
of which non-sovereign (219.7) 207.8 (11.9) 67.3 2.8 (210.6) 203.1 (7.5) 76.2 0.8
1
Represents credit protection purchased with identical underlyings and recoveries.
2
Based on internal ratings of BBB and above.
3
Includes synthetic securitized loan portfolios.
130 Condensed consolidated financial statements – unaudited
amount of future payments that the Group would be required to Credit protection sold 242.9 238.6
make as a result of credit risk-related events. Credit protection purchased 228.8 228.9
Other protection purchased 73.3 83.4
Credit protection purchased Other instruments 1 6.2 7.8
Credit protection purchased represents those instruments where Total credit derivatives 551.2 558.7
the underlying reference instrument is identical to the reference 1
Consists of total return swaps and other derivative instruments.
instrument of the credit protection sold.
The segregation of the future payments by maturity range and
Other protection purchased underlying risk gives an indication of the current status of the
In the normal course of business, the Group purchases protection potential for performance under the derivative contracts.
to offset the risk of credit protection sold that may have similar, but
not identical, reference instruments and may use similar, but not Maturity of credit protection sold
identical, products, which reduces the total credit derivative expo-
Maturity Maturity Maturity
sure. Other protection purchased is based on the notional value of less between greater
than 1 to 5 than
the instruments. end of 1 year years 5 years Total
3Q17 (CHF billion)
Fair value of credit protection sold Single-name instruments 26.7 59.7 8.3 94.7
The fair values of the credit protection sold give an indication of the Multi-name instruments 46.6 66.7 34.9 148.2
amount of payment risk, as the negative fair values increase when Total instruments 73.3 126.4 43.2 242.9
the potential payment under the derivative contracts becomes
4Q16 (CHF billion)
Guarantees
Maturity Maturity Total Total
less than greater than gross net Carrying Collateral
end of 1 year 1 year amount amount 1 value received
3Q17 (CHF million)
Credit guarantees and similar instruments 1,791 1,081 2,872 2,629 21 1,649
Performance guarantees and similar instruments 4,803 2,221 7,024 6,073 28 3,011
Derivatives 2 11,638 9,782 21,420 21,420 437 – 3
Other guarantees 3,692 1,854 5,546 5,541 50 3,506
Performance guarantees and similar instruments 5,109 2,005 7,114 6,124 76 3,090
Derivatives 2 15,864 7,943 23,807 23,807 684 – 3
Other guarantees 3,460 2,000 5,460 5,456 44 3,668
Total guarantees 26,395 13,119 39,514 38,300 817 8,801
1
Total net amount is computed as the gross amount less any participations.
2
Excludes derivative contracts with certain active commercial and investment banks and certain other counterparties, as such contracts can be cash settled and the Group had no basis to
conclude it was probable that the counterparties held, at inception, the underlying instruments.
3
Collateral for derivatives accounted for as guarantees is not significant.
Deposit-taking banks and securities dealers in Switzerland and ratios and other characteristics of the property, the borrower and
certain other European countries are required to ensure the payout the loan; validity of the liens securing the loans and absence of
of privileged deposits in case of specified restrictions or compul- delinquent taxes or related liens; conformity to underwriting stan-
sory liquidation of a deposit-taking bank. In Switzerland, deposit- dards and completeness of documentation; and origination in com-
taking banks and securities dealers jointly guarantee an amount pliance with law. If it is determined that representations and war-
of up to CHF 6 billion. Upon occurrence of a payout event trig- ranties were breached, the Group may be required to repurchase
gered by a specified restriction of business imposed by FINMA the related loans or indemnify the investors to make them whole
or by the compulsory liquidation of another deposit-taking bank, for losses. Whether the Group will incur a loss in connection with
the Group’s contribution will be calculated based on its share of repurchases and make whole payments depends on: the extent to
privileged deposits in proportion to total privileged deposits. Based which claims are made; the validity of such claims made within the
on FINMA’s estimate for the Group’s banking subsidiaries in Swit- statute of limitations (including the likelihood and ability to enforce
zerland, the Group’s share in the deposit insurance guarantee pro- claims); whether the Group can successfully claim against parties
gram for the period July 1, 2017 to June 30, 2018 is CHF 0.5 that sold loans to the Group and made representations and war-
billion. These deposit insurance guarantees were reflected in other ranties to the Group; the residential real estate market, including
guarantees. the number of defaults; and whether the obligations of the securiti-
zation vehicles were guaranteed or insured by third parties.
Representations and warranties on residential mortgage During the first nine months of 2017, the Group received
loans sold repurchase claims for residential mortgage loans that were not
In connection with the former Investment Banking division’s sale significant, and loans repurchased during this period and related
of US residential mortgage loans, the Group has provided cer- losses were not significant. The balance of outstanding repurchase
tain representations and warranties relating to the loans sold. The claims as of the end of 3Q17 was not significant.
Group has provided these representations and warranties relating Repurchase claims on residential mortgage loans sold that are
to sales of loans to: the US government-sponsored enterprises subject to arbitration or litigation proceedings, or become so dur-
Fannie Mae and Freddie Mac; institutional investors, primar- ing the reporting period, are not included in this Guarantees and
ily banks; and non-agency, or private label, securitizations. The commitments disclosure but are addressed in litigation and related
loans sold are primarily loans that the Group has purchased from loss contingencies and provisions. The Group is involved in litiga-
other parties. The scope of representations and warranties, if any, tion relating to representations and warranties on residential mort-
depends on the transaction, but can include: ownership of the gages sold.
mortgage loans and legal capacity to sell the loans; loan-to-value u Refer to “Note 30 – Litigation” for further information.
132 Condensed consolidated financial statements – unaudited
Other commitments
end of 3Q17 4Q16
Maturity Maturity Total Total
Maturity Maturity Total Total
less than greater than gross net Collateral less than greater than gross net Collateral
1 1
1 year 1 year amount amount received 1 year 1 year amount amount received
Other commitments (CHF million)
Irrevocable commitments
under documentary credits 4,113 16 4,129 4,013 2,523 4,356 0 4,356 4,281 2,748
Irrevocable loan commitments 2 23,763 81,163 104,926 101,038 43,484 30,382 86,593 116,975 113,016 46,068
Forward reverse
In the normal course of business, the Group enters into transac- (CMBS), RMBS and asset-backed securities (ABS) that are col-
tions with, and makes use of, SPEs. An SPE is an entity in the lateralized by the assets transferred to the SPE and that pay a
form of a trust or other legal structure designed to fulfill a spe- return based on the returns on those assets. Investors in these
cific limited need of the company that organized it and is gener- mortgage-backed securities or ABS typically have recourse to
ally structured to isolate the SPE’s assets from creditors of other the assets in the SPEs, unless a third-party guarantee has been
entities, including the Group. The principal uses of SPEs are to received to further enhance the creditworthiness of the assets.
assist the Group and its clients in securitizing financial assets and The investors and the SPEs have no recourse to the Group’s
creating investment products. The Group also uses SPEs for other assets. The Group is typically an underwriter of, and makes a mar-
client-driven activity, such as to facilitate financings, and Group tax ket in, these securities.
or regulatory purposes. The Group also transacts in re-securitizations of previously
issued RMBS securities. Typically, certificates issued out of an
TRANSFERS OF FINANCIAL ASSETS existing securitization vehicle are sold into a newly created and
Securitizations separate securitization vehicle. Often, these re-securitizations
The majority of the Group’s securitization activities involve mort- are initiated in order to repackage an existing security to give the
gages and mortgage-related securities and are predominantly investor a higher rated tranche.
transacted using SPEs. In a typical securitization, the SPE pur- The Group also uses SPEs for other asset-backed financings
chases assets financed by proceeds received from the SPE’s relating to client-driven activity and for Group tax or regulatory
issuance of debt and equity instruments, certificates, commercial purposes. Types of structures included in this category include
paper (CP) and other notes of indebtedness. These assets and managed collateralized loan obligations (CLOs), CLOs, leveraged
liabilities are recorded on the balance sheet of the SPE and not finance, repack and other types of transactions, including life insur-
reflected on the Group’s consolidated balance sheet, unless either ance structures, emerging market structures set up for financing,
the Group sold the assets to the entity and the accounting require- loan participation or loan origination purposes, and other alter-
ments for sale were not met or the Group consolidates the SPE. native structures created for the purpose of investing in venture
The Group purchases commercial and residential mortgages capital-like investments. CLOs are collateralized by loans trans-
for the purpose of securitization and sells these mortgage loans to ferred to the CLO vehicle and pay a return based on the returns
SPEs. These SPEs issue commercial mortgage-backed securities on the loans. Leveraged finance structures are used to assist in
Condensed consolidated financial statements – unaudited 133
the syndication of certain loans held by the Group, while repack Continuing involvement in transferred financial assets
structures are designed to give a client collateralized exposure to The Group may have continuing involvement in the financial assets
specific cash flows or credit risk backed by collateral purchased that are transferred to an SPE which may take several forms,
from the Group. In these asset-backed financing structures inves- including, but not limited to, servicing, recourse and guarantee
tors typically only have recourse to the collateral of the SPE and do arrangements, agreements to purchase or redeem transferred
not have recourse to the Group’s assets. assets, derivative instruments, pledges of collateral and beneficial
When the Group transfers assets into an SPE, it must assess interests in the transferred assets.
whether that transfer is accounted for as a sale of the assets. u Refer to “Transfer of financial assets” in V – Consolidated financial statements
Transfers of assets may not meet sale requirements if the assets – Credit Suisse Group – Note 34 – Transfer of financial assets and variable inter-
est entities in the Credit Suisse Annual Report 2016 for a detailed description of
have not been legally isolated from the Group and/or if the Group’s continuing involvement in transferred financial assets.
continuing involvement is deemed to give it effective control
over the assets. If the transfer is not deemed a sale, it is instead The following table provides the outstanding principal balance
accounted for as a secured borrowing, with the transferred assets of assets to which the Group continued to be exposed after the
as collateral. transfer of the financial assets to any SPE and the total assets of
Gains and losses on securitization transactions depend, in the SPE as of the end of 3Q17 and 4Q16, regardless of when the
part, on the carrying values of mortgages and loans involved in transfer of assets occurred.
the transfer and are allocated between the assets sold and any
beneficial interests retained according to the relative fair values at Principal amounts outstanding and total assets of SPEs
the date of sale. resulting from continuing involvement
The Group does not retain material servicing responsibilities end of 3Q17 4Q16
from securitization activities.
CHF million
The following table provides the gains or losses and proceeds CMBS
from the transfer of assets relating to 9M17 and 9M16 securi- Principal amount outstanding 20,968 28,779
tizations of financial assets that qualify for sale accounting and Total assets of SPE 31,424 40,234
subsequent derecognition, along with the cash flows between the RMBS
Group and the SPEs used in any securitizations in which the Group Principal amount outstanding 35,152 38,319
maintained continuing involvement from the time of the transac- Total assets of SPE 36,310 39,680
tion, regardless of when the securitization occurred. Other asset-backed financings
Net gain 32 0
1
Proceeds from transfer of assets 4,234 3,315 Fair value of beneficial interests
Cash received on interests that continue to be held 23 53 The fair value measurement of the beneficial interests held at the
RMBS
time of transfer and as of the reporting date that result from any
Net gain/(loss) 3 (1)
1 continuing involvement is determined using fair value estimation
Proceeds from transfer of assets 11,329 7,706 techniques, such as the present value of estimated future cash
Servicing fees 2 2 flows that incorporate assumptions that market participants cus-
Cash received on interests that continue to be held 225 394 tomarily use in these valuation techniques. The fair value of the
Other asset-backed financings
assets or liabilities that result from any continuing involvement
Net gain 31 22
1 does not include any benefits from financial instruments that the
Proceeds from transfer of assets 5,833 1,963 Group may utilize to hedge the inherent risks.
Fees 2 93 93
Cash received on interests that continue to be held 4 2
1
Includes underwriting revenues, deferred origination fees, gains or losses on the sale of
collateral to the SPE and gains or losses on the sale of newly issued securities to third
parties, but excludes net interest income on assets prior to the securitization. The gains or
losses on the sale of the collateral is the difference between the fair value on the day prior
to the securitization pricing date and the sale price of the loans.
