FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Dated April 27, 2004
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of April 27, 2004
Commission File Number 001-15244
CREDIT SUISSE GROUP
(Translation of registrant's name into English)
Paradeplatz 8, P.O. Box 1, CH-8070 Zurich, Switzerland
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
Media Relations CREDIT SUISSE GROUP P.O. Box 1 CH-8070 Zurich www.credit-suisse.com | |||
Telephone | +41 1 333 88 44 | ||
Fax | +41 1 333 88 77 | ||
media.relations@credit-suisse.com | |||
Zurich, April 27, 2004 - Credit Suisse Group today published US GAAP financial information for 2003 and prior years, as announced at the presentation of its 2003 Swiss GAAP results on February 12, 2004. The US GAAP financial information is now available at: www.credit-suisse.com. Credit Suisse Group changed its primary accounting standard from Swiss GAAP to US GAAP at the beginning of 2004. Credit Suisse Group’s unaudited US GAAP net income for 2003 was CHF 770 million, compared to the net profit of CHF 5.0 billion under Swiss GAAP. Credit Suisse Group’s unaudited US GAAP shareholders’ equity as of December 31, 2003, was CHF 34.0 billion, compared to CHF 31.7 billion under Swiss GAAP (excluding minority interests). As explained previously, the main reason for the variation in the Group’s net result is the differing accounting treatment of the 1997 merger with Winterthur, which led to the creation of goodwill under US GAAP. The divestitures at Winterthur in the UK and in Italy, as well as the deterioration of the market environment for the entire insurance industry, resulted in a CHF 3.2 billion reduction in this goodwill, which was recognized in the 2003 US GAAP income statement. Further reasons for the variation in the Group’s net result include the differing accounting treatment under Swiss GAAP and US GAAP of goodwill amortization, certain insurance reserves, pension plans, software capitalization and hedging transactions. During the transition to US GAAP, the Group identified certain errors pertaining to periods when US GAAP was applied on a supplemental, reconciliation basis only. The Group is today filing an Annual Report on Form 20-F/A for 2002 with the SEC, which reflects a restatement of its US GAAP reconciled financial information for 2002, 2001 and 2000. The overall impact of the US GAAP adjustments was a reduction of CHF 232 million in the Group’s net loss for 2002, a reduction of CHF 28 million in its net loss for 2001 and an increase of CHF 159 million in its net profit for 2000. These adjustments had no impact on the respective results reported under Swiss GAAP. The Annual Report on Form 20-F/A for 2002 can also be found at: www.credit-suisse.com. |
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First quarter 2004 net income will be pre-released in connection with the Annual General Meeting on April 30, 2004. The first quarter 2004 results will be published in full on May 5, 2004. The Group’s 2003 Annual Report on Form 20-F, including full audited US GAAP consolidated financial statements, is expected to be filed with the SEC at the end of June 2004.
Enquiries
Credit Suisse Group, Media Relations Telephone +41 1 333 8844
Credit Suisse Group, Investor Relations Telephone +41 1 333 4570
Credit Suisse Group
Credit Suisse Group is a leading global financial services company headquartered in Zurich. The business unit Credit Suisse Financial Services provides private clients and small and medium-sized companies with private banking and financial advisory services, banking products, and pension and insurance solutions from Winterthur. The business unit Credit Suisse First Boston, an investment bank, serves global institutional, corporate, government and individual clients in its role as a financial intermediary. Credit Suisse Group’s registered shares (CSGN) are listed in Switzerland and in the form of American Depositary Shares (CSR) in New York. The Group employs around 60,800 staff worldwide. As of December 31, 2003, it reported assets under management of CHF 1,199.0 billion.
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This press release contains statements that constitute forward-looking statements. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements. Such forward-looking statements may include, without limitation, statements relating to our plans, objectives or goals; our future economic performance or prospects; the potential effect on our future performance of certain contingencies; and assumptions underlying any such statements. Words such as “believes,” “anticipates,” “expects,” "intends” and “plans” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We do not intend to update these forward-looking statements except as may be required by applicable laws. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include (i) market and interest rate fluctuations; (ii) the strength of the global economy in general and the strength of the economies of the countries in which we conduct our operations in particular; (iii) the ability of counterparties to meet their obligations to us; (iv) the effects of, and changes in, fiscal, monetary, trade and tax policies, and currency fluctuations; (v) political and social developments, including war, civil unrest or terrorist activity; (vi) the possibility of foreign exchange controls, expropriation, nationalization or confiscation of assets in countries in which we conduct our operations; (vii) the ability to maintain sufficient liquidity and access capital markets; (viii) operational factors such as systems failure, human error, or the failure to properly implement procedures; (ix) actions taken by regulators with respect to our business and practices in one or more of the countries in which we conduct our operations; (x) the effects of changes in laws, regulations or accounting policies or practices; (xi) competition in geographic and business areas in which we conduct our operations; (xii) the ability to retain and recruit qualified personnel; (xiii) the ability to maintain our reputation and promote our brands; (xiv) the ability to increase market share and control expenses; (xv) technological changes; (xvi) the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users; (xvii) acquisitions, including the ability to integrate successfully acquired businesses; (xviii) the adverse resolution of litigation and other contingencies; and (xix) our success at managing the risks involved in the foregoing. We caution you that the foregoing list of important factors is not exclusive; when evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, as well as the risks identified in our most recently filed Form 20-F and reports on Form 6-K furnished to the US Securities and Exchange Commission.
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CONSOLIDATED US GAAP FINANCIAL INFORMATION – UNAUDITED – 2003 Important note The unaudited consolidated US GAAP financial information contained in this report represents historical information, which previously was reported in accordance with Swiss GAAP and has been restated to be presented in accordance with US GAAP. This restatement to US GAAP has been performed in connection with the Group’s change of its primary basis of accounting from Swiss GAAP to US GAAP as of January 1, 2004. The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance. This unaudited consolidated US GAAP financial information includes certain primary financial statements (income statement, balance sheet and statement of changes in shareholders’ equity) and certain explanatory notes. It does not, however, represent complete financial statements in accordance with US GAAP. Complete audited consolidated US GAAP financial statements and related note disclosures will be made available in connection with the Group’s filing of the 2003 Annual Report on Form 20-F with the SEC, which is expected to take place in June 2004. The purpose of providing this unaudited consolidated US GAAP financial information is to assist stakeholders in understanding the format of the Group’s US GAAP reporting prior to its release of first quarter 2004 results on May 5, 2004. This information is supplemental and is not intended to satisfy any regulatory reporting requirements. Cautionary statement regarding forward-looking information This “Unaudited consolidated US GAAP financial information 2003” contains statements that constitute forward-looking statements. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements. Such forward-looking statements may include, without limitation, statements relating our plans, objectives or goals; our future economic performance or prospects; the potential effect on our future performance of certain contingencies; and assumptions underlying any such statements. Words such as “believes,” “anticipates,” “expects,” “intends” and “plans” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We do not intend to update these forward-looking statements except as may be required by applicable laws. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include (i) market and interest rate fluctuations; (ii) the strength of the global economy in general and the strength of the economies of the countries in which we conduct our operations in particular; (iii) the ability of counterparties to meet their obligations to us; (iv) the effects of, and changes in, fiscal, monetary, trade and tax policies, and currency fluctuations; (v) political and social developments, including war, civil unrest or terrorist activity; (vi) the possibility of foreign exchange controls, expropriation, n ationalization or confiscation of assets in countries in which we conduct our operations; (vii) the ability to maintain sufficient liquidity and access capital markets; (viii) operational factors such as systems failure, human error, or the failure to properly implement procedures; (ix) actions taken by regulators with respect to our business and practices in one or more of the countries in which we conduct our operations; (x) the effects of changes in laws, regulations or accounting policies or practices; (xi) competition in geographic and business areas in which we conduct our operations; (xii) the ability to retain and recruit qualified personnel; (xiii) the ability to maintain our reputation and promote our brands; (xiv) the ability to increase market share and control expenses; (xv) technological changes; (xvi) the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users; (xvii) acquisitions, including the ability to int egrate successfully acquired businesses; and (xviii) our success at managing the risks involved in the foregoing. We caution you that the foregoing list of important factors is not exclusive; when evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, as well as the risks identified in our Form 20-F and reports on Form 6-K filed with or furnished to the US Securities and Exchange Commission. CONSOLIDATED US GAAP FINANCIAL INFORMATION (UNAUDITED) CONSOLIDATED US GAAP FINANCIAL INFORMATION – UNAUDITED – CONSOLIDATED US GAAP FINANCIAL INFORMATION (UNAUDITED) Consolidated statements of income Consolidated balance sheets Consolidated statements of changes in shareholders’ equity Comprehensive income SELECTED EXPLANATORY NOTES TO THE CONSOLIDATED US GAAP FINANCIAL INFORMATION (UNAUDITED) A Summary of significant accounting policies Principles of consolidation Foreign currency translation Cash and cash equivalents Reverse repurchase and repurchase agreements Securities lending and borrowing (SLB) transactions Trading assets and liabilities Derivatives classified as trading Investment securities Other investments Loans Allowance for loan losses Real estate, premises and equipment Goodwill and other intangible assets Present value of future profits Recognition of impairment losses on tangible fixed assets, goodwill and other intangible assets Income taxes Assets and liabilities held for separate accounts Other assets Derivatives used for hedging purposes Deferred policy acquisition costs Provisions from the insurance businesses Provision for future policyholder benefits Provision for death and other benefits Provision for future dividends to policyholders Life products, where the investment risk is borne by the policyholders Provision for unpaid claims and claim adjustment expenses Reinsurance Other liabilities Pensions and other post-retirement benefits Share-based compensation Own shares and own bonds Commissions and fees Insurance premiums earned, net and related expenses B Recently issued accounting standards Recently adopted standards Standards to be adopted in future periods C Business developments and subsequent events Divestitures Acquisitions Indemnification Subsequent events D Discontinued operations E Interest and dividend income and interest expense F Trading activities G Loans H Earnings per share I Description of derivatives and hedging activities Swaps Options Forwards and Futures Trading activities Economic hedges Fair value hedges Cash flow hedges Net investment hedges Hedge documentation Hedge discontinuation |
Consolidated statements of income
Year ended December 31, in CHF m | 2003 | 2002 | 2001 | ||||||
Interest and dividend income | 28,364 | 32,200 | 45,961 | ||||||
Interest expense | (16,637) | (21,191) | (35,872) | ||||||
Net interest income | 11,727 | 11,009 | 10,089 | ||||||
Commissions and fees | 12,948 | 15,344 | 18,992 | ||||||
Trading revenues | 3,528 | 3,443 | 9,728 | ||||||
Realized gains/(losses) from investment securities, net | 1,536 | (4,207) | (563) | ||||||
Insurance net premiums earned | 21,823 | 22,307 | 22,159 | ||||||
Other revenues | (56) | (510) | (231) | ||||||
Total noninterest revenues | 39,779 | 36,377 | 50,085 | ||||||
Net revenues | 51,506 | 47,386 | 60,174 | ||||||
Policyholder benefits, claims and dividends | 22,885 | 19,274 | 21,756 | ||||||
Provision for credit losses | 615 | 2,504 | 1,672 | ||||||
Total benefits, claims and credit losses | 23,500 | 21,778 | 23,428 | ||||||
Insurance underwriting, acquisition and administration expenses | 4,542 | 4,909 | 5,078 | ||||||
Banking compensation and benefits | 11,042 | 13,495 | 18,177 | ||||||
Other expenses | 9,010 | 11,421 | 14,285 | ||||||
Goodwill impairment | 1,510 | 0 | 0 | ||||||
Restructuring charges | 138 | 32 | 74 | ||||||
Total operating expenses | 26,242 | 29,857 | 37,614 | ||||||
Income/(loss) from continuing operations before taxes, minority interests, extraordinary items and cumulative effect of accounting changes | 1,764 | (4,249) | (868) | ||||||
Income tax expense/(benefit) | (13) | (109) | (206) | ||||||
Dividends on preferred securities for consolidated entities | 133 | 133 | 96 | ||||||
Minority interests, net of tax | (31) | (193) | 146 | ||||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | 1,675 | (4,080) | (904) | ||||||
Income/(loss) from discontinued operations, net of tax | (346) | (447) | 122 | ||||||
Extraordinary items, net of tax | 7 | 18 | 0 | ||||||
Cumulative effect of accounting changes, net of tax | (566) | 61 | 123 | ||||||
Net income/(loss) | 770 | (4,448) | (659) | ||||||
Basic earnings per share, in CHF | |||||||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | 1.43 | (3.53) | (0.80) | ||||||
Income/(loss) from discontinued operations, net of tax | (0.30) | (0.39) | 0.11 | ||||||
Extraordinary items, net of tax | 0.01 | 0.02 | 0.00 | ||||||
Cumulative effect of accounting changes, net of tax | (0.48) | 0.05 | 0.11 | ||||||
Net income/(loss) | 0.66 | (3.85) | (0.58) | ||||||
Diluted earnings per share, in CHF | |||||||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | 1.39 | (3.53) | (0.80) | ||||||
Income/(loss) from discontinued operations, net of tax | (0.29) | (0.39) | 0.11 | ||||||
Extraordinary items, net of tax | 0.01 | 0.02 | 0.00 | ||||||
Cumulative effect of accounting changes, net of tax | (0.47) | 0.05 | 0.11 | ||||||
Net income/(loss) | 0.64 | (3.85) | (0.58) | ||||||
Consolidated balance sheets
December 31, in CHF m | 2003 | 2002 | |||
Assets | |||||
Cash and due from banks | 24,799 | 28,461 | |||
Interest-bearing deposits with banks | 2,992 | 2,618 | |||
Central bank funds sold, securities purchased under resale agreements and securities borrowing transactions | 257,083 | 267,634 | |||
Securities received as collateral | 15,151 | 8,313 | |||
Trading assets (of which CHF 103,286 m and CHF 96,476 m encumbered) | 296,076 | 263,090 | |||
Investment securities (of which CHF 4 m and CHF 992 m encumbered) | 105,807 | 108,732 | |||
Other investments | 7,894 | 15,107 | |||
Real estate held for investment | 9,148 | 9,916 | |||
Loans, net of allowance for loan losses of CHF 4,646 m and CHF 7,427 m | 177,179 | 180,797 | |||
Premises and equipment | 7,819 | 9,372 | |||
Goodwill | 12,325 | 16,664 | |||
Intangible assets | 4,056 | 4,794 | |||
Assets held for separate accounts | 5,693 | 13,377 | |||
Other assets (of which CHF 2,644 m and CHF 5,594 m encumbered) | 78,286 | 79,243 | |||
Discontinued operations – assets | 0 | 19,040 | |||
Total assets | 1,004,308 | 1,027,158 | |||
Liabilities and shareholders' equity | |||||
Deposits | 261,989 | 245,265 | |||
Central bank funds purchased, securities sold under repurchase agreements and securities lending transactions | 236,847 | 251,843 | |||
Obligation to return securities received as collateral | 15,151 | 8,313 | |||
Trading liabilities | 156,331 | 140,398 | |||
Short-term borrowings | 11,497 | 10,008 | |||
Provisions from the insurance business | 128,835 | 126,093 | |||
Long-term debt | 89,697 | 105,440 | |||
Liabilities held for separate accounts | 5,689 | 13,503 | |||
Other liabilities | 61,300 | 72,789 | |||
Discontinued operations – liabilities | 24 | 16,441 | |||
Preferred securities | 2,214 | 2,178 | |||
Minority interests | 743 | 709 | |||
Total liabilities | 970,317 | 992,980 | |||
Common shares | 1,195 | 1,190 | |||
Additional paid-in capital | 23,586 | 24,417 | |||
Retained earnings | 14,873 | 14,214 | |||
Treasury shares, at cost | (3,144) | (4,387) | |||
Accumulated other comprehensive income/(loss) | (2,519) | (1,256) | |||
Total shareholders' equity | 33,991 | 34,178 | |||
Total liabilities and shareholders' equity | 1,004,308 | 1,027,158 | |||
Commitments and contingencies refer to notes 3, 36 and 46. |
Consolidated statements of changes in shareholders’ equity
Accumulated | |||||||||||||||
Common | other | ||||||||||||||
Additional | shares in | comprehen- | |||||||||||||
Common shares | Common | paid in | Retained | treasury | sive income/ | ||||||||||
in CHF m, except common shares outstanding | outstanding | 1) | shares | capital | earnings | at cost | 2) | (loss) | Total | ||||||