2
Represents management fees and performance fees earned for investment management
services provided to managed CLOs.
134 Condensed consolidated financial statements – unaudited
Key economic assumptions used in measuring fair value of beneficial interests at time of transfer
at time of transfer, in 9M17 9M16
CMBS RMBS CMBS RMBS
CHF million, except where indicated
Fair value of beneficial interests 71 1,323 42 1,499
of which level 2 71 1,254 42 1,396
of which level 3 0 69 0 103
Weighted-average life, in years 10.4 8.1 10.7 6.4
Prepayment speed assumption (rate per annum), in % 1 – 2 5.0–17.9 – 2 8.0–33.0
Cash flow discount rate (rate per annum), in % 3 2.4–3.5 2.0–9.9 2.4–4.9 1.4–24.4
Expected credit losses (rate per annum), in % 0.6–0.6 0.8–2.1 0.0–0.0 11.2–11.2
Transfers of assets in which the Group does not have beneficial interests are not included in this table.
1
Prepayment speed assumption (PSA) is an industry standard prepayment speed metric used for projecting prepayments over the life of a residential mortgage loan. PSA utilizes the con-
stant prepayment rate (CPR) assumptions. A 100% prepayment assumption assumes a prepayment rate of 0.2% per annum of the outstanding principal balance of mortgage loans in the
first month. This increases by 0.2 percentage points thereafter during the term of the mortgage loan, leveling off to a CPR of 6% per annum beginning in the 30th month and each month
thereafter during the term of the mortgage loan. 100 PSA equals 6 CPR.
2
To deter prepayment, commercial mortgage loans typically have prepayment protection in the form of prepayment lockouts and yield maintenances.
3
The rate was based on the weighted-average yield on the beneficial interests.
Key economic assumptions used in measuring fair value of beneficial interests held in SPEs
end of 3Q17 4Q16
Other asset- Other asset-
backed backed
financing financing
CMBS RMBS activities CMBS RMBS activities 2 1 2 1
Impact on fair value from 20% adverse change (4.9) (35.7) (29.3) (6.9) (53.3) (10.0)
1
To deter prepayment, commercial mortgage loans typically have prepayment protection in the form of prepayment lockouts and yield maintenances.
2
CDOs and CLOs within this category are generally structured to be protected from prepayment risk.
3
PSA is an industry standard prepayment speed metric used for projecting prepayments over the life of a residential mortgage loan. PSA utilizes the CPR assumptions. A 100% prepayment
assumption assumes a prepayment rate of 0.2% per annum of the outstanding principal balance of mortgage loans in the first month. This increases by 0.2 percentage points thereafter
during the term of the mortgage loan, leveling off to a CPR of 6% per annum beginning in the 30th month and each month thereafter during the term of the mortgage loan. 100 PSA equals
6 CPR.
4
The rate was based on the weighted-average yield on the beneficial interests.
Condensed consolidated financial statements – unaudited 135
These sensitivities are hypothetical and do not reflect economic Transfers of financial assets accounted for as a sale
hedging activities. Changes in fair value based on a 10% or 20% US GAAP requires the disclosure of a transaction accounted for
variation in assumptions generally cannot be extrapolated because as a sale that comprises both of the following: a transfer of finan-
the relationship of the change in assumption to the change in fair cial assets to a transferee and an agreement entered into in con-
value may not be linear. Also, the effect of a variation in a particular templation of the initial transfer with the transferee that results
assumption on the fair value of the beneficial interests is calculated in the transferor retaining substantially all of the exposure to the
without changing any other assumption. In practice, changes in economic return on the transferred financial asset throughout the
one assumption may result in changes in other assumptions (for term of the transaction. In the ordinary course of business, the
example, increases in market interest rates may result in lower Group transfers a financial asset accounted for as a sale and, in
prepayments and increased credit losses), which might magnify or some instances, enters into an agreement in contemplation of that
counteract the sensitivities. initial transfer with the same counterparty to retain substantially all
of the economics of that transferred financial asset. As of the end
Transfers of financial assets where sale treatment was not of 3Q17 and 4Q16, the Group had agreements in the form of lon-
achieved gevity swaps on life insurance policies.
The following table provides the carrying amounts of transferred The following table presents information about the transfers
financial assets and the related liabilities where sale treatment was of financial assets accounted for as sales with agreements that
not achieved as of the end of 3Q17 and 4Q16. result in the Group retaining substantially all of the exposure to the
u Refer to “Note 29 – Assets pledged and collateral” for further information. economic return on the transferred assets at the date of sale and
remain outstanding as of the end of 3Q17 and 4Q16, respectively,
Carrying amounts of transferred financial assets and gross cash proceeds received for assets derecognized at the date
liabilities where sale treatment was not achieved of sale and the fair values of transferred assets and the aforemen-
end of 3Q17 4Q16 tioned agreements as of the end of 3Q17 and 4Q16.
CHF million
Other asset-backed financings
Other assets 0 12
Liability to SPE, included in Other liabilities (406) (252)
Securities sold under repurchase agreements and collateral by the class of collateral pledged and by remaining con-
securities lending transactions accounted for as secured tractual maturity as of the end of 3Q17 and 4Q16.
borrowings
For securities sold under repurchase agreements and securities Securities sold under repurchase agreements, securities
lending transactions accounted for as secured borrowings, US lending transactions and obligation to return securities
GAAP requires the disclosure of the collateral pledged and the received as collateral – by class of collateral pledged
associated risks to which a transferor continues to be exposed end of 3Q17 4Q16
after the transfer. This provides an understanding of the nature
CHF billion
and risks of short-term collateralized financing obtained through Government debt securities 26.5 29.4
these types of transactions. Corporate debt securities 16.5 13.9
Securities sold under repurchase agreements and securities Asset-backed securities 8.4 10.3
lending transactions represent collateralized financing transactions Equity securities 0.6 1.1
used to earn net interest income, increase liquidity or facilitate Other 0.4 0.3
trading activities. These transactions are collateralized principally Securities sold under repurchase agreements 52.4 55.0
by government debt securities, corporate debt securities, asset- Government debt securities 2.8 2.5
backed securities, equity securities and other collateral and have Corporate debt securities 0.4 0.5
terms ranging from on demand to a longer period of time. Equity securities 6.2 6.0
In the event of the Group’s default or a decline in fair value of Other 0.3 0.4
collateral pledged, the repurchase agreement provides the coun- Securities lending transactions 9.7 9.4
terparty with the right to liquidate the collateral held or request Government debt securities 2.3 0.7
additional collateral. Similarly, in the event of the Group’s default, Corporate debt securities 0.5 0.4
the securities lending transaction provides the counterparty the Equity securities 33.1 31.5
right to liquidate the securities borrowed. Obligation to return securities received
The following tables provide the gross obligation relating to as collateral, at fair value 35.9 32.6
securities sold under repurchase agreements, securities lend- Total 98.0 97.0
ing transactions and obligation to return securities received as
Securities sold under repurchase agreements, securities lending transactions and obligation to return securities received
as collateral – by remaining contractual maturity
Remaining contractual maturities
Upto 31 – 90
More than
end of On demand 1 2
30 days days
90 days Total
3Q17 (CHF billion)
Securities sold under repurchase agreements 8.1 27.2 8.0 9.1 52.4
Securities sold under repurchase agreements 6.8 31.9 8.4 7.9 55.0
Securities lending transactions 6.7 2.4 0.0 0.3 9.4
Obligation to return securities received as collateral, at fair value 32.2 0.4 0.0 0.0 32.6
Total 45.7 34.7 8.4 8.2 97.0
1
Includes contracts with no contractual maturity that may contain termination arrangements subject to a notice period.
2
Includes overnight transactions.
VARIABLE INTEREST ENTITIES purposes and the Group is deemed the primary beneficiary and
As a normal part of its business, the Group engages in various consolidates this entity.
transactions that include entities that are considered variable inter- The overall average maturity of the conduit’s outstanding CP
est entities (VIEs) and are grouped into three primary categories: was approximately 164 days as of the end of 3Q17. Alpine was
collateralized debt obligations (CDOs)/CLOs, CP conduits and rated A-1(sf) by Standard & Poor’s and P-1(sf) by Moody’s and
financial intermediation. had exposures mainly in a reverse repurchase agreement, credit
u Refer to “Variable interest entities” in V – Consolidated financial statements card receivables, student loans and car loans.
– Credit Suisse Group – Note 34 – Transfer of financial assets and variable inter- The Group’s commitment to this CP conduit consists of obli-
est entities in the Credit Suisse Annual Report 2016 for a detailed description of
VIEs, CDO/CLOs, CP conduit or financial intermediation.
gations under liquidity agreements. The liquidity agreements are
asset-specific arrangements, which require the Group to purchase
assets from the CP conduit in certain circumstances, including a
Collateralized debt and loan obligations lack of liquidity in the CP market such that the CP conduit cannot
The Group engages in CDO/CLO transactions to meet client and refinance its obligations or, in some cases, a default of an underly-
investor needs, earn fees and sell financial assets. The Group may ing asset. The asset-specific credit enhancements provided by the
act as underwriter, placement agent or asset manager and may client seller of the assets remain unchanged as a result of such a
warehouse assets prior to the closing of a transaction. purchase. In entering into such agreements, the Group reviews the
credit risk associated with these transactions on the same basis
Commercial paper conduit that would apply to other extensions of credit.
In 2Q16, the Group established Alpine Securitization Ltd (Alpine), The Group’s economic risks associated with the CP conduit
a multi-seller asset-backed CP conduit used for client and Group are included in the Group’s risk management framework including
financing purposes. The Group acts as the administrator and pro- counterparty, economic risk capital and scenario analysis.
vider of liquidity and credit enhancement facilities for Alpine. Alpine
discloses to CP investors certain portfolio and asset data and sub- Financial intermediation
mits its portfolio to rating agencies for public ratings. This CP con- The Group has significant involvement with VIEs in its role as a
duit purchases assets such as loans and receivables or enters financial intermediary on behalf of clients.
into reverse repurchase agreements and finances such activities Financial intermediation consists of securitizations, funds,
through the issuance of CP backed by these assets. The CP con- loans and other vehicles.
duit can enter into liquidity facilities with third-party entities pursu-
ant to which it may purchase assets from these entities to provide Consolidated VIEs
them with liquidity and credit support. The financing transactions The Group has significant involvement with VIEs in its role as a
are structured to provide credit support to the CP conduit in the financial intermediary on behalf of clients. The Group consolidates
form of over-collateralization and other asset-specific enhance- all VIEs related to financial intermediation for which it was the pri-
ments. Alpine is a separate legal entity that is wholly owned by the mary beneficiary.
Group. However, its assets are available to satisfy only the claims The consolidated VIEs tables provide the carrying amounts
of its creditors. In addition, the Group, as administrator and liquid- and classifications of the assets and liabilities of consolidated VIEs
ity facility provider, has significant exposure to and power over as of the end of 3Q17 and 4Q16.
the activities of Alpine. Alpine is considered a VIE for accounting
138 Condensed consolidated financial statements – unaudited
CDO/ CP Securi-
end of CLO Conduit tizations Funds Loans Other Total
3Q17 (CHF million)
Short-term borrowings 0 0 0 1 0 0 1
Long-term debt 54 0 1,639 7 57 2 1,759
Other liabilities 0 0 1 15 124 104 244
Total liabilities of consolidated VIEs 54 0 1,640 23 199 106 2,022
Condensed consolidated financial statements – unaudited 139
Non-consolidated VIEs
Financial intermediation
CDO/ Securi-
end of CLO tizations Funds Loans Other Total
3Q17 (CHF million)
28 Financial instruments
The disclosure of the Group’s financial instruments below includes FAIR VALUE MEASUREMENT
the following sections: A significant portion of the Group’s financial instruments are car-
p Concentration of credit risk; ried at fair value. Deterioration of financial markets could signifi-
p Fair value measurement (including fair value hierarchy, trans- cantly impact the fair value of these financial instruments and the
fers between levels; level 3 reconciliation; qualitative and quan- results of operations.
titative disclosures of valuation techniques and nonrecurring u Refer to “Note 35 – Financial instruments” in V – Consolidated financial state-
fair value changes); ments – Credit Suisse Group in the Credit Suisse Annual Report 2016 for further
information on fair value measurement of financial instruments and the definition
p Fair value option; and
of the levels of the fair value hierarchy.
p Disclosures about fair value of financial instruments not carried
at fair value.
of which equity funds 0 0 0 – 196 196
Hedge funds 0 0 0 – 334 334
of which debt funds 0 0 0 – 236 236
Other equity investments 24 5 268 – 1,308 1,605
of which private 16 5 267 – 1,306 1,594
Life finance instruments 0 1 1,358 – – 1,359
Other investments 24 6 1,633 – 2,064 3,727
Loans 0 10,399 4,963 – – 15,362
of which commercial and industrial loans 0 4,201 2,400 – – 6,601
of which financial institutions 0 3,795 1,631 – – 5,426
Other intangible assets (mortgage servicing rights) 0 0 153 – – 153
Other assets 252 6,670 1,899 (197) – 8,624
of which loans held-for-sale 0 4,763 1,691 – – 6,454
Total assets at fair value 114,027 310,853 17,602 (139,166) 3,122 306,438
1
Derivative contracts are reported on a gross basis by level. The impact of netting represents legally enforceable master netting agreements.