Balance December 31, 2000 | 1,103,882,156 | 6,009 | 24,795 | 19,472 | (7,466) | 6,294 | 49,104 | ||||||||
Net income | – | – | – | (659) | – | – | (659) | ||||||||
Other comprehensive income/(loss), net of tax | – | – | – | – | – | (3,631) | (3,631) | ||||||||
Issuance of common shares | 2,457,851 | 11 | 164 | – | – | – | 175 | ||||||||
Cancellation of repurchased shares | (7,600,000) | (38) | (531) | – | – | – | (569) | ||||||||
Issuance of treasury shares | 235,177,204 | – | 235 | – | 15,874 | – | 16,109 | ||||||||
Repurchase of treasury shares | (243,106,991) | – | – | – | (16,799) | – | (16,799) | ||||||||
Share-based compensation | 29,913,015 | – | 363 | – | 2,133 | – | 2,496 | ||||||||
Net premium/discount on treasury share and own share derivative activity | – | – | 54 | – | – | – | 54 | ||||||||
Repayment out of share capital (CHF 2.00 per share) 3) | – | (2,392) | – | – | – | – | (2,392) | ||||||||
Dividend on treasury shares | – | – | – | 173 | – | – | 173 | ||||||||
Balance December 31, 2001 | 1,120,723,235 | 3,590 | 25,080 | 18,986 | (6,258) | 2,663 | 44,061 | ||||||||
Net income | – | – | – | (4,448) | – | – | (4,448) | ||||||||
Other comprehensive income/(loss), net of tax | – | – | – | – | – | (3,919) | (3,919) | ||||||||
Issuance of common shares | 1,011,909 | 2 | 26 | – | – | – | 28 | ||||||||
Cancellation of repurchased shares | (7,730,000) | (23) | (69) | (450) | – | – | (542) | ||||||||
Issuance of treasury shares | 141,837,418 | – | (482) | – | 4,884 | – | 4,402 | ||||||||
Repurchase of treasury shares | (163,895,110) | – | – | – | (4,811) | – | (4,811) | ||||||||
Share-based compensation | 24,110,853 | – | (147) | – | 1,798 | – | 1,651 | ||||||||
Net premium/discount on treasury share and own share derivative activity | – | – | 9 | – | – | – | 9 | ||||||||
Repayment out of share capital (CHF 2.00 per share) 3) | – | (2,379) | – | – | – | – | (2,379) | ||||||||
Dividend on treasury shares | – | – | – | 126 | – | – | 126 | ||||||||
Balance December 31, 2002 | 1,116,058,305 | 1,190 | 24,417 | 14,214 | (4,387) | (1,256) | 34,178 | ||||||||
Net income | – | – | 770 | – | – | 770 | |||||||||
Other comprehensive income/(loss), net of tax | – | – | – | – | (1,263) | (1,263) | |||||||||
Issuance of common shares | 5,114,194 | 5 | 14 | – | – | – | 19 | ||||||||
Issuance of treasury shares | 182,622,865 | – | – | – | 6,913 | – | 6,913 | ||||||||
Repurchase of treasury shares | (191,245,719) | – | – | – | (7,009) | – | (7,009) | ||||||||
Share-based compensation | 17,813,303 | – | (844) | – | 1,339 | – | 495 | ||||||||
Net premium/discount on treasury share and own share derivative activity | – | (1) | – | – | – | (1) | |||||||||
Cash dividends paid (CHF 0.10 per share) | – | – | (111) | – | – | (111) | |||||||||
Balance December 31, 2003 | 1,130,362,948 | 1,195 | 23,586 | 14,873 | (3,144) | (2,519) | 33,991 | ||||||||
1) At par value CHF 1.00 each, fully paid, net of treasury shares. | |||||||||||||||
2) Comprising 64,642,966, 73,833,415 and 75,886,576 treasury shares at December 31, 2003, 2002 and 2001, respectively. In addition to the treasury shares, a maximum of 272,718,007, 228,970,984 and 191,026,457 unissued shares (conditional and authorized capital) at December 31, 2003, 2002 and 2001, respectively, were available for issuance without the approval of the shareholders. | |||||||||||||||
3) For the financial year 2000, repayment out of share capital as approved on June 1, 2001 in lieu of a dividend. For the financial year 2001, repayment out of share capital as approved on May 31, 2002 in lieu of a dividend. |
Comprehensive income
Year ended December 31, in CHF m | 2003 | 2002 | 2001 | ||||
Net income/(loss) | 770 | (4,448) | (659) | ||||
Other comprehensive income/(loss) | (1,263) | (3,919) | (3,631) | ||||
Comprehensive income/(loss) | (493) | (8,367) | (4,290) | ||||
Year ended December 31, in CHF m, except the per share amounts | 2003 | 2002 | 2001 | ||||
Net income/(loss) – as reported | 770 | (4,448) | (659) | ||||
Add: Share-based compensation expense included in reported net income/(loss), net of related tax effects | 740 | 1,040 | 1,544 | ||||
Deduct: Total share-based compensation expense determined under the fair value method for all awards vested during the year, net of related tax effects | (761) | (1,557) | (2,109) | ||||
Net income/(loss) – pro forma | 749 | (4,965) | (1,224) | ||||
Basic earnings/(loss) per share – as reported | 0.66 | (3.85) | (0.58) | ||||
Basic earnings/(loss) per share – pro forma | 0.64 | (4.30) | (1.08) | ||||
Diluted earnings/(loss) per share – as reported | 0.64 | (3.85) | (0.58) | ||||
Diluted earnings/(loss) per share – pro forma | 0.62 | (4.30) | (1.08) | ||||
Year ended December 31, in CHF m | 2003 | 2002 | 2001 | ||||
Total revenues | 5,290 | 7,729 | 7,751 | ||||
Total expenses | (5,278) | 1) | (7,650) | (7,626) | |||
Income/(loss) before taxes from discontinued operations | 12 | 79 | 125 | ||||
Gain/(loss) on disposal of stock | (234) | (526) | 0 | ||||
Income tax expense | 124 | 0 | 3 | ||||
Income/(loss) from discontinued operations, net | (346) | (447) | 122 | ||||
1) Including charges from indemnification provisions. |
E Interest and dividend income and interest expense
The following table sets forth the details of interest and dividend income and interest expense:
Year ended December 31, in CHF m | 2003 | 2002 | 2001 | ||||
Interest income on loans | 6,834 | 7,394 | 9,663 | ||||
Interest income on investment securities | 3,944 | 3,395 | 4,327 | ||||
Dividend income from investment securities | 198 | 469 | 679 | ||||
Interest and dividend income on trading assets | 10,775 | 10,997 | 13,747 | ||||
Central bank funds sold, securities purchased under resale agreements and securities borrowing transactions | 5,252 | 7,750 | 14,303 | ||||
Other | 1,361 | 2,195 | 3,242 | ||||
Total interest and dividend income | 28,364 | 32,200 | 45,961 | ||||
Deposits | 3,404 | 4,386 | 9,084 | ||||
Short-term borrowings | 339 | 239 | 701 | ||||
Interest expense on trading liabilities | 4,829 | 4,328 | 6,417 | ||||
Central bank funds purchased, securities sold under repurchase agreements and securities lending transactions | 4,655 | 7,505 | 15,249 | ||||
Long-term debt | 2,808 | 4,239 | 4,111 | ||||
Other | 602 | 494 | 310 | ||||
Total interest expense | 16,637 | 21,191 | 35,872 | ||||
Net interest income | 11,727 | 11,009 | 10,089 | ||||
F Trading activities
The following table sets forth the details of trading-related revenues:
Year ended December 31, in CHF m | 2003 | 2002 | 2001 | ||||
Interest rate products | 353 | 842 | 2,740 | ||||
Equity/index-related products | 2,361 | 806 | 5,088 | ||||
Foreign exchange products | 964 | 859 | 1,711 | ||||
Other | (150) | 936 | 189 | ||||
Trading revenues | 3,528 | 3,443 | 9,728 | ||||
Interest and dividend income on trading assets | 10,775 | 10,997 | 13,747 | ||||
Interest expense on trading liabilities | (4,829) | (4,328) | (6,417) | ||||
Trading interest income, net | 5,946 | 6,669 | 7,330 | ||||
Total trading-related revenues | 9,474 | 10,112 | 17,058 | ||||
The following table summarizes the details of trading assets and liabilities:
December 31, in CHF m | 2003 | 2002 | |||
Trading assets | |||||
Debt securities | 162,424 | 157,198 | |||
Equity securities | 66,269 | 40,052 | |||
Positive replacement values of derivative trading positions | 51,842 | 53,032 | |||
Other | 15,541 | 12,808 | |||
Total trading assets | 296,076 | 263,090 | |||
Trading liabilities | |||||
Short positions | 98,424 | 86,925 | |||
Negative replacement values of derivative trading positions | 57,907 | 53,473 | |||
Total trading liabilities | 156,331 | 140,398 | |||
G Loans
The following table sets forth details of the domestic (Switzerland) and foreign loan portfolio:
December 31, in CHF m | 2003 | 2002 | |||
Banks | 1,254 | 1,416 | |||
Commercial | 42,811 | 47,693 | |||
Consumer | 70,932 | 65,029 | |||
Public authorities | 3,419 | 3,107 | |||
Lease financings | 3,481 | 3,230 | |||
Switzerland | 121,897 | 120,475 | |||
Banks | 7,876 | 8,841 | |||
Commercial | 31,264 | 38,648 | |||
Consumer | 19,741 | 18,330 | |||
Public authorities | 797 | 1,586 | |||
Lease financings | 144 | 165 | |||
Foreign | 59,822 | 67,570 | |||
Loans, gross | 181,719 | 188,045 | |||
Deferred expenses, net | 106 | 179 | |||
Allowance for loan losses | (4,646) | (7,427) | |||
Total loans, net | 177,179 | 180,797 | |||
The following table sets forth the movements in the allowance for loan losses:
Year ended December 31, in CHF m | 2003 | 2002 | 2001 | ||||
Balance January 1 | 7,427 | 9,348 | 10,906 | ||||
New provisions | 1,686 | 3,194 | 2,674 | ||||
Releases of provisions | (1,071) | (690) | (1,002) | ||||
Net additions charged to income statement | 615 | 2,504 | 1,672 | ||||
Gross write-offs | (3,333) | (3,692) | (3,720) | ||||
Recoveries | 48 | 61 | 48 | ||||
Net write-offs | (3,285) | (3,631) | (3,672) | ||||
Allowances acquired | 26 | 4 | 2 | ||||
Provisions for interest | 155 | 187 | 400 | ||||
Foreign currency translation impact and other adjustments, net | (292) | (985) | 40 | ||||
Balance December 31 | 4,646 | 7,427 | 9,348 | ||||
The allowance for loan losses is estimated considering a variety of sources of information including, as appropriate, discounted cash flow analysis, fair value of collateral held less disposal costs and historical loss experience. The following tables set forth details of impaired loans, with or without specific allowance, including troubled debt restructurings. Loans are considered impaired, when it is considered probable that the Group will not collect all amounts due under the loan terms. |
December 31, in CHF m | 2003 | 2002 | |||
With a specific allowance | 6,459 | 11,807 | |||
Without a specific allowance | 748 | 699 | |||
Total impaired loans, gross | 7,207 | 12,506 | |||
H Earnings per share
The following table sets forth details of the calculation of earnings per share:
Year ended December 31, in CHF m | 2003 | 2002 | 2001 | ||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | 1,675 | (4,080) | (904) | ||||
Income/(loss) from discontinued operations, net of tax | (346) | (447) | 122 | ||||
Extraordinary items, net of tax | 7 | 18 | 0 | ||||
Cumulative effect of accounting changes, net of tax | (566) | 61 | 123 | ||||
Net income available for common shares for basic EPS | 770 | (4,448) | (659) | ||||
Interest on convertible securities | – | 1) | – | 2) | – | 2) | |
Net income available for common shares for diluted EPS | 770 | (4,448) | (659) | ||||
Weighted-average common shares outstanding for basic EPS | 1,168,883,452 | 1,154,529,909 | 1,134,355,261 | ||||
Potential dilutive common shares | |||||||
Contingent issuable shares | 23,956,296 | – | 2) | – | 2) | ||
Incremental shares from assumed conversions | |||||||
Convertible securities | – | 1) | – | 2) | – | 2) | |
Share options | 7,606,650 | – | 2) | – | 2) | ||
Adjusted weighted-average common shares for diluted EPS | 1,200,446,398 | 1,154,529,909 | 1,134,355,261 | ||||
Basic earnings per share, in CHF | |||||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | 1.43 | (3.53) | (0.80) | ||||
Income/(loss) from discontinued operations, net of tax | (0.30) | (0.39) | 0.11 | ||||
Extraordinary items, net of tax | 0.01 | 0.02 | 0.00 | ||||
Cumulative effect of accounting changes, net of tax | (0.48) | 0.05 | 0.11 | ||||
Net income/(loss) | 0.66 | (3.85) | (0.58) | ||||
Diluted earnings per share, in CHF | |||||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | 1.39 | (3.53) | (0.80) | ||||
Income/(loss) from discontinued operations, net of tax | (0.29) | (0.39) | 0.11 | ||||
Extraordinary items, net of tax | 0.01 | 0.02 | 0.00 | ||||
Cumulative effect of accounting changes, net of tax | (0.47) | 0.05 | 0.11 | ||||
Net income/(loss) | 0.64 | (3.85) | (0.58) | ||||
1) For 2003, the computation of the diluted earnings per share excludes the effect of the potential exchange of convertible securities into 40,413,838 shares, as the effect would be antidilutive. | |||||||
2) For 2002 and 2001, the computation of the diluted earnings per share excludes the effect of the contingent issuable shares, the potential exchange of convertible securities and the potential exercise of share options, as the effect would be antidilutive. |
SEGMENT US GAAP FINANCIAL INFORMATION - UNAUDITED
2003 BY QUARTER / FULL YEAR 2003 AND 2002
The unaudited US GAAP segment information contained in this report represents historical information, which previously was reported based on Swiss GAAP and is restated to be presented in accordance with US GAAP. This restatement to US GAAP has been performed in connection with the Group’s change of its primary basis of accounting from Swiss GAAP to US GAAP as of January 1, 2004. The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance. For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein. This information is being provided on a supplemental basis and not intended to satisfy any regulatory reporting requirements. The unaudited US GAAP segment information presented herein reflects the segment composition effective as of January 1, 2004. As of that date, Credit Suisse First Boston reorganized its operations by transferring the private equity and private fund groups from the Institutional Securities segment to the CSFB Financial Services segment, which was renamed Wealth & Asset Management. Effective January 1, 2004, the Insurance segment within Credit Suisse Financial Services was renamed Non-Life. |
SEGMENT US GAAP FINANCIAL INFORMATION - UNAUDITED
2003 BY QUARTER / FULL YEAR 2003 AND 2002
Consolidated statements of income
Private Banking income statement
Corporate & Retail Banking income statement
Life & Pensions income statement
Institutional Securities income statement
Wealth & Asset Management income statement
Corporate Center income statement
Consolidated statements of income
Unaudited
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Interest and dividend income | 6,527 | 7,504 | 7,123 | 7,210 | 28,364 | 32,200 | |||||||
Interest expense | (4,030 | ) | (4,486 | ) | (3,950 | ) | (4,171 | ) | (16,637 | ) | (21,191 | ) | |
Net interest income | 2,497 | 3,018 | 3,173 | 3,039 | 11,727 | 11,009 | |||||||
Commissions and fees | 3,029 | 3,179 | 3,465 | 3,275 | 12,948 | 15,344 | |||||||
Trading revenues | 1,287 | 1,214 | 233 | 794 | 3,528 | 3,443 | |||||||
Realized gains/(losses) from investment securities, net | 82 | 588 | 513 | 353 | 1,536 | (4,207 | ) | ||||||
Insurance net premiums earned | 7,470 | 4,631 | 4,566 | 5,156 | 21,823 | 22,307 | |||||||
Other revenues | 346 | (474 | ) | (200 | ) | 272 | (56 | ) | (510 | ) | |||
Total noninterest revenues | 12,214 | 9,138 | 8,577 | 9,850 | 39,779 | 36,377 | |||||||
Net revenues | 14,711 | 12,156 | 11,750 | 12,889 | 51,506 | 47,386 | |||||||
Policyholder benefits, claims and dividends | 7,382 | 4,654 | 4,399 | 6,450 | 22,885 | 19,274 | |||||||
Provision for credit losses | 197 | 114 | 113 | 191 | 615 | 2,504 | |||||||
Total benefits, claims and credit losses | 7,579 | 4,768 | 4,512 | 6,641 | 23,500 | 21,778 | |||||||
Insurance underwriting, acquisition and administration expenses | 1,149 | 1,049 | 1,116 | 1,228 | 4,542 | 4,909 | |||||||
Banking compensation and benefits | 2,942 | 3,092 | 2,482 | 2,526 | 11,042 | 13,495 | |||||||
Other expenses | 1,937 | 1,911 | 2,599 | 2,563 | 9,010 | 11,421 | |||||||
Goodwill impairment | 0 | 1,510 | 0 | 0 | 1,510 | 0 | |||||||
Restructuring charges | 25 | 35 | 32 | 46 | 138 | 32 | |||||||
Total operating expenses | 6,053 | 7,597 | 6,229 | 6,363 | 26,242 | 29,857 | |||||||
Income/(loss) from continuing operations before taxes, | |||||||||||||
minority interests, extraordinary items and cumulative | |||||||||||||
effect of accounting changes | 1,079 | (209 | ) | 1,009 | (115 | ) | 1,764 | (4,249 | ) | ||||
Income tax expense/(benefit) | 318 | 357 | 259 | (947 | ) | (13 | ) | (109 | ) | ||||
Dividends on preferred securities for consolidated entities | 32 | 33 | 34 | 34 | 133 | 133 | |||||||
Minority interests, net of tax | (1 | ) | 8 | (9 | ) | (29 | ) | (31 | ) | (193 | ) | ||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | |||||||||||||
730 | (607 | ) | 725 | 827 | 1,675 | (4,080 | ) | ||||||
Income/(loss) from discontinued operations, net of tax | 75 | 62 | (452 | ) | (31 | ) | (346 | ) | (447 | ) | |||
Extraordinary items, net of tax | 4 | 1 | 0 | 2 | 7 | 18 | |||||||
Cumulative effect of accounting changes, net of tax | (530 | ) | (12 | ) | (10 | ) | (14 | ) | (566 | ) | 61 | ||
Net income/(loss) | 279 | (556 | ) | 263 | 784 | 770 | (4,448 | ) | |||||
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance.
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein.
Private Banking income statement
Segment US GAAP financial information (unaudited)
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Net interest income | 345 | 399 | 377 | 404 | 1,525 | 1,476 | |||||||
Commissions and fees | 996 | 1,069 | 1,185 | 1,024 | 4,274 | 4,375 | |||||||
Trading revenues including realized gains/(losses) | |||||||||||||
from investment securities, net | 127 | (1 | ) | 131 | 250 | 507 | 79 | ||||||
Other revenues | 19 | 11 | 23 | 140 | 193 | 82 | |||||||
Total noninterest revenues | 1,142 | 1,079 | 1,339 | 1,414 | 4,974 | 4,536 | |||||||
Net revenues | 1,487 | 1,478 | 1,716 | 1,818 | 6,499 | 6,012 | |||||||
Provision for credit losses | 11 | 5 | 3 | (7 | ) | 12 | 62 | ||||||
Compensation and benefits | 495 | 509 | 517 | 530 | 2,051 | 2,215 | |||||||
Other expenses | 459 | 438 | 504 | 541 | 1,942 | 2,107 | |||||||
Goodwill impairment | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Restructuring charges | 0 | 1 | 0 | 11 | 12 | 17 | |||||||
Total operating expenses | 954 | 948 | 1,021 | 1,082 | 4,005 | 4,339 | |||||||
Income from continuing operations before taxes, minority | |||||||||||||
interests, extraordinary items and cumulative effect | |||||||||||||
of accounting changes | 522 | 525 | 692 | 743 | 2,482 | 1,611 | |||||||
Income tax expense | 126 | 121 | 172 | 113 | 532 | 397 | |||||||
Minority interests, net of tax | 3 | 4 | 4 | 4 | 15 | 15 | |||||||
Income from continuing operations before extraordinary | |||||||||||||
items and cumulative effect of accounting changes | 393 | 400 | 516 | 626 | 1,935 | 1,199 | |||||||
Income/(loss) from discontinued operations, net of tax | (1 | ) | 0 | 0 | 2 | 1 | (35 | ) | |||||
Extraordinary items, net of tax | 4 | 1 | 0 | 2 | 7 | 17 | |||||||
Cumulative effect of accounting changes, net of tax | 0 | 0 | (6 | ) | (1 | ) | (7 | ) | 0 | ||||
Net income | 396 | 401 | 510 | 629 | 1,936 | 1,181 | |||||||
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance.
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein.