2
In accordance with US GAAP, certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.
The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.
Condensed consolidated financial statements – unaudited 141
of which equity funds 0 0 0 – 240 240
Hedge funds 0 0 0 – 546 546
of which debt funds 0 0 0 – 292 292
Other equity investments 22 64 310 – 984 1,380
of which private 15 64 310 – 984 1,373
Life finance instruments 0 0 1,588 – – 1,588
Other investments 22 64 1,906 – 2,104 4,096
Loans 0 12,943 6,585 – – 19,528
of which commercial and industrial loans 0 6,051 3,816 – – 9,867
of which financial institutions 0 4,403 1,829 – – 6,232
Other intangible assets (mortgage servicing rights) 0 0 138 – – 138
Other assets 260 8,359 1,679 (915) – 9,383
of which loans held-for-sale 0 4,640 1,316 – – 5,956
Total assets at fair value 127,790 374,486 23,390 (208,211) 3,450 320,905
1
Derivative contracts are reported on a gross basis by level. The impact of netting represents legally enforceable master netting agreements.
2
In accordance with US GAAP, certain investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.
The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.
Condensed consolidated financial statements – unaudited 143
Transfers between level 1 and level 2 Transfers between level 1 and level 2
All transfers between level 1 and level 2 are reported through the in
9M17 9M16
last day of the reporting period.
Transfers Transfers Transfers Transfers
In 9M17, transfers to level 1 out of level 2 were from trad- to level 1 out of level 1 to level 1 out of level 1
out of level 2 to level 2 out of level 2 to level 2
ing assets and trading liabilities. The transfers from trading assets
Assets (CHF million)
were mainly in exchange traded derivatives and equity securities
Securities received as collateral 0 135 0 0
as prices became observable. The transfers from trading liabilities
Debt 15 220 1,998 1,683
were primarily in exchange traded derivatives as prices became
Equity 700 337 286 1,003
observable.
Derivatives 2,688 0 2,875 0
In 9M17, transfers out of level 1 to level 2 were primarily from
Trading assets 3,403 557 5,159 2,686
trading assets, mainly in debt and equity securities, for which suit-
Investment securities 0 0 0 1,233
able closing prices were unobtainable as of the end of 9M17.
Liabilities (CHF million)
Obligations to return securities
Assets and liabilities measured at fair value on a recurring basis for level 3
Balance at
beginning Transfers Transfers
9M17 of period in out Purchases Sales Issuances
Assets (CHF million)
Interest-bearing deposits with banks 1 40 0 0 (41) 0
Central bank funds sold, securities purchased under
resale agreements and securities borrowing transactions 174 0 0 0 0 26
Securities received as collateral 70 3 (1) 37 (86) 0
Debt 3,977 421 (721) 1,684 (2,752) 0
of which corporates 1,674 177 (513) 1,491 (1,644) 0
of which RMBS 605 234 (196) 77 (227) 0
of which CMBS 65 5 (16) 1 (13) 0
of which CDO 1,165 25 (128) 141 (995) 0
Equity 240 33 (29) 131 (149) 0
Derivatives 4,305 314 (693) 0 0 734
of which interest rate products 748 54 (33) 0 0 109
of which equity/index-related products 914 100 (63) 0 0 298
of which credit derivatives 688 158 (199) 0 0 57
Other 4,243 96 (227) 11,060 (12,153) 0
Trading assets 12,765 864 (1,670) 12,875 (15,054) 734
Investment securities 72 0 (17) 89 (86) 0
Equity 318 0 (22) 124 (143) 0
Life finance instruments 1,588 0 0 140 (320) 0
Other investments 1,906 0 (22) 264 (463) 0
Loans 6,585 941 (597) 66 (565) 805
of which commercial and industrial loans 3,816 299 (325) 62 (385) 312
of which financial institutions 1,829 349 (9) 3 (176) 407
Other intangible assets (mortgage servicing rights) 138 0 0 23 (1) 0
Other assets 1,679 154 (83) 497 (843) 1,022
of which loans held-for-sale 2 1,316 79 (68) 429 (708) 1,021
Total assets at fair value 23,390 2,002 (2,390) 13,851 (17,139) 2,587
Liabilities (CHF million)
Customer deposits 410 0 0 0 0 35
Obligation to return securities received as collateral 70 3 (1) 37 (86) 0
Trading liabilities 3,737 343 (872) 92 (102) 763
of which interest rate derivatives 538 52 (35) 0 0 45
of which foreign exchange derivatives 150 11 (1) 0 0 7
of which equity/index-related derivatives 1,181 30 (129) 0 0 396
of which credit derivatives 851 205 (297) 0 0 129
Short-term borrowings 516 90 (103) 0 0 484
Long-term debt 13,415 1,010 (2,361) 0 0 3,550
of which structured notes over two years 12,434 842 (2,261) 0 0 2,997
Other liabilities 1,684 108 (56) 121 (199) 8
of which failed sales 219 46 (28) 108 (147) 0
Total liabilities at fair value 19,832 1,554 (3,393) 250 (387) 4,840
Net assets/(liabilities) at fair value 3,558 448 1,003 13,601 (16,752) (2,253)
1
For all transfers to level 3 or out of level 3, the Group determines and discloses as level 3 events only gains or losses through the last day of the reporting period.
2
Includes unrealized losses recorded in trading revenues of CHF (48) million primarily related to subprime exposures in securitized products business and market movements across the wider
loans held-for-sale portfolio.
Condensed consolidated financial statements – unaudited 145
Accumulated other
Trading revenues Other revenues comprehensive income
Foreign
On On On On On On currency Balance
transfers all transfers all transfers all translation at end
Settlements in / out 1 other in / out 1 other in / out 1 other impact of period
0 0 0 0 0 0 0 0 0
(193) 0 0 0 0 0 0 (7) 0
0 0 0 0 0 0 0 (4) 19
0 (6) (95) 5 2 0 0 (391) 2,124
0 (5) (26) 5 0 0 0 (103) 1,056
0 3 (75) 0 0 0 0 (28) 393
0 (3) (2) 0 0 0 0 (4) 33
0 0 (11) 0 1 0 0 (41) 157
0 0 (5) 0 0 0 0 (12) 209
(1,102) 102 19 0 0 0 0 (206) 3,473
(119) 6 70 0 0 0 0 (29) 806
(404) 10 79 0 0 0 0 (45) 889
(210) 24 (8) 0 0 0 0 (36) 474
(247) 4 316 0 0 0 0 (17) 3,075
(1,349) 100 235 5 2 0 0 (626) 8,881
(80) (1) 81 0 0 0 0 (4) 54
0 0 (19) 0 29 0 0 (12) 275
0 0 33 0 0 0 0 (83) 1,358
0 0 14 0 29 0 0 (95) 1,633
(2,052) (14) 105 0 0 0 0 (311) 4,963
(1,246) (2) 42 0 0 0 0 (173) 2,400
(672) 0 (9) 0 0 0 0 (91) 1,631
0 0 0 0 1 0 0 (8) 153
(297) 0 (150) 0 (6) 0 0 (74) 1,899
(297) 0 (18) 0 (5) 0 0 (58) 1,691
(3,971) 85 285 5 26 0 0 (1,129) 17,602
0 0 (29) 0 0 0 25 (3) 438
0 0 0 0 0 0 0 (4) 19
(1,235) 101 159 0 (2) 0 0 (192) 2,792
(242) 4 (9) 0 0 0 0 (25) 328
(10) 0 (68) 0 0 0 0 (7) 82
(528) 20 185 0 0 0 0 (63) 1,092
(222) 17 49 0 0 0 0 (46) 686
(368) (2) 28 4 4 0 (27) (27) 599
(3,179) 52 1,061 0 0 12 138 (781) 12,917
(2,055) 51 1,055 0 0 12 137 (736) 12,476
(397) (16) (5) 0 246 0 0 (79) 1,415
0 (1) 47 0 0 0 0 (11) 233
(5,179) 135 1,214 4 248 12 136 (1,086) 18,180
1,208 (50) (929) 1 (222) (12) (136) (43) (578)
146 Condensed consolidated financial statements – unaudited
Assets and liabilities measured at fair value on a recurring basis for level 3 (continued)
Balance at
beginning Transfers Transfers
9M16 of period in out Purchases Sales Issuances
Assets (CHF million)
Interest-bearing deposits with banks 0 0 0 49 0 0
Central bank funds sold, securities purchased under
resale agreements and securities borrowing transactions 158 0 0 0 0 227
Securities received as collateral 0 0 0 34 (18) 0
Debt 4,563 941 (1,276) 3,114 (3,121) 0
of which corporates 1,745 361 (590) 2,206 (1,839) 0
of which RMBS 814 442 (464) 378 (475) 0
of which CMBS 215 12 (9) 44 (167) 0
of which CDO 1,298 76 (159) 454 (508) 0
Equity 871 101 (118) 450 (962) 0
Derivatives 4,831 1,108 (701) 0 0 1,269
of which interest rate products 791 60 (38) 0 0 106
of which equity/index-related products 936 268 (109) 0 0 354
of which credit derivatives 1,568 765 (542) 0 0 517
Other 4,266 770 (952) 2,464 (2,433) 0
Trading assets 14,531 2,920 (3,047) 6,028 (6,516) 1,269
Investment securities 148 0 (36) 95 (85) 0
Equity 366 7 (1) 57 (107) 0
Life finance instruments 1,669 0 0 142 (271) 0
Other investments 2,035 7 (1) 199 (378) 0
Loans 8,950 601 (1,700) 445 (1,211) 2,890
of which commercial and industrial loans 5,735 338 (453) 45 (839) 1,728
of which financial institutions 1,729 73 (288) 332 (337) 570
Other intangible assets (mortgage servicing rights) 112 0 0 6 (1) 0
Other assets 7,087 280 (1,186) 1,955 (5,791) 825
of which loans held-for-sale 6,768 209 (1,001) 1,748 (5,705) 825
Total assets at fair value 33,021 3,808 (5,970) 8,811 (14,000) 5,211
Liabilities (CHF million)
Customer deposits 254 0 (39) 0 0 239
Obligation to return securities received as collateral 0 0 0 34 (18) 0
Trading liabilities 4,615 962 (778) 42 (48) 1,007
of which interest rate derivatives 578 36 (45) 0 0 105
of which foreign exchange derivatives 329 10 (3) 0 0 13
of which equity/index-related derivatives 1,347 122 (181) 0 0 326
of which credit derivatives 1,757 784 (539) 0 0 362
Short-term borrowings 72 24 (29) 0 0 498
Long-term debt 14,123 2,508 (1,596) 0 0 3,666
of which structured notes over two years 9,924 2,148 (1,465) 0 0 3,277
of which non-recourse liabilities 3,197 0 (3) 0 0 180
Other liabilities 2,491 159 (143) 145 (70) 14
of which failed sales 454 27 (94) 107 (18) 0
Total liabilities at fair value 21,555 3,653 (2,585) 221 (136) 5,424
Net assets/(liabilities) at fair value 11,466 155 (3,385) 8,590 (13,864) (213)
1
For all transfers to level 3 or out of level 3, the Group determines and discloses as level 3 events only gains or losses through the last day of the reporting period.