Corporate & Retail Banking income statement
Segment US GAAP financial information (unaudited)
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Net interest income | 550 | 585 | 597 | 579 | 2,311 | 2,181 | |||||||
Commissions and fees | 173 | 170 | 177 | 194 | 714 | 739 | |||||||
Trading revenues including realized gains/(losses) from investment securities, net | 27 | (1 | ) | 114 | 41 | 181 | (430 | ) | |||||
Other revenues | 24 | 35 | 16 | 12 | 87 | 173 | |||||||
Total noninterest revenues | 224 | 204 | 307 | 247 | 982 | 482 | |||||||
Net revenues | 774 | 789 | 904 | 826 | 3,293 | 2,663 | |||||||
Provision for credit losses | 50 | 39 | 77 | 225 | 391 | 628 | |||||||
Compensation and benefits | 281 | 281 | 293 | 259 | 1,114 | 1,065 | |||||||
Other expenses | 239 | 253 | 253 | 293 | 1,038 | 1,375 | |||||||
Goodwill impairment | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Restructuring charges | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Total operating expenses | 520 | 534 | 546 | 552 | 2,152 | 2,440 | |||||||
Income/(loss) from continuing operations before taxes, minority interests, extraordinary items and cumulative effect of accounting changes | 204 | 216 | 281 | 49 | 750 | (405 | ) | ||||||
Income tax expense/(benefit) | 49 | 52 | 57 | 0 | 158 | (111 | ) | ||||||
Minority interests, net of tax | 0 | 1 | 0 | 0 | 1 | 0 | |||||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | 155 | 163 | 224 | 49 | 591 | (294 | ) | ||||||
Income/(loss) from discontinued operations, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Extraordinary items, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Cumulative effect of accounting changes, net of tax | 0 | 0 | (6 | ) | 1 | (5 | ) | 0 | |||||
Net income/(loss) | 155 | 163 | 218 | 50 | 586 | (294 | ) | ||||||
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance. |
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein. |
Life & Pensions income statement
Segment US GAAP financial information (unaudited)
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Gross premiums written | 4,982 | 2,103 | 1,969 | 2,440 | 11,494 | 12,268 | |||||||
Net premiums earned | 4,950 | 2,091 | 1,939 | 2,424 | 11,404 | 12,193 | |||||||
Net investment income | 1,001 | 1,136 | 999 | 1,057 | 4,193 | 188 | |||||||
Other revenues including fees, net revenues from deposit business | |||||||||||||
general and separate account | 96 | 123 | 37 | 126 | 382 | 354 | |||||||
Net revenues | 6,047 | 3,350 | 2,975 | 3,607 | 15,979 | 12,735 | |||||||
Policyholder benefits incurred | 5,443 | 2,479 | 2,127 | 2,779 | 12,828 | 13,482 | |||||||
Dividends to policyholders incurred | 23 | 229 | 132 | 1,374 | 1,758 | (1,880 | ) | ||||||
Provision for credit losses | (4 | ) | 4 | 3 | 10 | 13 | 23 | ||||||
Total benefits, dividends and credit losses | 5,462 | 2,712 | 2,262 | 4,163 | 14,599 | 11,625 | |||||||
Insurance underwriting and acquisition expenses | 159 | 119 | 152 | 313 | 743 | 801 | |||||||
Administration expenses | 302 | 266 | 237 | 236 | 1,041 | 1,315 | |||||||
Other expenses | 53 | 28 | 159 | 119 | 359 | 217 | |||||||
Goodwill impairment | 0 | 1,510 | 0 | 0 | 1,510 | 0 | |||||||
Restructuring charges | 13 | 10 | 13 | 3 | 39 | 0 | |||||||
Total operating expenses | 527 | 1,933 | 561 | 671 | 3,692 | 2,333 | |||||||
Income/(loss) from continuing operations before taxes, | |||||||||||||
minority interests, extraordinary items and cumulative | |||||||||||||
effect of accounting changes | 58 | (1,295 | ) | 152 | (1,227 | ) | (2,312 | ) | (1,223 | ) | |||
Income tax expense/(benefit) | 88 | 17 | (12 | ) | (1,031 | ) | (938 | ) | 772 | ||||
Minority interests, net of tax | (4 | ) | 1 | (10 | ) | (26 | ) | (39 | ) | (93 | ) | ||
Income/(loss) from continuing operations before extraordinary | |||||||||||||
items and cumulative effect of accounting changes | (26 | ) | (1,313 | ) | 174 | (170 | ) | (1,335 | ) | (1,902 | ) | ||
Income/(loss) from discontinued operations, net of tax | 38 | 12 | (215 | ) | (5 | ) | (170 | ) | (26 | ) | |||
Extraordinary items, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Cumulative effect of accounting changes, net of tax | (529 | ) | 0 | 0 | (1 | ) | (530 | ) | 0 | ||||
Net income/(loss) | (517 | ) | (1,301 | ) | (41 | ) | (176 | ) | (2,035 | ) | (1,928 | ) | |
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance.
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein.
Segment US GAAP financial information (unaudited)
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Gross premiums written | 4,992 | 2,103 | 1,968 | 1,919 | 10,982 | 10,665 | |||||||
Reinsurance ceded | (285 | ) | (56 | ) | (60 | ) | (39 | ) | (440 | ) | (331 | ) | |
Change in provisions for unearned premiums | (2,187 | ) | 493 | 719 | 852 | (123 | ) | (220 | ) | ||||
Net premiums earned | 2,520 | 2,540 | 2,627 | 2,732 | 10,419 | 10,114 | |||||||
Net investment income | 192 | 229 | 245 | 264 | 930 | (280 | ) | ||||||
Other revenues including fees | (27 | ) | 4 | 6 | (40 | ) | (57 | ) | 10 | ||||
Net revenues | 2,685 | 2,773 | 2,878 | 2,956 | 11,292 | 9,844 | |||||||
Claims and annuities incurred | 1,869 | 1,872 | 2,058 | 2,000 | 7,799 | 7,787 | |||||||
Dividends to policyholders incurred | 47 | 75 | 81 | 297 | 500 | (117 | ) | ||||||
Provision for credit losses | 1 | (2 | ) | 1 | 9 | 9 | 15 | ||||||
Total claims, dividends and credit losses | 1,917 | 1,945 | 2,140 | 2,306 | 8,308 | 7,685 | |||||||
Insurance underwriting and acquisition expenses | 373 | 373 | 386 | 419 | 1,551 | 1,463 | |||||||
Administration expenses | 317 | 294 | 341 | 262 | 1,214 | 1,339 | |||||||
Other expenses | 26 | 96 | 479 | 9 | 610 | 668 | |||||||
Goodwill impairment | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Restructuring charges | 11 | 25 | 20 | 31 | 87 | 15 | |||||||
Total operating expenses | 727 | 788 | 1,226 | 721 | 3,462 | 3,485 | |||||||
Income/(loss) from continuing operations before taxes, | |||||||||||||
minority interests, extraordinary items and cumulative | |||||||||||||
effect of accounting changes | 41 | 40 | (488 | ) | (71 | ) | (478 | ) | (1,326 | ) | |||
Income tax expense/(benefit) | (33 | ) | (3 | ) | (110 | ) | (148 | ) | (294 | ) | 80 | ||
Minority interests, net of tax | (1 | ) | 3 | (4 | ) | (5 | ) | (7 | ) | (117 | ) | ||
Income/(loss) from continuing operations before extraordinary items and cumulative | |||||||||||||
effect of accounting changes | 75 | 40 | (374 | ) | 82 | (177 | ) | (1,289 | ) | ||||
Income/(loss) from discontinued operations, net of tax | 17 | 51 | (238 | ) | (24 | ) | (194 | ) | 190 | ||||
Extraordinary items, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Cumulative effect of accounting changes, net of tax | 0 | 0 | 0 | (3 | ) | (3 | ) | 0 | |||||
Net income/(loss) | 92 | 91 | (612 | ) | 55 | (374 | ) | (1,099 | ) | ||||
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance.
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein.
Institutional Securities income statement
Segment US GAAP financial information (unaudited)
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Net interest income | 829 | 937 | 1,092 | 1,157 | 4,015 | 3,697 | |||||||
Investment banking | 813 | 873 | 939 | 839 | 3,464 | 4,389 | |||||||
Commissions and fees | 612 | 624 | 691 | 581 | 2,508 | 3,301 | |||||||
Trading revenues including realized gains/(losses) | |||||||||||||
from investment securities, net | 1,321 | 759 | (100 | ) | (42 | ) | 1,938 | 3,376 | |||||
Other revenues | (21 | ) | 119 | (3 | ) | 170 | 265 | (437 | ) | ||||
Total noninterest revenues | 2,725 | 2,375 | 1,527 | 1,548 | 8,175 | 10,629 | |||||||
Net revenues | 3,554 | 3,312 | 2,619 | 2,705 | 12,190 | 14,326 | |||||||
Provision for credit losses | 154 | 50 | 10 | (47 | ) | 167 | 2,023 | ||||||
Compensation and benefits | 1,839 | 1,966 | 1,350 | 1,443 | 6,598 | 8,635 | |||||||
Other expenses | 963 | 901 | 1,004 | 1,013 | 3,881 | 5,859 | |||||||
Goodwill impairment | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Restructuring charges | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Total operating expenses | 2,802 | 2,867 | 2,354 | 2,456 | 10,479 | 14,494 | |||||||
Income/(loss) from continuing operations before taxes, | |||||||||||||
minority interests, extraordinary items and cumulative | |||||||||||||
effect of accounting changes | 598 | 395 | 255 | 296 | 1,544 | (2,191 | ) | ||||||
Income tax expense/(benefit) | 87 | 228 | 124 | 193 | 632 | (1,095 | ) | ||||||
Dividends on preferred securities for consolidated entities | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Minority interests, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Income/(loss) from continuing operations before extraordinary | |||||||||||||
items and cumulative effect of accounting changes | 511 | 167 | 131 | 103 | 912 | (1,096 | ) | ||||||
Income/(loss) from discontinued operations, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Extraordinary items, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Cumulative effect of accounting changes, net of tax | 0 | (12 | ) | (1 | ) | (7 | ) | (20 | ) | 64 | |||
Net income/(loss) | 511 | 155 | 130 | 96 | 892 | (1,032 | ) | ||||||
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance.