Condensed consolidated financial statements – unaudited 147
Accumulated other
Trading revenues Other revenues comprehensive income
Foreign
On On On On On On currency Balance
transfers all transfers all transfers all translation at end
Settlements in / out 1 other in / out 1 other in / out 1 other impact of period
0 0 0 0 0 0 0 0 49
(227) 0 0 0 0 0 0 (2) 156
0 0 0 0 0 0 0 0 16
0 (6) (129) 0 1 0 0 (28) 4,059
0 0 (21) 0 0 0 0 (14) 1,848
0 (12) (80) 0 0 0 0 (16) 587
0 0 (36) 0 0 0 0 (2) 57
0 2 (20) 0 1 0 0 (23) 1,121
0 (42) (49) 0 0 0 0 (11) 240
(2,517) 28 276 0 (22) 0 0 (39) 4,233
(173) 4 85 0 0 0 0 (5) 830
(353) 12 91 0 (22) 0 0 2 1,179
(1,599) 15 (33) 0 0 0 0 (20) 671
(269) 6 322 0 0 0 0 (83) 4,091
(2,786) (14) 420 0 (21) 0 0 (161) 12,623
(103) (10) 80 0 0 0 0 (1) 88
0 0 16 0 12 0 0 11 361
0 0 134 0 0 0 0 (34) 1,640
0 0 150 0 12 0 0 (23) 2,001
(2,864) (49) 4 0 0 0 0 (117) 6,949
(1,894) (17) (70) 0 0 0 0 (48) 4,525
(547) (2) 46 0 0 0 0 (36) 1,540
0 0 0 0 1 0 0 (3) 115
(797) (59) (128) 0 (6) 0 0 40 2,220
(797) (72) (32) 0 (6) 0 0 45 1,982
(6,777) (132) 526 0 (14) 0 0 (267) 24,217
(18) 0 (41) 0 0 0 5 14 414
0 0 0 0 0 0 0 0 16
(3,106) 84 672 0 (10) 0 0 (54) 3,386
(141) 14 21 0 0 0 0 (8) 560
(392) 2 175 0 0 0 0 (4) 130
(672) 16 192 0 0 0 0 (6) 1,144
(1,684) 51 195 0 0 0 0 (23) 903
(159) 1 14 (3) 0 0 0 (7) 411
(5,390) (74) 496 0 0 1 (70) (279) 13,385
(1,482) (86) 250 0 0 1 (70) (230) 12,267
(3,230) 3 46 0 0 0 0 (32) 161
(602) (63) (120) (1) 41 0 0 (32) 1,819
0 0 6 0 0 0 0 (10) 472
(9,275) (52) 1,021 (4) 31 1 (65) (358) 19,431
2,498 (80) (495) 4 (45) (1) 65 91 4,786
148 Condensed consolidated financial statements – unaudited
Gains and losses on assets and liabilities measured at fair value on a recurring basis using significant unobservable
inputs (level 3)
in 9M17 9M16
Trading Other Total Trading Other
Total
revenues revenues revenues revenues revenues revenues
Gains and losses on assets and liabilities (CHF million)
Net realized/unrealized gains/(losses) included in net revenues (979) (221) (1,200) 1 (575) (41) (616) 1
Whereof:
to assets and liabilities still held as of the reporting date (1,194) 107 (1,087) (239) 3 (236)
1
Excludes net realized/unrealized gains/(losses) attributable to foreign currency translation impact.
Both observable and unobservable inputs may be used to deter- define the principles for controlling the valuation of the Group’s
mine the fair value of positions that have been classified within financial instruments.
level 3. As a result, the unrealized gains and losses for assets and u Refer to “Note 35 – Financial instruments” in V – Consolidated financial state-
liabilities within level 3 presented in the table above may include ments – Credit Suisse Group in the Credit Suisse Annual Report 2016 for further
information on the Group’s valuation control framework.
changes in fair value that were attributable to both observable and
unobservable inputs.
The Group employs various economic hedging techniques in The following information on the valuation techniques and signifi-
order to manage risks, including risks in level 3 positions. Such cant unobservable inputs of the various financial instruments, and
techniques may include the purchase or sale of financial instru- the sensitivity of fair value measurements to changes in significant
ments that are classified in levels 1 and/or 2. The realized and unobservable inputs, should be read in conjunction with the tables
unrealized gains and losses for assets and liabilities in level 3 pre- “Quantitative information about level 3 assets at fair value” and
sented in the table above do not reflect the related realized or “Quantitative information about level 3 liabilities at fair value”.
unrealized gains and losses arising on economic hedging instru-
ments classified in levels 1 and/or 2. Central bank funds sold, securities purchased under resale
agreements and securities borrowing transactions
Transfers in and out of level 3 Securities purchased under resale agreements and securities sold
Transfers into level 3 assets during 9M17 were CHF 2,002 mil- under repurchase agreements are measured at fair value using dis-
lion, primarily from loans and trading assets. The transfers were counted cash flow analysis. Future cash flows are discounted using
primarily in the credit, fixed income and financing businesses due observable market interest rate repurchase/resale curves for the
to limited observability of pricing data and reduced pricing infor- applicable maturity and underlying collateral of the instruments. As
mation from external providers. Transfers out of level 3 assets such, the significant majority of both securities purchased under
during 9M17 were CHF 2,390 million, primarily in trading assets resale agreements and securities sold under repurchase agree-
and loans. The transfers were primarily in the Strategic Resolution ments are included in level 2 of the fair value hierarchy. Structured
Unit and credit businesses due to increased observability of pricing resale and repurchase agreements include embedded derivatives,
data and increased availability of pricing information from external which are measured using the same techniques as described
providers. below for stand-alone derivative contracts held for trading pur-
Transfers into level 3 assets during 3Q17 were CHF 764 mil- poses or used in hedge accounting relationships. If the value of the
lion, primarily from loans and trading assets. The transfers were embedded derivative is determined using significant unobservable
primarily in the Strategic Resolution Unit, credit, fixed income and inputs, those structured resale and repurchase agreements are
financing businesses due to limited observability of pricing data classified within level 3 of the fair value hierarchy. The significant
and reduced pricing information from external providers. Transfers unobservable input is funding spread.
out of level 3 assets during 3Q17 were CHF 683 million, primar- Securities purchased under resale agreements are usually
ily in trading assets and loans. The transfers were primarily in the fully collateralized or over collateralized by government securities,
Strategic Resolution Unit and credit businesses due to increased money market instruments, corporate bonds, or other debt instru-
observability of pricing data and increased availability of pricing ments. In the event of counterparty default, the collateral service
information from external providers. agreement provides the Group with the right to liquidate the col-
lateral held.
Qualitative disclosures of valuation techniques
Overview Debt securities
The Group has implemented and maintains a valuation control Foreign governments and corporates
framework, which is supported by policies and procedures that Government debt securities typically have quoted prices in active
markets and are categorized as level 1 instruments. For debt
Condensed consolidated financial statements – unaudited 149
securities for which market prices are not available, valuations are rating and the underlying collateral supporting the structure. Valua-
based on yields reflecting credit rating, historical performance, tion models are used to value both cash and synthetic CDOs.
delinquencies, loss severity, the maturity of the security, recent
transactions in the market or other modeling techniques, which Equity securities
may involve judgment. Those securities where the price or model The majority of the Group’s positions in equity securities are traded
inputs are observable in the market are categorized as level 2 on public stock exchanges for which quoted prices are readily
instruments, while those securities where prices are not observ- and regularly available and are therefore categorized as level 1
able and significant model inputs are unobservable are categorized instruments. Level 2 and level 3 equities include fund-linked prod-
as level 3 of the fair value hierarchy. ucts, convertible bonds or equity securities with restrictions that
Corporate bonds are priced to reflect current market levels are not traded in active markets. Significant unobservable inputs
either through recent market transactions or broker or dealer may include market comparable price and earnings before interest,
quotes. Where a market price for the particular security is not taxes, depreciation and amortization (EBITDA) multiple.
directly available, valuations are obtained based on yields reflected
by other instruments in the specific or similar entity’s capital struc- Derivatives
ture and adjusting for differences in seniority and maturity, bench- Derivatives held for trading purposes or used in hedge accounting
marking to a comparable security where market data is available relationships include both OTC and exchange-traded derivatives.
(taking into consideration differences in credit, liquidity and matu- The fair values of exchange-traded derivatives measured using
rity), or through the application of cash flow modeling techniques observable exchange prices are included in level 1 of the fair value
utilizing observable inputs, such as current interest rate curves hierarchy. For exchange-traded derivatives where the volume of
and observable CDS spreads. Significant unobservable inputs may trading is low, the observable exchange prices may not be con-
include price and correlation. For securities using market compa- sidered executable at the reporting date. These derivatives are
rable price, the differentiation between level 2 and level 3 is based valued in the same manner as similar observable OTC derivatives
upon the relative significance of any yield adjustments as well as and are included in level 2 of the fair value hierarchy. If the similar
the accuracy of the comparison characteristics (i.e., the observ- OTC derivative used for valuing the exchange-traded derivative is
able comparable security may be in the same country but a differ- not observable, the exchange-traded derivative is included in level
ent industry and may have a different seniority level – the lower the 3 of the fair value hierarchy.
comparability the more likely the security will be level 3). The fair values of OTC derivatives are determined on the basis
of either industry standard models or internally developed propri-
CMBS, RMBS and CDO securities etary models. Both model types use various observable and unob-
Fair values of RMBS, CMBS and CDO may be available through servable inputs in order to determine fair value. The inputs include
quoted prices, which are often based on the prices at which simi- those characteristics of the derivative that have a bearing on the
larly structured and collateralized securities trade between deal- economics of the instrument. The determination of the fair value
ers and to and from customers. Fair values of RMBS, CMBS and of many derivatives involves only a limited degree of subjectivity
CDO for which there are significant unobservable inputs are val- because the required inputs are observable in the marketplace,
ued using capitalization rate and discount rate. Price may not be while more complex derivatives may use unobservable inputs that
observable for fair value measurement purposes for many reasons, rely on specific proprietary modeling assumptions. Where observ-
such as the length of time since the last executed transaction for able inputs (prices from exchanges, dealers, brokers or market
the related security, use of a price from a similar instrument, or consensus data providers) are not available, attempts are made to
use of a price from an indicative quote. Fair values determined by infer values from observable prices through model calibration (spot
market comparable price may include discounted cash flow models and forward rates, mean reversion, benchmark interest rate curves
using the inputs prepayment rate, default rate, loss severity, dis- and volatility inputs for commonly traded option products). For
count rate and credit spread. Prices from similar observable instru- inputs that cannot be derived from other sources, estimates from
ments are used to calculate implied inputs which are then used to historical data may be made. OTC derivatives where the majority of
value unobservable instruments using discounted cash flow. The the value is derived from market observable inputs are categorized
discounted cash flow price is then compared to the unobservable as level 2 instruments, while those where the majority of the value
prices and assessed for reasonableness. is derived from unobservable inputs are categorized as level 3 of
For most structured debt securities, determination of fair value the fair value hierarchy.
requires subjective assessment depending on liquidity, ownership The valuation of derivatives includes an adjustment for the cost
concentration, and the current economic and competitive environ- of funding uncollateralized OTC derivatives.
ment. Valuation is determined based on the Front Office’s own
assumptions about how market participants would price the asset. Interest rate derivatives
Collateralized bond and loan obligations are split into various struc- OTC vanilla interest rate products, such as interest rate swaps,
tured tranches and each tranche is valued based upon its individual swaptions, and caps and floors are valued by discounting the
150 Condensed consolidated financial statements – unaudited
anticipated future cash flows. The future cash flows and discount- examine the insured individual’s medical conditions, family history
ing are derived from market standard yield curves and industry and other factors to arrive at a life expectancy estimate.
standard volatility inputs. Where applicable, exchange-traded For RMBS loans, the use of market comparable price var-
prices are also used to value exchange-traded futures and options ies depending upon each specific loan. For some loans, similar
and can be used in yield curve construction. For more complex to unobservable RMBS securities, prices from similar observable
products, inputs include, but are not limited to correlation, volatility instruments are used to calculate implied inputs which are then
skew, prepayment rate and basis spread. used to value unobservable instruments using discounted cash
flow. The discounted cash flow price is then compared to the
Foreign exchange derivatives unobservable prices and assessed for reasonableness. For other
Foreign exchange derivatives include vanilla products such as RMBS loans, the loans are categorized by specific characteristics,
spot, forward and option contracts where the anticipated dis- such as loan-to-value ratio, average account balance, loan type
counted future cash flows are determined from foreign exchange (single or multi-family), lien, seasoning, coupon, FICO score, local-
forward curves and industry standard optionality modeling tech- ity, delinquency status, cash flow velocity, roll rates, loan purpose,
niques. Where applicable, exchange-traded prices are also used occupancy, servicers advance agreement type, modification sta-
for futures and option prices. For more complex products inputs tus, Federal Housing Administration insurance, property value and
include, but are not limited to prepayment rate, correlation and documentation quality. Loans with unobservable prices are put into
contingent probability. consistent buckets which are then compared to market observable
comparable prices in order to assess the reasonableness of those
Equity and index-related derivatives unobservable prices.