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein.
Wealth & Asset Management income statement
Segment US GAAP financial information (unaudited)
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Net interest income | 2 | 11 | 20 | 25 | 58 | 48 | |||||||
Asset management and administrative fees | 562 | 569 | 616 | 670 | 2,417 | 2,944 | |||||||
Trading revenues including realized gains/(losses) | |||||||||||||
from investment securities, net | 53 | 70 | (1 | ) | 21 | 143 | 186 | ||||||
Other revenues | 58 | (2 | ) | 76 | 240 | 372 | (140 | ) | |||||
Total noninterest revenues | 673 | 637 | 691 | 931 | 2,932 | 2,990 | |||||||
Net revenues | 675 | 648 | 711 | 956 | 2,990 | 3,038 | |||||||
Provision for credit losses | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Compensation and benefits | 268 | 251 | 304 | 284 | 1,107 | 1,391 | |||||||
Other expenses | 338 | 342 | 321 | 639 | 1,640 | 1,574 | |||||||
of which commission and distribution expenses | 180 | 193 | 208 | 186 | 767 | 856 | |||||||
of which intangible asset impairment | 0 | 0 | 0 | 270 | 270 | 0 | |||||||
Goodwill impairment | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Restructuring charges | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Total operating expenses | 606 | 593 | 625 | 923 | 2,747 | 2,965 | |||||||
Income from continuing operations before taxes, minority | |||||||||||||
interests, extraordinary items and cumulative effect | |||||||||||||
of accounting changes | 69 | 55 | 86 | 33 | 243 | 73 | |||||||
Income tax expense/(benefit) | 3 | 7 | 14 | 3 | 27 | (30 | ) | ||||||
Dividends on preferred securities for consolidated entities | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Minority interests, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Income from continuing operations before extraordinary | |||||||||||||
items and cumulative effect of accounting changes | 66 | 48 | 72 | 30 | 216 | 103 | |||||||
Income/(loss) from discontinued operations, net of tax | 21 | (1 | ) | 1 | (3 | ) | 18 | (576 | ) | ||||
Extraordinary items, net of tax | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Cumulative effect of accounting changes, net of tax | 0 | 0 | 0 | (1 | ) | (1 | ) | (4 | ) | ||||
Net income/(loss) | 87 | 47 | 73 | 26 | 233 | (477 | ) | ||||||
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance.
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein.
Corporate Center income statement
Segment US GAAP financial information (unaudited)
12 months | |||||||||||||
in CHF m | 1Q2003 | 2Q2003 | 3Q2003 | 4Q2003 | 2003 | 2002 | |||||||
Net revenues | (511 | ) | (194 | ) | (53 | ) | 21 | (737 | ) | (1,232 | ) | ||
Policyholder benefits, claims and dividends | 0 | (1 | ) | 1 | 0 | 0 | 2 | ||||||
Provision for credit losses | (15 | ) | 18 | 19 | 1 | 23 | (247 | ) | |||||
Total benefits, claims and credit losses | (15 | ) | 17 | 20 | 1 | 23 | (245 | ) | |||||
Insurance underwriting, acquisition and administration expenses | (2 | ) | (3 | ) | 0 | (2 | ) | (7 | ) | (9 | ) | ||
Banking compensation and benefits | 59 | 85 | 18 | 10 | 172 | 189 | |||||||
Other expenses | (141 | ) | (147 | ) | (121 | ) | (51 | ) | (460 | ) | (379 | ) | |
Goodwill impairment | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Restructuring charges | 1 | (1 | ) | (1 | ) | 1 | 0 | 0 | |||||
Total operating expenses | (83 | ) | (66 | ) | (104 | ) | (42 | ) | (295 | ) | (199 | ) | |
Income/(loss) from continuing operations before taxes, | |||||||||||||
minority interests, extraordinary items and cumulative | |||||||||||||
effect of accounting changes | (413 | ) | (145 | ) | 31 | 62 | (465 | ) | (788 | ) | |||
Income tax expense/(benefit) | (2 | ) | (65 | ) | 14 | (77 | ) | (130 | ) | (122 | ) | ||
Dividends on preferred securities for consolidated entities | 32 | 33 | 34 | 34 | 133 | 133 | |||||||
Minority interests, net of tax | 1 | (1 | ) | 1 | (2 | ) | (1 | ) | 2 | ||||
Income/(loss) from continuing operations before extraordinary items and cumulative effect of accounting changes | |||||||||||||
(444 | ) | (112 | ) | (18 | ) | 107 | (467 | ) | (801 | ) | |||
Income/(loss) from discontinued operations, net of tax | 0 | 0 | 0 | (1 | ) | (1 | ) | 0 | |||||
Extraordinary items, net of tax | 0 | 0 | 0 | 0 | 0 | 1 | |||||||
Cumulative effect of accounting changes, net of tax | (1 | ) | 0 | 3 | (2 | ) | 0 | 1 | |||||
Net income/(loss) | (445 | ) | (112 | ) | (15 | ) | 104 | (468 | ) | (799 | ) | ||
The Group did not manage its business in accordance with all requirements of US GAAP during the periods presented and, accordingly, the results presented on the restated basis may not be indicative of future financial performance.
For details on the accounting policies applied please refer to CONSOLIDATED US GAAP FINANCIAL INFORMATION 2003 – UNAUDITED and the selected explanatory notes contained therein.
Important note
This "Report" includes an unaudited reconciliation from Swiss GAAP to US GAAP of consolidated net profit and shareholders’ equity for and as of the year ended December 31, 2003. The purpose of providing this information is to allow stakeholders to understand the major differences between Swiss GAAP, in accordance with which the Group previously reported its results, and US GAAP, the Group's primary basis of accounting effective January 1, 2004. This report should be read only in conjunction with the audited consolidated Swiss GAAP financial statements included in our Annual Report 2003 and our Consolidated US GAAP financial information 2003 (unaudited). This report provides supplemental information and is not intended to satisfy any regulatory reporting requirements.
Cautionary statement regarding forward-looking information
This Report contains statements that constitute forward-looking statements. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements. Such forward-looking statements may include, without limitation, statements relating our plans, objectives or goals; our future economic performance or prospects; the potential effect on our future performance of certain contingencies; and assumptions underlying any such statements.
Words such as “believes,” “anticipates,” “expects,” “intends” and “plans” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such -statements. We do not intend to update these forward-looking statements except as may be required by applicable laws.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include (i) market and interest rate fluctuations; (ii) the strength of the global economy in general and the strength of the economies of the countries in which we conduct our operations in particular; (iii) the ability of counterparties to meet their obligations to us; (iv) the effects of, and changes in, fiscal, monetary, trade and tax policies, and currency fluctuations; (v) political and social developments, including war, civil unrest or terrorist activity; (vi) the possibility of foreign exchange controls, expropriation, n ationalization or confiscation of assets in countries in which we conduct our operations; (vii) the ability to maintain sufficient -liquidity and access capital markets; (viii) operational factors such as systems failure, human error, or the failure to properly implement procedures; (ix) actions taken by regulators with respect to our business and practices in one or more of the countries in which we conduct our operations; (x) the effects of changes in laws, regulations or accounting policies or practices; (xi) competition in geographic and business areas in which we conduct our operations; (xii) the ability to retain and recruit qualified personnel; (xiii) the ability to maintain our reputation and promote our brands; (xiv) the ability to increase market share and control expenses; (xv) technological changes; (xvi) the timely development and acceptance of our new products and services and the perceived overall value of these -products and services by users; (xvii) acquisitions, including the ability to int egrate successfully acquired businesses; and (xviii) our success at managing the risks involved in the foregoing.
We caution you that the foregoing list of important factors is not exclusive; when evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, as well as the risks identified in our Form 20-F and reports on Form 6-K filed with or furnished to the US Securities and Exchange Commission.
Cautionary statement regarding non-GAAP financial information
This Report may contain non-GAAP financial information. A reconciliation of such non-GAAP financial information to the most directly comparable measures under generally accepted accounting principles is contained in this report and is posted on our website at
www.credit-suisse.com/sec.html.