Equity derivatives include a variety of products ranging from vanilla
options and swaps to exotic structures with bespoke payoff pro- Other investments
files. The main inputs in the valuation of equity derivatives may Private equity, hedge funds and other equity investments
include volatility, buyback probability, gap risk, correlation and Other equity investments principally includes equity investments
price. in the form of a) direct investments in third-party hedge funds,
Generally, the interrelationship between the volatility and cor- private equity funds and funds of funds, b) equity-method invest-
relation is positively correlated. ments where the Group has the ability to significantly influence
the operating and financial policies of the investee, and c) direct
Credit derivatives investments in non-marketable equity securities.
Credit derivatives include index and single name CDS in addition Direct investments in third-party hedge funds, private equity
to more complex structured credit products. Vanilla products are funds and funds of funds are measured at fair value based on
valued using industry standard models and inputs that are gener- their published net asset values (NAVs) as permitted by ASC Topic
ally market observable including credit spread and recovery rate. 820 – Fair Value Measurement. In some cases, NAVs may be
Complex structured credit derivatives are valued using propri- adjusted where there is sufficient evidence that the NAV published
etary models requiring unobservable inputs such as recovery rate, by the investment manager is not in line with the fund’s observable
credit spread and correlation. These inputs are generally implied market data, it is probable that the investment will be sold for an
from available market observable data. Fair values determined by amount other than NAV or there exist other circumstances that
price may include discounted cash flow models using the inputs would require an adjustment to the published NAV. Although rarely
prepayment rate, default rate, loss severity and discount rate. adjusted, significant judgment is involved in making any adjust-
ments to the published NAVs. The investments for which the fair
Other trading assets value is measured using the NAV practical expedient are not cat-
Other trading assets primarily include RMBS loans and life settle- egorized within the fair value hierarchy.
ment and premium finance instruments. Life settlement and pre- Direct investments in non-marketable equity securities consist
mium finance instruments are valued using proprietary models with of both real estate investments and non-real estate investments.
several inputs. The significant unobservable inputs of the fair value Equity-method investments and direct investments in non-mar-
for life settlement and premium finance instruments is the estimate ketable equity securities are initially measured at their transaction
of market implied life expectancy, while for RMBS loans it is mar- price, as this is the best estimate of fair value. Thereafter, these
ket comparable price. investments are individually measured at fair value based upon
For life settlement and premium finance instruments, individual a number of factors that include any recent rounds of financing
life expectancy rates are typically obtained by multiplying a base involving third-party investors, comparable company transactions,
mortality curve for the general insured population provided by a multiple analyses of cash flows or book values, or discounted cash
professional actuarial organization together with an individual-spe- flow analyses. The availability of information used in these model-
cific multiplier. Individual-specific multipliers are determined based ing techniques is often limited and involves significant judgment
on data from third-party life expectancy data providers, which in evaluating these different factors over time. As a result, these
investments are included in level 3 of the fair value hierarchy.
Condensed consolidated financial statements – unaudited 151
Life finance instruments discount rates which are derived from observable market interest
Life finance instruments include Single Premium Immediate Annui- rates for the applicable maturity and currency and from counter-
ties (SPIA) and other premium finance instruments. Life finance party-related credit spreads.
instruments are valued in a similar manner as described for life
settlement and premium finance instruments under the other trad- Deposits
ing assets section above. Accrual based deposits with a stated maturity, for which an esti-
mated fair value is disclosed in the table “Carrying value and fair
Loans value of financial instruments not carried at fair value” below, are
The Group’s loan portfolio which is measured at fair value primarily generally fair valued by using a discounted cash flow model incor-
consists of commercial and industrial loans and loans to financial porating the Group’s credit spreads. The estimated fair value of
institutions. Within these categories, loans measured at fair value accrual accounted deposits without a stated maturity approximates
include commercial loans, real estate loans, corporate loans, lever- the carrying amount; however, the value does not include an esti-
age finance loans and emerging market loans. Fair value is based mate of the value attributed to the long-term relationships with
on recent transactions and quoted prices, where available. Where its customers that in the aggregate adds significant value to the
recent transactions and quoted prices are not available, fair value Group’s stable deposit base.
may be determined by relative value benchmarking (which includes
pricing based upon another position in the same capital structure, Short-term borrowings and long-term debt
other comparable loan issues, generic industry credit spreads, The Group’s short-term borrowings and long-term debt include
implied credit spreads derived from CDS for the specific borrower, structured notes (hybrid financial instruments that are both bifur-
and enterprise valuations) or calculated based on the exit price of catable and non-bifurcatable) and vanilla debt. The fair value of
the collateral, based on current market conditions. structured notes is based on quoted prices, where available. When
Both the funded and unfunded portion of revolving credit lines quoted prices are not available, fair value is determined by using
on the corporate lending portfolio are valued using a loan pric- a discounted cash flow model incorporating the Group’s credit
ing model, which requires estimates of significant inputs includ- spreads, the value of derivatives embedded in the debt and the
ing credit spreads, recovery rates, credit conversion factors, and residual term of the issuance based on call options. Derivatives
weighted average life of the loan. Significant unobservable inputs structured into the issued debt are valued consistently with the
may include credit spread and price. Group’s stand-alone derivative contracts held for trading purposes
The Group’s other assets and liabilities include mortgage loans or used in hedge accounting relationships as discussed above. The
held in conjunction with securitization activities and assets and fair value of structured debt is heavily influenced by the combined
liabilities of VIEs and mortgage securitizations that do not meet the call options and performance of the underlying derivative returns.
criteria for sale treatment under US GAAP. The fair value of mort- Significant unobservable inputs for long-term debt include buy-
gage loans held in conjunction with securitization activities is deter- back probability, gap risk, correlation, volatility, credit spread, mean
mined on a whole-loan basis and is consistent with the valuation reversion and price.
of RMBS loans discussed in “Other trading assets” above. Whole- Generally, the interrelationships between volatility, correlation,
loan valuations are calculated based on the exit price reflecting the gap risk and credit spread inputs are positively correlated.
current market conditions. The fair value of assets and liabilities
of VIEs and mortgage securitizations that do not meet the crite- Other liabilities
ria for sale treatment under US GAAP are determined based on Failed sales
the quoted prices for securitized bonds, where available, or on These liabilities represent the financing of assets that did not
cash flow analyses for securitized bonds, when quoted prices are achieve sale accounting treatment under US GAAP. Failed sales
not available. The fair value of the consolidated financial assets of are valued in a manner consistent with the related underlying
RMBS and CMBS securitization vehicles, which qualify as CFEs, financial instruments.
are measured on the basis of the more observable fair value of the
VIEs’ financial liabilities. Short-term financial instruments
Accrual based loans in the Group’s private, corporate and insti- Certain short-term financial instruments are not carried at fair
tutional banking businesses, for which an estimated fair value is value on the balance sheet, but a fair value has been disclosed
disclosed in the table “Carrying value and fair value of financial in the table “Carrying value and fair value of financial instruments
instruments not carried at fair value” below, include consumer not carried at fair value” below. These instruments include: cash
loans relating to mortgages, loans collateralized by securities or and due from banks, cash collateral receivables and payables
consumer finance, as well as corporate and institutional loans and other receivables and payables arising in the ordinary course
relating to real estate, commercial and industrial loans, and loans of business. For these financial instruments, the carrying value
to financial institutions, governments and public institutions. Fair approximates the fair value due to the relatively short period of
values for these loans are determined by using a discounted cash time between their origination and expected realization, as well as
flow model. Future cash flows are discounted using risk-adjusted the minimal credit risk inherent in these instruments.
152 Condensed consolidated financial statements – unaudited
Sensitivity of fair value measurements to changes in significant unobservable input basis spread would decrease the
significant unobservable inputs fair value.
For level 3 assets with a significant unobservable input of EBITDA
multiple, market implied life expectancy (for life finance instru- Interrelationships between significant unobservable inputs
ments), buyback probability, correlation, contingent probability, Except as noted above, there are no material interrelationships
price, volatility, volatility skew or funding spread, in general, an between the significant unobservable inputs for the financial
increase in the significant unobservable input would increase the instruments. As the significant unobservable inputs move inde-
fair value. For level 3 assets with a significant unobservable input pendently, generally an increase or decrease in one significant
of market implied life expectancy (for life settlement and premium unobservable input will have no impact on the other significant
finance instruments), capitalization rate, discount rate, prepay- unobservable inputs.
ment rate, gap risk, recovery rate or credit spread, in general, an
increase in the significant unobservable input would decrease the Quantitative disclosures of valuation techniques
fair value. The following tables provide the representative range of minimum
For level 3 liabilities, in general, an increase in the related and maximum values and the associated weighted averages of
significant unobservable inputs would have the inverse impact each significant unobservable input for level 3 assets and liabilities
on fair value. An increase in the significant unobservable input by the related valuation technique most significant to the related
mean reversion would increase the fair value. An increase in the financial instrument.
of which interest rate products 806 Option model Correlation, in % 21 100 73
Prepayment rate, in % 4 34 17
Volatility skew, in % (4) 0 (1)
of which equity/index-related products 889 Option model Correlation, in % (60) 98 69
Volatility, in % 2 163 30
Buyback probability, in % 2 50 100 87
Gap risk, in % 3 0 2 1
of which credit derivatives 474 Discounted cash flow Credit spread, in bp 0 1,713 132
Recovery rate, in % 0 70 29
Discount rate, in % 0 40 18
Default rate, in % 1 20 5
Loss severity, in % 22 100 64
Correlation, in % 97 97 97
Prepayment rate, in % 0 15 6
Other 3,075
of which 1,946 Market comparable Price, in % 0 110 24
Market implied life
Investment securities 54 – – – – –
Private equity 7 – – – – –
Other equity investments 268 – – – – –
Market implied life
Life finance instruments 1,358 Discounted cash flow expectancy, in years 2 18 6
Other investments 1,633
Loans 4,963
of which commercial and industrial loans 2,400
of which 1,978 Discounted cash flow Credit spread, in bp 96 1,160 383
of which 414 Market comparable Price, in % 0 100 59
of which financial institutions 1,631
of which 1,442 Discounted cash flow Credit spread, in bp 52 1,475 407
of which 10 Market comparable Price, in % 0 95 95
Other intangible assets (mortgage servicing rights) 153 – – – – –
Other assets 1,899
of which loans held-for-sale 1,691
of which 1,247 Discounted cash flow Credit spread, in bp 117 961 243
Recovery rate, in % 12 98 76
of which 225 Market comparable Price, in % 0 102 79
Total level 3 assets at fair value 17,602
1
Cash instruments are generally presented on a weighted average basis, while certain derivative instruments either contain a combination of weighted averages and arithmetic means of the
related inputs or are presented on an arithmetic mean basis.
2
Estimate of the probability of structured notes being put back to the Group at the option of the investor over the remaining life of the financial instruments.
3
Risk of unexpected large declines in the underlying values occuring between collateral settlement dates.
154 Condensed consolidated financial statements – unaudited
and securities borrowing transactions 174 Discounted cash flow Funding spread, in bp 10 450 259
Securities received as collateral 70 – – – – –
Debt 3,977
of which interest rate products 748 Option model Correlation, in % 20 100 65
Prepayment rate, in % 1 32 16
Volatility skew, in % (7) 1 (2)
of which equity/index-related products 914 Option model Correlation, in % (85) 98 21
Volatility, in % 2 180 32
Buyback probability, in % 2 50 100 62
Gap risk, in % 3 0 2 1
of which credit derivatives 688 Discounted cash flow Credit spread, in bp 0 1,635 396
Recovery rate, in % 0 45 10
Discount rate, in % 1 45 21
Default rate, in % 0 33 5
Loss severity, in % 15 100 69
Correlation, in % 97 97 97
Prepayment rate, in % 0 13 5
Other 4,243
of which 3,005 Market comparable Price, in % 0 116 39
Market implied life
Investment securities 72 – – – – –
Private equity 8 – – – – –
Other equity investments 310 – – – – –
Market implied life
Life finance instruments 1,588 Discounted cash flow expectancy, in years 2 19 6
Other investments 1,906
Loans 6,585
of which commercial and industrial loans 3,816
of which 2,959 Discounted cash flow Credit spread, in bp 5 5,400 544
of which 852 Market comparable Price, in % 0 100 51
of which financial institutions 1,829
of which 1,588 Discounted cash flow Credit spread, in bp 67 952 342
of which 149 Market comparable Price, in % 0 550 483
Other intangible assets (mortgage servicing rights) 138 – – – – –
Other assets 1,679
of which loans held-for-sale 1,316
of which 760 Discounted cash flow Credit spread, in bp 117 1,082 334
Recovery rate, in % 6 100 74
of which 356 Market comparable Price, in % 0 102 78
Total level 3 assets at fair value 23,390
1
Cash instruments are generally presented on a weighted average basis, while certain derivative instruments either contain a combination of weighted averages and arithmetic means of the
related inputs or are presented on an arithmetic mean basis.
2
Estimate of the probability of structured notes being put back to the Group at the option of the investor over the remaining life of the financial instruments.
3
Risk of unexpected large declines in the underlying values occuring between collateral settlement dates.
156 Condensed consolidated financial statements – unaudited
Customer deposits 438 – – – – –
Obligation to return securities received
as collateral 19 – – – – –
Trading liabilities 2,792
of which interest rate derivatives 328 Option model Basis spread, in bp (13) 70 28
Correlation, in % 21 100 61
Prepayment rate, in % 4 34 9
of which foreign exchange derivatives 82
of which 64 Option model Correlation, in % (10) 70 48
Prepayment rate, in % 27 34 31
of which 6 Discounted cash flow Contingent probability, in % 90 95 92
of which equity/index-related derivatives 1,092 Option model Correlation, in % (60) 98 56
Volatility, in % 2 163 26
Buyback probability, in % 2 50 100 87
of which credit derivatives 686 Discounted cash flow Credit spread, in bp 0 1,713 114
Discount rate, in % 0 40 18
Default rate, in % 1 20 5
Recovery rate, in % 20 70 43
Loss severity, in % 22 100 64
Correlation, in % 27 86 56
Prepayment rate, in % 0 15 6
Short-term borrowings 599 – – – – –
Long-term debt 12,917
of which structured notes over two years 12,476
of which 10,072 Option model Correlation, in % (60) 99 55
Volatility, in % 0 163 21
Buyback probability, in % 2 50 100 87
Gap risk, in % 3 0 2 1
Mean reversion, in % 4 (14) (1) (6)
of which 1,752 Discounted cash flow Credit spread, in bp 0 652 110
Other liabilities 1,415
of which failed sales 233
of which 109 Market comparable Price, in % 0 91 55
of which 46 Discounted cash flow Discount rate, in % 9 19 14
Total level 3 liabilities at fair value 18,180
1
Cash instruments are generally presented on a weighted average basis, while certain derivative instruments either contain a combination of weighted averages and arithmetic means of the
related inputs or are presented on an arithmetic mean basis.
2
Estimate of the probability of structured notes being put back to the Group at the option of the investor over the remaining life of the financial instruments.
3
Risk of unexpected large declines in the underlying values occuring between collateral settlement dates.
4
Management’s best estimate of the speed at which interest rates will revert to the long-term average.
Condensed consolidated financial statements – unaudited 157
Customer deposits 410 – – – – –
Obligation to return securities received
as collateral 70 – – – – –
Trading liabilities 3,737
of which interest rate derivatives 538 Option model Basis spread, in bp (2) 66 33
Correlation, in % 20 100 57
Prepayment rate, in % 1 32 9
Gap risk, in % 2 20 20 20
Funding spread, in bp 237 237 237
of which foreign exchange derivatives 150
of which 65 Option model Correlation, in % (10) 70 49
Prepayment rate, in % 22 32 27
of which 69 Discounted cash flow Contingent probability, in % 95 95 95
of which equity/index-related derivatives 1,181 Option model Correlation, in % (85) 98 23
Volatility, in % 2 180 28
Buyback probability, in % 3 50 100 62
of which credit derivatives 851 Discounted cash flow Credit spread, in bp 0 1,635 163
Discount rate, in % 2 45 21
Default rate, in % 0 33 5
Recovery rate, in % 20 60 35
Loss severity, in % 15 100 70
Correlation, in % 43 85 63
Prepayment rate, in % 0 13 5
Short-term borrowings 516 – – – – –
Long-term debt 13,415
of which structured notes over two years 12,434
of which 12,008 Option model Correlation, in % (85) 99 23
Volatility, in % 0 180 23
Buyback probability, in % 3 50 100 62
Gap risk, in % 2 0 2 1
Mean reversion, in % 4 (14) (1) (6)
of which 286 Discounted cash flow Credit spread, in bp 1 452 89
Other liabilities 1,684
of which failed sales 219
of which 163 Market comparable Price, in % 0 100 68
1
Cash instruments are generally presented on a weighted average basis, while certain derivative instruments either contain a combination of weighted averages and arithmetic means of the
related inputs or are presented on an arithmetic mean basis.
2
Risk of unexpected large declines in the underlying values occuring between collateral settlement dates.
3
Estimate of the probability of structured notes being put back to the Group at the option of the investor over the remaining life of the financial instruments.
4
Management’s best estimate of the speed at which interest rates will revert to the long-term average.
EBITDA multiple of withdrawals from the fund during the redemption period due to
EBITDA multiple is a primary significant unobservable input for illiquidity of the investments. In other instances, the withdrawal
some equity deals which are benchmarked using industry com- amounts may vary depending on the redemption notice period and
parables. The EBITDA multiple may be preferred over other are usually larger for the longer redemption notice periods. In addi-
measures because it is normalized for differences between the tion, penalties may apply if redemption is within a certain time
accounting policies of similar companies. period from initial investment.
Investment in funds held in other investments principally
Contingent probability involves private securities and, to a lesser extent, publicly traded
Contingent probability is the primary significant unobservable input securities and fund of funds. Several of these investments have
for contingent foreign exchange forward trades where the delivery redemption restrictions subject to the discretion of the Board
or exercise and the premium payment are contingent on an event of Directors of the fund and/or redemption is permitted without
such as completion of an M&A deal or regulatory approval for a restriction, but is limited to a certain percentage of total assets or
product. only after a certain date.
Furthermore, for those investments held in both trading assets
Fair value measurements of investments in certain entities and other investments that are nonredeemable, the underlying
that calculate NAV per share assets of such funds are expected to be liquidated over the life of
Investments in funds held in trading assets and liabilities primar- the fund, which is generally up to 10 years.
ily include positions held in equity funds of funds as an economic The following table pertains to investments in certain entities
hedge for structured notes and derivatives issued to clients that that calculate NAV per share or its equivalent, primarily private
reference the same underlying risk and liquidity terms of the fund. equity and hedge funds. These investments do not have a readily
A majority of these funds have limitations imposed on the amount determinable fair value and are measured at fair value using NAV.
Difference between the aggregate fair value and the aggregate unpaid principal balances of loans and financial
instruments
end of 3Q17 4Q16
Aggregate
Aggregate
Aggregate Aggregate
fair
unpaid
fair unpaid
value principal Difference value principal Difference
resale agreements and securities borrowing transactions 97,413 97,324 89 87,331 87,208 123
Loans 15,362 15,832 (470) 19,528 20,144 (616)
Other assets 1 7,875 10,635 (2,760) 8,369 11,296 (2,927)
Due to banks and customer deposits (1,063) (997) (66) (1,120) (1,059) (61)
Central bank funds purchased, securities sold under
repurchase agreements and securities lending transactions (17,300) (17,301) 1 (19,634) (19,638) 4
Short-term borrowings (5,821) (5,798) (23) (4,061) (4,017) (44)
Long-term debt (69,346) (72,536) 3,190 (72,868) (76,123) 3,255
Other liabilities (618) (2,205) 1,587 (727) (2,331) 1,604
1
Primarily loans held-for-sale.
Condensed consolidated financial statements – unaudited 161
The following table provides additional information regarding the in instrument-specific credit risk. In addition it includes the gains
gains and losses attributable to changes in instrument-specific and losses related to instrument-specific credit risk that was pre-
credit risk on fair value option elected liabilities which are recorded viously recorded in AOCI that have been transferred during the
through AOCI. The table includes both the amount of change dur- period to net income.
ing the period and cumulatively that is attributable to the changes
Own credit gains/(losses) on fair value option elected instruments recorded in AOCI
Gains/(losses) recorded
in AOCI transferred
1 1
Gains/(losses) recorded into AOCI to net income
in 3Q17 Cumulatively 3Q16 3Q17 3Q16
Financial instruments (CHF million)
Carrying value and fair value of financial instruments not carried at fair value
Carrying
value Fair value
end of
Level 1 Level 2 Level 3 Total
3Q17 (CHF million)
Financial assets
The Group pledges assets mainly for repurchase agreements and Collateral
other securities financing. Certain pledged assets may be encum- The Group receives cash and securities in connection with resale
bered, meaning they have the right to be sold or repledged. The agreements, securities borrowing and loans, derivative transac-
encumbered assets are disclosed on the consolidated balance tions and margined broker loans. A substantial portion of the col-
sheet. lateral and securities received by the Group was sold or repledged
in connection with repurchase agreements, securities sold not yet
Assets pledged purchased, securities borrowings and loans, pledges to clearing
end of 3Q17 4Q16 organizations, segregation requirements under securities laws and
Assets pledged (CHF million) regulations, derivative transactions and bank loans.
Total assets pledged or assigned as collateral 117,553 122,805
of which encumbered 72,209 83,473 Collateral
end of 3Q17 4Q16
Collateral (CHF million)
Fair value of collateral received
30 Litigation
The Group is involved in a number of judicial, regulatory and arbi- estimable; and (b) proceedings where the Group has not accrued
tration proceedings concerning matters arising in connection with such a loss contingency provision for various reasons, including,
the conduct of its businesses. The Group’s material proceedings, but not limited to, the fact that any related losses are not reason-
related provisions and estimate of the aggregate range of reason- ably estimable. The description of certain of the matters includes
ably possible losses that are not covered by existing provisions a statement that the Group has established a loss contingency
are described in Note 39 – Litigation in V – Consolidated finan- provision and discloses the amount of such provision; for the other
cial statements – Credit Suisse Group in the Credit Suisse Annual matters no such statement is made. With respect to the matters
Report 2016 and updated in subsequent quarterly reports (includ- for which no such statement is made, either (a) the Group has not
ing those discussed below). Some of these proceedings have been established a loss contingency provision, in which case the matter
brought on behalf of various classes of claimants and seek dam- is treated as a contingent liability under the applicable accounting
ages of material and/or indeterminate amounts. standard, or (b) the Group has established such a provision but
The Group accrues loss contingency litigation provisions and believes that disclosure of that fact would violate confidentiality
takes a charge to income in connection with certain proceedings obligations to which the Group is subject or otherwise compromise
when losses, additional losses or ranges of loss are probable and attorney-client privilege, work product protection or other protec-
reasonably estimable. The Group also accrues litigation provi- tions against disclosure or compromise the Group’s management
sions for the estimated fees and expenses of external lawyers and of the matter. The future outflow of funds in respect of any matter
other service providers in relation to such proceedings, including for which the Group has accrued loss contingency provisions can-
in cases for which it has not accrued a loss contingency provision. not be determined with certainty based on currently available infor-
The Group accrues these fee and expense litigation provisions mation, and accordingly may ultimately prove to be substantially
and takes a charge to income in connection therewith when such greater (or may be less) than the provision that is reflected on the
fees and expenses are probable and reasonably estimable. The Group’s balance sheet.