Reconciliation From Swiss Gaap to US GAAP (UNAUDITED)
Reconciliation of Swiss GAAP and US GAAP net profit | |||||
in CHF m | Notes | 2003 | |||
Swiss GAAP net profit before minority interests | 5,123 | ||||
Swiss GAAP minority interests | (124) | ||||
Swiss GAAP net profit | 4,999 | ||||
Adjustments in respect of | |||||
Debt and equity securities | 1) | (246) | |||
Consolidation | 2) | 45 | |||
Transfer of financial assets | 3) | (15) | |||
Real estate | 4) | (2) | |||
General provisions | 5) | (202) | |||
Business combinations and disposals | 6) | 797 | |||
Share-based compensation | 7) | 8 | |||
Pension plans | 8) | 290 | |||
Taxation | 9) | (404) | |||
Loans | 10) | (27) | |||
Leasing | 11) | 38 | |||
Derivatives | 12) | (17) | |||
Own bonds | 13) | (15) | |||
Foreign currency | 14) | 85 | |||
Capitalization of software | 15) | (234) | |||
Mandatory convertible securities | 16) | (17) | |||
Insurance liabilities | 17) | (400) | |||
Winterthur purchase accounting | 18) | (3,913) | |||
Total adjustments | (4,229) | ||||
US GAAP net profit | 770 | ||||
US GAAP minority interests | (102) | ||||
US GAAP net profit before minority interests | 872 | ||||
Reconciliation of Swiss GAAP and US GAAP shareholders' equity | |||||
December 31, in CHF m | Notes | 2003 | |||
Swiss GAAP shareholders' equity before minority interests | 34,692 | ||||
Swiss GAAP minority interests | (2,956) | ||||
Swiss GAAP shareholders' equity | 31,736 | ||||
Adjustments in respect of | |||||
Debt and equity securities | 1) | 222 | |||
Consolidation | 2) | (57) | |||
Transfer of financial assets | 3) | (255) | |||
Real estate | 4) | (10) | |||
General provisions | 5) | (30) | |||
Business combinations and disposals | 6) | 2,149 | |||
Share-based compensation | 7) | (433) | |||
Pension plans | 8) | (197) | |||
Taxation | 9) | 50 | |||
Loans | 10) | 164 | |||
Leasing | 11) | (3) | |||
Derivatives | 12) | 447 | |||
Own bonds | 13) | (129) | |||
Foreign currency | 14) | 0 | |||
Capitalization of software | 15) | 203 | |||
Mandatory convertible securities | 16) | (1,252) | |||
Insurance liabilities | 17) | (397) | |||
Winterthur purchase accounting | 18) | 1,783 | |||
Total adjustments | 2,255 | ||||
US GAAP shareholders' equity | 33,991 | ||||
US GAAP minority interests | (2,957) | ||||
US GAAP shareholders' equity before minority interests | 36,948 | ||||
Explanatory Notes
Differences between Swiss and US generally accepted accounting principles
The following narrative provides additional details to support the tabular reconciliation of net profit and shareholders’ equity prepared under Swiss generally accepted accounting principles (Swiss GAAP) to net profit and shareholders’ equity prepared under US generally accepted accounting principles (US GAAP).
1 Debt and equity securities
Valuation
Under Swiss GAAP, trading securities are carried at fair value, unless fair value is not determinable, in which case they are carried at the lower of cost or market value (LOCOM). Under Swiss GAAP, the trading criteria must be fulfilled in order for a security to be classified as a trading security.
Under Swiss GAAP, debt and equity securities for the banking business that are held for sale and that do not constitute trading balances are carried at LOCOM. Unrealized losses are recorded through the income statement when market value is lower than cost. When market value increases, unrealized gains are recorded through the income statement only up to the initial cost value. Debt securities held until final maturity are valued at amortized cost (accrual method). Premiums and discounts are deferred and accrued over the term of the instrument until final maturity. Realized gains or losses that are interest related and that arise from the early disposal or redemption of the instrument are deferred and accrued over the remaining term of that instrument. In addition, under Swiss GAAP, any impairment of held-to-maturity securities, based on the credit worthiness of the issuer, is charged to the income statement.
Under US GAAP, debt and equity securities must be classified as:
- Trading, which are carried at fair value with changes in fair value recorded through earnings;
- Held-to-maturity (debt securities only), which are carried at amortized cost; or
- Available-for-sale, which are carried at fair value, with changes in fair value recorded in other comprehensive income, a separate component of shareholders’ equity.
Private equity
Under Swiss GAAP, private equity investments are carried at LOCOM.
Under US GAAP, in accordance with specialized industry accounting principles, private equity investments held by subsidiaries, which are considered investment companies that engage exclusively in venture capital and other related activities, are carried at estimated fair value, with changes in fair value recorded through net profit.
2 Consolidation
Special Purpose Entities
Under Swiss GAAP, consolidation of a special purpose entity (SPE) is required if the Group holds more than 50% of the voting rights of the SPE or has the ability to exercise control over the SPE. Consolidation would also be required if the Group has a legal or de facto obligation to support the SPE or the SPE is dependent on the Group for funding. Consolidation may be required by application of the principle of substance over form.
Under US GAAP, additional criteria apply. In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities”, which requires the Group to consolidate all variable interest entities (VIEs) for which it is the primary beneficiary, defined as the entity that will absorb a majority of expected losses, receive a majority of the expected residual returns, or both. In December 2003, the Financial Accounting Standards Board (FASB) modified FIN 46, through the issuance of FIN 46R, to provide companies the option to defer the adoption of FIN 46 to periods ending after March 15, 2004 for certain VIEs. As of December 31, 2003, with the exception of certain private equity investment companies, mutual funds and VIE counterparties to certain derivatives transactions that were subject to deferral, the Group consolidated all VIEs under FIN 46 for which it is the primary beneficiary. The Group is continuing to assess the impact of applying FIN 46R to the private equity investment companies, mutual funds and VIE counterparties.
Determination of consolidated subsidiaries and equity method subsidiaries
Under Swiss GAAP, majority-owned subsidiaries that are not long-term investments or do not operate in the core businesses of the Group may be accounted for as financial investments or using the equity method, respectively. US GAAP has no such exception to consolidating majority-owned subsidiaries.
Under US GAAP, the Group accounts for investments under the equity method where it has the ability to exercise significant influence, which generally are investments in which the Group holds 20% to 50% of the voting rights.
3 Transfer of financial assets
Swiss GAAP requires that, when transferring financial assets, the assets be removed from the transferor’s balance sheet and a gain or loss be recognized when the following conditions are met:
- The securities are isolated from the transferor;
- The transferee obtains the right to pledge or exchange the transferred securities; and
- The transferor does not maintain effective control.
Under US GAAP, the accounting for transfers of financial assets that are considered sales is generally based on the same conditions as under Swiss GAAP. However, satisfying the US GAAP criteria requires a “true sale” legal opinion, which is a more stringent threshold than under Swiss GAAP. The resulting adjustment for transfers not deemed to be sales is that the transferred assets remain on the balance sheet and the transaction is treated as a secured borrowing.
Under US GAAP, income from matched book repo transactions is recorded on an accrual basis.
4 Real estate
Under Swiss GAAP, the banking segments’ real estate held for own use that has been designated as held for disposal is carried at the lower of carrying amount or market value. Until a contract for sale is executed, depreciation continues to be recorded on these properties.
Under Swiss GAAP, real estate investments for the insurance business are impaired when the carrying amount exceeds the higher of net selling price and value in use. Value in use is defined as the sum of the discounted cash flows. An impairment results in a charge to the income statement. If the factors to determine the recoverable amount materially improve in subsequent periods, this would lead to a value increase, resulting in an adjustment to investment income from the insurance business.
Under US GAAP, real estate that is classified as held for disposal and where the sale is probable within one year is carried at the lower of carrying amount or fair value less sale costs. No depreciation is recorded on real estate held for disposal.
Under US GAAP, real estate investments are impaired when the carrying amount exceeds both the fair value and the sum of undiscounted cash flows. An impairment results in a charge to the income statement and establishes a new cost basis, which is not adjusted for subsequent recoveries.
5 General provisions
Under Swiss GAAP, valuation adjustments and reserves are permitted to be recorded when economically necessary or legally required. The criteria for establishing such provisions under US GAAP are more stringent than under Swiss GAAP. Under US GAAP, such provisions are generally only recorded when it is probable that a liability has been incurred and is reasonably estimable.
Under Swiss GAAP, the balance sheet line item Valuation adjustments and provisions includes provisions for restructuring, litigation, technology and other operational risks. The reserve for general banking risks is recorded as a separate component of shareholders’ equity. For purposes of the US GAAP reconciliation, certain of these provisions and reserves are not allowed and have been reversed.
Other business risks and Other provisions
Valuation adjustments and provisions for other business risks principally include provisions for miscellaneous operating receivables and technology risks. Other provisions consist primarily of litigation reserves. Under Swiss GAAP, these reserves are permitted to be recorded when economically necessary or legally required.
Under US GAAP, only probable and estimable costs that can be identified with an event or set of events that have occurred prior to the balance sheet date are accrued.
Reserve for general banking risks
In accordance with Swiss banking regulations, a reserve for general banking risks is recorded as a separate component of shareholders’ equity. Changes in the equity component must be recorded as an extraordinary item in the income statement or result from a reclassification from valuation adjustments and provisions no longer required.
US GAAP does not allow general unallocated provisions. For purposes of the US GAAP reconciliation, the reserve for general banking risks has been reversed.
6 Business combinations and disposals
Under Swiss GAAP, the Group capitalizes goodwill and intangible assets and amortizes them over their estimated useful lives on a straight-line basis.
Under US GAAP, all business combinations effected after June 30, 2001 must be accounted for using the purchase method. The associated goodwill and intangible assets with an indefinite life are not amortized, but are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired.
Amortization amounts recorded under Swiss GAAP are reversed for the US GAAP reconciliation.
Further US GAAP adjustments are the result of: (1) capitalization of goodwill for pre-1997 acquisitions net of accumulated depreciation; (2) differences in the valuation of net assets at the date of acquisition, including certain amounts which are expensed under US GAAP but capitalized under Swiss GAAP, adjustments for items such as retention payments and certain restructuring charges and differences related to share option plans; and (3) differences in the carrying values of assets of discontinued operations and long-lived assets to be disposed of.
7 Share-based compensation
Under Swiss GAAP, the fair value method of accounting is applied to share option plans. The fair value of options granted is expensed over the future service periods. The fair value of shares issued in consideration of services rendered during the reporting period is accrued in that period. For shares granted in respect of future services, the fair value at grant date is expensed over the future service periods.
Under US GAAP, Credit Suisse Group has adopted the fair value recognition provisions of SFAS 123, “Accounting for Stock-based Compensation”, as amended by SFAS 148 “Accounting for Stock-based Compensation – Transition and Disclosure”, using the prospective method. SFAS 123 requires all share-based compensation awards, including share options, to be accounted for at fair value. Under the prospective transition method, all new awards granted to employees on or after January 1, 2003 will be accounted for at fair value. The fair value of share options is based on a Black-Scholes valuation model, with compensation expense recognized in earnings over the required service period. Share options outstanding as of December 31, 2002, if not subsequently modified, continue to be accounted for under APB Opinion No. 25, “Accounting for Stock Issued to Employees”. The difference between Swiss and US GAAP results from the settlement of outstanding awards that were granted prior to the adoption of SFAS 123.