Group reviews its legal proceedings each quarter to determine the It is inherently difficult to determine whether a loss is probable
adequacy of its litigation provisions and may increase or release or even reasonably possible or to estimate the amount of any loss or
provisions based on management’s judgment and the advice of loss range for many of the Group’s legal proceedings. Estimates, by
counsel. The establishment of additional provisions or releases of their nature, are based on judgment and currently available informa-
litigation provisions may be necessary in the future as develop- tion and involve a variety of factors, including, but not limited to, the
ments in such proceedings warrant. type and nature of the proceeding, the progress of the matter, the
The specific matters described include (a) proceedings where advice of counsel, the Group’s defenses and its experience in similar
the Group has accrued a loss contingency provision, given that it matters, as well as its assessment of matters, including settlements,
is probable that a loss may be incurred and such loss is reasonably involving other defendants in similar or related cases or proceedings.
164 Condensed consolidated financial statements – unaudited
Factual and legal determinations, many of which are complex, must Company, dismissed with prejudice all claims against CSS LLC
be made before a loss, additional losses or ranges of loss can be and its employees related to approximately USD 107 million of
reasonably estimated for any proceeding. RMBS at issue.
Most matters pending against the Group seek damages of an On October 30, 2017, CSS LLC reached an agreement in
indeterminate amount. While certain matters specify the damages principle with CMFG Life Insurance Company and affiliated entities
claimed, such claimed amount may not represent the Group’s rea- to settle the action brought against CSS LLC relating to approxi-
sonably possible losses. For certain of the proceedings discussed mately USD 62 million of RMBS.
the Group has disclosed the amount of damages claimed and cer-
tain other quantifiable information that is publicly available. Rates-related matters
The Group’s aggregate litigation provisions include estimates Regulatory authorities in a number of jurisdictions, including the
of losses, additional losses or ranges of loss for proceedings for Swiss Competition Commission, the European Competition Com-
which such losses are probable and can be reasonably estimated. mission, the South African Competition Commission, the Brazilian
The Group does not believe that it can estimate an aggregate Competition Authority and the New York Department of Finan-
range of reasonably possible losses for certain of its proceedings cial Services, have been conducting investigations into the trading
because of their complexity, the novelty of some of the claims, activities, information sharing and the setting of benchmark rates
the early stage of the proceedings, the limited amount of discov- in the foreign exchange (including electronic trading) markets. On
ery that has occurred and/or other factors. The Group’s estimate March 31, 2014, the Swiss Competition Commission announced
of the aggregate range of reasonably possible losses that are a formal investigation of numerous Swiss and international finan-
not covered by existing provisions for the proceedings discussed cial institutions, including the Group, in relation to the setting of
in Note 39 referenced above and updated in quarterly reports exchange rates in foreign exchange trading. The Group is cooper-
(including below) for which the Group believes an estimate is pos- ating fully with these investigations.
sible is zero to CHF 1.3 billion. On September 29, 2017, the US District Court for the South-
In 3Q17, the Group recorded net litigation provisions of CHF 162 ern District of New York (SDNY) in the multi-district litigation
million. After taking into account its litigation provisions, the Group concerning US Dollar LIBOR dismissed without prejudice Credit
believes, based on currently available information and advice of Suisse AG from the remaining non-stayed putative class action on
counsel, that the results of its legal proceedings, in the aggregate, the ground that there were no remaining class representatives with
will not have a material adverse effect on the Group’s financial con- claims against any Credit Suisse entity.
dition. However, in light of the inherent uncertainties of such pro- On September 25, 2017, the SDNY granted defendants’
ceedings, including those brought by regulators or other govern- motion to dismiss all claims against Credit Suisse Group AG and
mental authorities, the ultimate cost to the Group of resolving such other defendants in the putative class action relating to Swiss franc
proceedings may exceed current litigation provisions and any excess LIBOR. The SDNY has granted plaintiffs leave to file an amended
may be material to its operating results for any particular period, complaint by November 6, 2017.
depending, in part, upon the operating results for such period. On August 18, 2017, the SDNY dismissed all claims against
Credit Suisse Group AG and affiliates in the putative class action
Enron-related litigation lawsuit relating to the Singapore Interbank Offered Rate and Sin-
On September 27, 2017, following a settlement, an order of final gapore Swap Offer Rate. On September 18, 2017, the plaintiffs
judgment was entered by the US District Court for the Southern filed an amended complaint. On October 18, 2017, defendants
District of Texas, presiding in the action brought by Connecticut filed motions to dismiss the amended complaint.
Resources Recovery Authority, dismissing with prejudice all claims On August 11, 2017, defendants filed motions to dismiss the
against Credit Suisse Securities (USA) LLC (CSS LLC) and its consolidated putative class action complaint in the SDNY alleging
affiliates. manipulation of the foreign exchange market on behalf of indirect
purchasers of foreign exchange instruments.
Mortgage-related matters On August 23, 2017, the SDNY appointed lead counsel in
Civil litigation the consolidated putative class actions relating to the US treasury
The amounts disclosed below do not reflect actual realized plain- markets. On August 25, 2017, three purported class representa-
tiff losses to date or anticipated future litigation exposure. Rather, tives re-filed their complaints as a collective individual action.
unless otherwise stated, these amounts reflect the original unpaid On July 28, 2017, the SDNY granted in part and denied in part
principal balance amounts as alleged in these actions and do not defendants’ motion to dismiss plaintiffs’ consolidated putative civil
include any reduction in principal amounts since issuance. class action complaint and plaintiffs’ consolidated individual com-
plaint, relating to interest rate swaps.
Individual investor actions On October 6, 2017, in response to defendants’ motions to
On September 12, 2017, following a settlement, the US Dis- dismiss the putative class action in the SDNY relating to suprana-
trict Court for the District of Massachusetts, presiding in the tional, sub-sovereign, and agency bonds, plaintiffs filed a motion
two actions brought by Massachusetts Mutual Life Insurance for leave to file a consolidated amended class action complaint.
Condensed consolidated financial statements – unaudited 165
On August 17, 2017, Credit Suisse Group AG and affiliates, Customer account matters
along with other financial institutions, were named in a civil puta- In connection with claims that a former relationship manager in
tive class action lawsuit filed in the SDNY, alleging that defendants Switzerland had exceeded his investment authority, civil liability
conspired to keep stock loan trading fixed in an over-the-counter lawsuits were initiated on August 25, 2017 in the High Court of
market and collectively boycotted certain trading platforms which Singapore, the High Court of New Zealand and the Supreme
sought to enter the market. Court of Bermuda against Credit Suisse AG and certain affili-
ates, based on the findings established in the criminal proceedings
CDS-related matters against the former relationship manager.
On September 11, 2017, defendants filed motions to dismiss
the civil action in the SDNY filed by Tera Group, Inc. and related Tax and securities law matters
entities alleging violations of antitrust law by credit default swap On May 19, 2014, Credit Suisse AG entered into settlement
dealers. agreements with several US regulators regarding its US cross-bor-
der matters, including the New York State Department of Finan-
ATA litigation cial Services (DFS). As part of the settlement, Credit Suisse AG,
On September 11, 2017, Credit Suisse AG and other defendants among other things, engaged an independent corporate monitor
served motions to dismiss the plaintiffs’ amended complaint in the that reports to the DFS (a separate position from the independent
case filed against a number of banks alleging claims under the consultant agreed to in the settlement with the SEC) and provides
United States Anti-Terrorism Act (ATA) that was transferred to the ongoing reports to various agencies. Credit Suisse AG is paying
US District Court for the Eastern District of New York (EDNY) by for the cost of the monitor. Credit Suisse AG is presently in discus-
order dated April 12, 2017. On October 3, 2017, the plaintiffs filed sions with the DFS regarding a potential limited extension of the
a stipulation of voluntary dismissal and withdrew their complaint. monitor’s term.
The separate lawsuit that was filed on November 10, 2014 in the
EDNY against a number of banks, including Credit Suisse AG,
alleging claims under the ATA, remains pending.
Certain wholly owned finance subsidiaries of the Group, includ- Credit Suisse (USA), Inc. The guarantee from the Group is subor-
ing Credit Suisse Group Funding (Guernsey) Limited, which is a dinated to senior liabilities. Credit Suisse (USA), Inc. is an indirect,
Guernsey incorporated non-cellular company limited by shares, wholly owned subsidiary of the Group.
have issued securities fully and unconditionally guaranteed by the As part of an announced program to evolve the Group’s legal
Group. There are various legal and regulatory requirements, includ- entity structure to meet developing and future regulatory require-
ing the satisfaction of a solvency test under Guernsey law for the ments and Fed regulation on establishing intermediate holding com-
Guernsey subsidiary, applicable to some of the Group’s subsidiar- panies in the US for non-US banks, legal entities are re-parented as
ies that may limit their ability to pay dividends or distributions and subsidiaries of Credit Suisse (USA), Inc.
make loans and advances to the Group. In order to align the corporate structure of Credit Suisse
On March 26, 2007, the Group and the Bank issued full, (Schweiz) AG with that of the Swiss Universal Bank division, during
unconditional and several guarantees of Credit Suisse (USA), 1Q17, the equity stakes in Neue Aargauer Bank AG, BANK-now
Inc.’s outstanding SEC-registered debt securities. In accordance AG and Swisscard AECS GmbH held by the Group were trans-
with the guarantees, if Credit Suisse (USA), Inc. fails to make ferred to Credit Suisse (Schweiz) AG, a wholly owned subsidiary
any timely payment under the agreements governing such debt of the Bank.
securities, the holders of the debt securities may demand payment Prior periods are restated to conform to the current presentation
from either the Group or the Bank, without first proceeding against to reflect the impact of such transactions.
166 Condensed consolidated financial statements – unaudited
Interest and dividend income 1,391 2,884 4,275 144 (146) 4,273
Interest expense (1,197) (1,422) (2,619) (157) 125 (2,651)
Net interest income 194 1,462 1,656 (13) (21) 1,622
Commissions and fees 828 1,895 2,723 7 32 2,762
Trading revenues (42) 360 318 (12) 14 320
Other revenues 215 62 277 262 2 (271) 268
Net revenues 1,195 3,779 4,974 244 (246) 4,972
Provision for credit losses 0 32 32 0 0 32
Interest and dividend income 4,002 8,918 12,920 409 (412) 12,917
Interest expense (3,269) (4,555) (7,824) (448) 347 (7,925)
Net interest income 733 4,363 5,096 (39) (65) 4,992
Commissions and fees 2,729 5,868 8,597 21 95 8,713
Trading revenues 60 1,032 1,092 (16) 55 1,131
Other revenues 658 271 929 1,179 2 (1,233) 875
Net revenues 4,180 11,534 15,714 1,145 (1,148) 15,711
Provision for credit losses 4 163 167 0 0 167
Compensation and benefits 2,302 5,252 7,554 54 43 7,651
General and administrative expenses 1,447 3,829 5,276 (57) (361) 4,858
Commission expenses 188 877 1,065 0 0 1,065
Restructuring expenses 110 142 252 0 66 318
Total other operating expenses 1,745 4,848 6,593 (57) (295) 6,241
Total operating expenses 4,047 10,100 14,147 (3) (252) 13,892
Income/(loss) before taxes 129 1,271 1,400 1,148 (896) 1,652
Interest and dividend income 4,427 9,138 13,565 210 (211) 13,564
Interest expense (2,932) (4,669) (7,601) (251) 228 (7,624)
Net interest income 1,495 4,469 5,964 (41) 17 5,940
Commissions and fees 2,538 5,487 8,025 20 106 8,151
Trading revenues (969) 1,016 47 32 (24) 55
Other revenues 608 503 1,111 (126) 2 11 996
Net revenues 3,672 11,475 15,147 (115) 110 15,142
Provision for credit losses (7) 184 177 0 0 177
Compensation and benefits 2,407 5,631 8,038 38 (186) 7,890
General and administrative expenses 1,664 4,035 5,699 (64) (49) 5,586
Commission expenses 181 880 1,061 1 (1) 1,061
Restructuring expenses 194 264 458 0 33 491
Total other operating expenses 2,039 5,179 7,218 (63) (17) 7,138
Total operating expenses 4,446 10,810 15,256 (25) (203) 15,028
Income/(loss) before taxes (767) 481 (286) (90) 313 (63)
Income tax expense/(benefit) (231) 172 (59) 1 85 27
Cash and due from banks 2,815 102,726 105,541 343 (105) 105,779
Interest-bearing deposits with banks 32 643 675 489 (480) 684
Central bank funds sold, securities purchased under
resale agreements and securities borrowing transactions 79,338 60,703 140,041 0 0 140,041
Securities received as collateral 34,106 1,795 35,901 0 0 35,901
Trading assets 44,467 98,198 142,665 0 (286) 142,379
Investment securities 740 1,961 2,701 13,910 (13,907) 2,704
Other investments 927 5,178 6,105 47,306 (47,238) 6,173
Net loans 15,681 264,211 279,892 0 (4,039) 275,853
Premises and equipment 957 3,396 4,353 0 238 4,591
Goodwill 715 3,297 4,012 0 703 4,715
Other intangible assets 191 28 219 0 0 219
Brokerage receivables 18,017 17,508 35,525 0 0 35,525
Other assets 12,789 20,727 33,516 406 204 34,126
Total assets 210,775 580,371 791,146 62,454 (64,910) 788,690
Liabilities
and equity (CHF million)
Due to banks 95 17,398 17,493 588 (584) 17,497
repurchase agreements and securities lending transactions 47,982 (14,836) 33,146 0 0 33,146
Obligation to return securities received as collateral 34,106 1,795 35,901 0 0 35,901
Trading liabilities 11,421 32,549 43,970 0 (50) 43,920
Short-term borrowings 13,529 3,182 16,711 0 (484) 16,227
Long-term debt 52,865 126,519 179,384 17,633 (16,723) 180,294
Brokerage payables 23,793 8,623 32,416 0 0 32,416
Other liabilities 11,172 19,817 30,989 375 (542) 30,822
Total liabilities 194,964 550,426 745,390 18,596 (19,377) 744,609
Total shareholders’ equity 15,673 29,250 44,923 43,858 (44,923) 43,858
Noncontrolling interests 138 695 833 0 (610) 223
Total equity 15,811 29,945 45,756 43,858 (45,533) 44,081
Total liabilities and equity 210,775 580,371 791,146 62,454 (64,910) 788,690
1
Includes eliminations and consolidation adjustments.
Condensed consolidated financial statements – unaudited 171
Cash and due from banks 2,491 118,575 121,066 938 (843) 121,161
Interest-bearing deposits with banks 3,520 (2,753) 767 5 0 772
Central bank funds sold, securities purchased under
resale agreements and securities borrowing transactions 82,363 52,476 134,839 0 0 134,839
Securities received as collateral 30,914 1,650 32,564 0 0 32,564
Trading assets 48,914 116,478 165,392 0 (242) 165,150
Investment securities 511 1,975 2,486 4,173 (4,170) 2,489
Other investments 1,146 5,571 6,717 44,753 (44,693) 6,777
Net loans 12,809 266,151 278,960 126 (3,110) 275,976
Premises and equipment 990 3,676 4,666 0 45 4,711
Goodwill 756 3,433 4,189 0 724 4,913
Other intangible assets 179 34 213 0 0 213
Brokerage receivables 17,461 15,970 33,431 0 0 33,431
Other assets 13,119 23,656 36,775 244 (154) 36,865
Total assets 215,173 606,892 822,065 50,239 (52,443) 819,861
Liabilities and equity (CHF million)
Due to banks 77 22,723 22,800 2,943 (2,943) 22,800
repurchase agreements and securities lending transactions 54,900 (21,884) 33,016 0 0 33,016
Obligation to return securities received as collateral 30,914 1,650 32,564 0 0 32,564
Trading liabilities 10,125 34,827 44,952 0 (22) 44,930
Short-term borrowings 17,110 (1,725) 15,385 0 0 15,385
Long-term debt 41,481 151,014 192,495 5,078 (4,258) 193,315
Brokerage payables 28,706 11,146 39,852 0 0 39,852
Other liabilities 14,992 24,927 39,919 321 (385) 39,855
Total liabilities 198,313 579,894 778,207 8,342 (8,999) 777,550
Total shareholders’ equity 17,006 25,783 42,789 41,897 (42,789) 41,897
Noncontrolling interests (146) 1,215 1,069 0 (655) 414
Total equity 16,860 26,998 43,858 41,897 (43,444) 42,311
Total liabilities and equity 215,173 606,892 822,065 50,239 (52,443) 819,861
1
Includes eliminations and consolidation adjustments.
172
List of abbreviations
A L
ABS Asset-backed securities LCR Liquidity coverage ratio
ADS American Depositary Share M
AOCI Accumulated other comprehensive income/(loss) M&A Mergers and acquisitions
ASC Accounting Standards Codification N
ASU Accounting Standards Update NAV Net asset value
B NRV Negative replacement value
BCBS Basel Committee on Banking Supervision NSFR Net stable funding ratio
BIS Bank for International Settlements O
BoE Bank of England OTC Over-the-counter
bp Basis point P
C PRV Positive replacement value
CDO Collateralized debt obligation PSA Prepayment speed assumption
CDS Credit default swaps Q
CECL Current expected credit loss QoQ Quarter on quarter
CET1 Common equity tier 1 R
CLO Collateralized loan obligations RMBS Residential mortgage-backed securities
CMBS Commercial mortgage-backed securities RWA Risk-weighted assets
CMS Constant maturity swap S
CP Commercial paper SDNY US District Court for the Southern District of New York
CPR Constant prepayment rate SEC US Securities and Exchange Commission
CSS LLC Credit Suisse Securities (USA) LLC SEI Significant economic interest
CVA Credit valuation adjustment SNB Swiss National Bank
D SPE Special purpose entity
DFS New York State Department of Financial Services SPIA Single premium immediate annuity
E T
EBITDA Earnings before interest, taxes, depreciation and amortization TLAC Total loss-absorbing capacity
ECB European Central Bank TRS Total return swap
EDNY US District Court for the Eastern District of New York U
EU European Union UK United Kingdom
F US United States of America
FASB Financial Accounting Standards Board US GAAP US generally accepted accounting principles
Fed US Federal Reserve V
FINMA Swiss Financial Market Supervisory Authority FINMA VaR Value-at-risk
G VDAX Deutsche Börse AG DAX Volatility Index
G7 Group of seven leading industry nations VIE Variable interest entity
G-SIB Global systemically important bank VIX Chicago Board Options Exchange Market Volatility Index
H Y
HQLA High-quality liquid assets YoY Year on year
I Ytd Year to date
ISDA International Swaps and Derivatives Association
ITS International Trading Solutions
173
Investor information
Share data Ticker symbols / stock exchange listings
in / end of 9M17 2016 2015 2014
Common shares ADS 1
Share price (common shares, CHF) Ticker symbols
Average 14.72 13.71 23.85 26.52 SIX Financial Information CSGN –
Minimum 13.04 9.92 18.22 23.77 Bloomberg CSGN VX CS US
Maximum 16.12 21.31 27.89 30.08 Reuters CSGN.VX CS.N
End of period 15.33 14.61 21.69 25.08 Stock exchange listings
Share price (American Depositary Shares, USD) Swiss security number 1213853 570660
Average 14.96 13.88 25.43 28.98 ISIN number CH0012138530 US2254011081
Minimum 13.37 10.21 20.48 24.84 CUSIP number – 225 401 108
Maximum 15.99 21.36 29.69 33.19 1
One American Depositary Share (ADS) represents one common share.
End of period 15.80 14.31 21.69 25.08
Market capitalization
Market capitalization (CHF million) 39,184 30,533 42,456 40,308 Credit ratings and outlook
Market capitalization (USD million) 40,385 29,906 42,456 40,308 Short-term Long-term
Share performance
CHF
35
30
25
20
15
10
5
2 015 2 016 2 017
1 USD / CHF 0.97 0.96 1.02 0.97 0.96 0.98 0.97 0.98 0.98
1 EUR / CHF 1.14 1.09 1.07 1.09 1.13 1.08 1.09 1.09 1.09
1 GBP / CHF 1.30 1.24 1.26 1.26 1.26 1.26 1.28 1.26 1.37
100 JPY / CHF 0.86 0.85 0.87 0.96 0.87 0.88 0.95 0.88 0.90
175
Cautionary statement regarding forward-looking information p the ability of counterparties to meet their obligations to us;
This document contains statements that constitute forward-looking state- p the effects of, and changes in, fiscal, monetary, exchange rate, trade and
ments. In addition, in the future we, and others on our behalf, may make tax policies, as well as currency fluctuations;
statements that constitute forward-looking statements. Such forward-look- p political and social developments, including war, civil unrest or terrorist
ing statements may include, without limitation, statements relating to the activity;
following: p the possibility of foreign exchange controls, expropriation, nationalization
p our plans, objectives or goals; or confiscation of assets in countries in which we conduct our operations;
p our future economic performance or prospects; p operational factors such as systems failure, human error, or the failure to
p the potential effect on our future performance of certain contingencies; and implement procedures properly;
p assumptions underlying any such statements. p the risk of cyberattacks on our business or operations;
p actions taken by regulators with respect to our business and practices
Words such as “believes,” “anticipates,” “expects,” “intends” and “plans” and and possible resulting changes to our business organization, practices
similar expressions are intended to identify forward-looking statements but and policies in countries in which we conduct our operations;
are not the exclusive means of identifying such statements. We do not intend p the effects of changes in laws, regulations or accounting policies or prac-
to update these forward-looking statements except as may be required by tices in countries in which we conduct our operations;
applicable securities laws. p the potential effects of proposed changes in our legal entity structure;
By their very nature, forward-looking statements involve inherent risks p competition or changes in our competitive position in geographic and
and uncertainties, both general and specific, and risks exist that predic- business areas in which we conduct our operations;
tions, forecasts, projections and other outcomes described or implied in p the ability to retain and recruit qualified personnel;
forward-looking statements will not be achieved. We caution you that a p the ability to maintain our reputation and promote our brand;
number of important factors could cause results to differ materially from the p the ability to increase market share and control expenses;
plans, objectives, expectations, estimates and intentions expressed in such p technological changes;
forward-looking statements. These factors include: p the timely development and acceptance of our new products and services
p the ability to maintain sufficient liquidity and access capital markets; and the perceived overall value of these products and services by users;
p market volatility and interest rate fluctuations and developments affecting p acquisitions, including the ability to integrate acquired businesses suc-
interest rate levels; cessfully, and divestitures, including the ability to sell non-core assets;
p the strength of the global economy in general and the strength of the p the adverse resolution of litigation, regulatory proceedings and other con-
economies of the countries in which we conduct our operations, in partic- tingencies; and
ular the risk of continued slow economic recovery or downturn in the US p other unforeseen or unexpected events and our success at managing
or other developed countries or in emerging markets in 2017 and beyond; these and the risks involved in the foregoing.
p the direct and indirect impacts of deterioration or slow recovery in residen-
tial and commercial real estate markets; We caution you that the foregoing list of important factors is not exclusive.
p adverse rating actions by credit rating agencies in respect of us, sovereign When evaluating forward-looking statements, you should carefully consider
issuers, structured credit products or other credit-related exposures; the foregoing factors and other uncertainties and events, including the infor-
p the ability to achieve our strategic objectives, including cost efficiency, net mation set forth in “Risk factors” in I – Information on the company in our
new asset, pre-tax income/(loss), capital ratios and return on regulatory Annual Report 2016.
capital, leverage exposure threshold, risk-weighted assets threshold and
other targets and ambitions;
Company
Profile 2016