8 Pension benefits
Most pension plans of the Group are separate legal entities and employees contribute to a specific pension plan. The Group also makes contributions to the pension plans.
Under Swiss GAAP and US GAAP, pension expense and liabilities for defined benefit plans are valued based on specific actuarial assumptions such as future salary increases, expected return on plan assets, employee turnover, mortality, retirement age and administrative expenses of the pension plan. In calculating the current pension benefit obligation, estimated future pension benefits are discounted to the current period. The discount rate is established by examining the rates of return of both high-quality, long-term corporate bonds and long-term government bonds. The methodology for determining of appropriate discount rates is applied consistently group-wide.
The US GAAP adjustments result from differences in the recognition of prepaid assets, additional minimum pension liabilities, the classification of the pension plan as either a defined benefit or defined contribution plan, and the amortization of transition assets or liabilities.
9 Taxation
An adjustment arises from the aggregate differences between Swiss GAAP and US GAAP that will result in taxable or deductible amounts in future years (temporary differences).
10 Loans
Loan fees and costs
Under Swiss GAAP, loan origination fee income is deferred but direct loan origination costs are normally expensed.
Under US GAAP, certain qualifying direct loan origination costs must be deferred and amortized over the life of the loan using the effective interest method.
Loan impairment
Under Swiss GAAP, provisions for impaired loans are recorded based on either the fair value of the underlying collateral or, if the loans are not collateralized, undiscounted future cash flows.
For certain non-collateral dependent impaired loans, US GAAP requires measurement of impairment using the present value of future cash flows.
11 Leasing
For Swiss GAAP purposes, the Group, as lessor, classifies lease contracts as financial leases and records a leasing receivable based on the leased asset’s underlying value at lease inception. This balance is amortized over the life of the lease using the interest method.
For US GAAP purposes, certain of these lease contracts are classified as operating leases and no finance lease receivable is recognized. However, the underlying leased asset is recorded as a tangible asset and depreciated on a straight-line basis over its useful life.
12 Derivatives
Under Swiss GAAP, trading derivatives are recorded on the balance sheet at fair value. Realized and unrealized gains and losses from derivatives classified as trading are reported in Net trading income. Realized and unrealized gains and losses on derivatives classified as hedging instruments are recognized in income on the same basis as the underlying item being hedged with any difference in fair value recorded in Other Assets or Other Liabilities.
Under US GAAP, depending on the designation of the hedging instrument as either a fair value hedge, cashflow hedge or hedge of a net investment in a foreign operation, changes in fair value of the derivative are either offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings (for fair value hedges) or are recognized in other comprehensive income (for cash flow hedges). US GAAP does not permit the use of internal derivatives in hedging relationships unless the risk is perfectly offset to a third party. US GAAP also does not permit macro-hedging.
Unlike US GAAP, Swiss GAAP permits the use of internal derivatives in hedging relationships without requiring that a corresponding trade be executed externally. Macro-hedging is permitted under Swiss GAAP.
13 Own bonds
Under Swiss GAAP, the Group’s own bonds classified in the securities trading portfolio are recorded at fair value with changes in fair value recorded in net profit. Changes in market value of own bonds held in the insurance business are reported in shareholders’ equity. Interest earned on own bonds is reported as interest income.
Under US GAAP, the purchase of own bonds is treated as a reduction of long-term debt. Any gain or loss on resale of own bonds is deferred and amortized over the remaining term of the instrument.
14 Foreign currency
Accounting for foreign currency is similar under Swiss GAAP and US GAAP. Each Group entity must specify a functional currency in which its financial statements will be prepared. Individual transactions denominated in currencies other than the functional currency are considered foreign currency transactions and result in gains and/or losses recognized in earnings. Foreign currency gains and losses related to trading activity are included in trading income. Foreign currency translation adjustments resulting from consolidation of financial statements with functional currencies different than the Group’s reporting currency are recorded in shareholders’ equity.
For Swiss GAAP, the determination of the functional currency is generally the same as under US GAAP. Under Swiss GAAP, the local currency is normally assumed to be the functional currency. US GAAP has stricter guidelines and the determination of the functional currency is made based on evaluation of the primary economic environment in which the entity operates using specific salient economic indicators. This difference results in certain Group affiliates having different functional currencies for US GAAP than for Swiss GAAP and, consequently, different amounts of foreign currency gains and losses reported in the Group’s consolidated net profit.
15 Capitalization of software
Under Swiss GAAP, certain costs related to the acquisition and development of internal use computer software have been capitalized and depreciated over the estimated useful life of the software. This treatment is in line with the treatment under US GAAP. The difference between Swiss GAAP and US GAAP results from the amortization of amounts capitalized under US GAAP prior to January 1, 2002 when software costs were not capitalized under Swiss GAAP.
16 Mandatory convertible securities
Under Swiss GAAP, the Mandatory Convertible Securities (MCS) issued by the Group through its wholly owned subsidiary, Credit Suisse Group Finance (Guernsey) Ltd., are disclosed in the line item Capital Reserves. Under US GAAP, the MCS are classified as Long-term debt. The MCS have fixed and variable coupons. Under Swiss GAAP, the fixed coupon amount is accrued through the line item Other operating expense and the variable coupon amount is disclosed as a movement in shareholders’ equity. Under US GAAP, both the fixed and variable coupon amounts are recorded as Interest expense.
17 Insurance liabilities
Under US GAAP, the Group has elected to adopt the Statement of Position 03-1 “Accounting and Reporting by Insurance Enterprises for Certain Non-traditional Long-Duration Contracts and for Separate Accounts”, as of January 1, 2003. This statement requires that additional liabilities be recorded in respect of guaranteed minimum death benefits, annuitization benefits and sale inducements. Under Swiss GAAP, no additional liabilities were recorded.
18 Winterthur purchase accounting
Under Swiss GAAP, the Group accounted for the merger of Credit Suisse Group and “Winterthur” Swiss Insurance Company using the pooling of interests method. The balance sheets and income statements of the two companies were combined with no adjustments made to carrying values of the assets and liabilities.
Under US GAAP, this business combination is accounted for using the purchase method of accounting, with Credit Suisse Group as the acquirer. Under the purchase method, the acquirer reports the assets and liabilities of the acquired company at fair market value on the date of acquisition. Any excess of the fair market value of the consideration given over the fair market value of the net tangible assets acquired is allocated first to identifiable intangible assets based on their fair value, if determinable, with the remainder allocated to goodwill.
The following table details adjustments to shareholders’ equity and net profit attributable to purchase accounting as described below:
Net | Shareholders' | ||||
profit | equity | ||||
in CHF m | 2003 | 31.12.03 | |||
Investments | (906) | 1,391 | |||
Life insurance | |||||
Deferred policy acquisition costs | 251 | (1,154) | |||
Present value of future profits | (331) | 1,911 | |||
Technical provisions | 47 | (428) | |||
Goodwill | (1,509) | 310 | |||
Retirement benefits | 12 | 227 | |||
Taxation | 377 | (474) | |||
Discontinued operations | (1,854) | 0 | |||
Total purchase accounting adjustments | (3,913) | 1,783 | |||
Investments
Under purchase accounting, investments are recorded at fair value at the date of acquisition. The unrealized gains and losses on available-for-sale securities existing before the date of acquisition are reclassified in shareholders’ equity from net unrealized gains to retained earnings. The fair value at the date of acquisition becomes the new cost basis for the investments and the realized gains and losses on disposal of investments, depreciation on real estate and the unrealized gains and losses on available-for-sale securities are adjusted for the new cost basis.
Life insurance
Deferred policy acquisition costs
Under purchase accounting, the deferred policy acquisition costs for life insurance existing at the date of acquisition are eliminated.
Present value of future profits
The present value of future profits (PVFP) is the actuarially determined present value of anticipated profits to be realized from life and health insurance in force at the date of the Group’s acquisition of “Winterthur” Swiss Insurance Company. Interest accrues on the unamortized PVFP based upon the policy liability rate or contract rate. The PVFP asset is amortized over the years that such profits are anticipated to be received in proportion to the estimated gross margins or estimated gross profits for participating traditional life products and non-traditional life products, respectively, and over the premium paying period in proportion to premiums for other traditional life products.
Technical provisions
Under purchase accounting, life insurance technical provisions are revalued at the date of acquisition, using current assumptions at such date.
Goodwill
The excess of the consideration paid for “Winterthur” Swiss Insurance Company over the fair value of the net tangible assets of Winterthur received was recorded as goodwill, which, under US GAAP, is subject to impairment testing at least annually or when certain triggering events, have occurred.
Retirement benefits
Under purchase accounting, the projected benefit obligation and fair value of plan assets are remeasured at the date of acquisition.
Taxation
This adjustment represents the tax effect of the purchase accounting adjustments that result in temporary differences.
Discontinued operations
This adjustment represents purchase accounting adjustments related to discontinued operations.
This report should be read only in conjunction with the audited consolidated Swiss GAAP financial statements 2003 and the Consolidated US GAAP financial information 2003 (unaudited).
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CREDIT SUISSE GROUP (Registrant) | |||
Date April 27, 2004 | By: | /s/ David Frick | |
(Signature)* | |||
*Print the name and title of the signing officer under his signature. | Member of the Executive Board | ||
/s/ Karin Rhomberg Hug | |||
Managing Director |