Prepared and filed by St Ives Financial

FORM 6-K


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Report of Foreign Private Issuer

Dated August 3, 2005

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of August 3, 2005

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-       

 

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          Media Relations

CREDIT SUISSE GROUP
P.O. Box 1
CH-8070 Zurich

www.credit-suisse.com
 


Telephone +41 44 333 88 44
Telefax     +41 44 333 88 77
media.relations@credit-suisse.com
         
 

Credit Suisse Group reports net income of CHF 919 million for the second quarter of 2005

Result includes a charge for litigation provisions in Institutional Securities in the amount of CHF 624 million after tax

Private Banking: net income of CHF 581 million; net new assets of CHF 12.8 billion

Corporate & Retail Banking: net income of CHF 277 million; record result; return on average allocated capital of 21.4%

Institutional Securities: net loss of CHF 408 million, reflecting the charge for litigation provisions; trading impacted by slowdown in market activity in April and May; strong investment banking revenues

Wealth & Asset Management: net income of CHF 245 million; good performance in Alternative Capital

Winterthur: continuing improvements in operational performance; net income of CHF 116 million in Life & Pensions and CHF 137 million in Non-Life

BIS tier 1 ratio of 10.9%

 

 

Financial Highlights                    











in CHF million 2Q2005   1Q2005   2Q2004   Change in %   Change in %  
              vs 1Q2005   vs 2Q2004  











Net revenues 14,101   17,062   13,733   (17 ) 3  











Total operating expenses 7,178   6,146   6,254   17   15  











Net income 919   1,910   1,457   (52 ) (37 )











Group return on equity 9.8 % 20.6 % 16.6 %    











Basic earnings per share (in CHF) 0.82   1.64   1.26      











BIS tier 1 ratio 10.9 % 12.1 %      











Zurich, August 3, 2005 – Credit Suisse Group today reported net income of CHF 919 million for the second quarter of 2005, compared to CHF 1,910 million in the previous quarter and CHF 1,457 million in the second quarter of 2004. The result for the second quarter of 2005 includes a charge for litigation provisions in Institutional Securities in the amount of CHF 624 million after tax.

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Credit Suisse Group’s return on equity for the second quarter was 9.8%, with a return on equity of 9.1% for the banking business and 11.3% for Winterthur. Basic earnings per share were CHF 0.82.

The Group's net income for the first half of 2005 amounted to CHF 2,829 million, compared to CHF 3,318 million for the corresponding period of 2004.

Oswald J. Grübel, CEO of Credit Suisse Group, said, "Following a strong start to 2005, the second quarter was impacted by the anticipated slowdown in market activity and our banking businesses experienced low levels of client activity in April and May. Benefiting from significant improvements in June, the Group generated a respectable second-quarter result, driven by good net revenues and effective cost management."

He added, "Our half-year results demonstrate that we are making good progress in advancing our business but still have some way to go before we deliver the full potential of Credit Suisse Group. We therefore remain committed to further improving on this performance as part of our efforts to build a powerful integrated banking organization. With that, I am convinced we will create compelling new opportunities for revenue growth and improved efficiency."

Banking Segments

Credit Suisse Group Banking Segment Results                  










in CHF million   2Q2005   1Q2005   2Q2004   Change in %   Change in %  
                vs 1Q2005   vs 2Q2004  










Private Banking Net revenues 1,810   1,912   1,869   (5 ) (3 )
  Total op. expenses 1,084   1,060   1,083   2   0  
  Net income 581   685   665   (15 ) (13 )










Corporate & Net revenues 858   860   950   0   (10 )
Retail Banking Total op. expenses 548   529   553   4   (1 )
  Net income 277   274   256   1   8  










Institutional Net revenues 3,335   3,842   3,134   (13 ) 6  
Securities Total op. expenses 3,891   3,006   2,858   29   36  
  Net income (408 ) 540   129   -   -  










Wealth & Asset Net revenues 1,570   936   1,499   68   5  
Management Total op. expenses 623   598   636   4   (2 )
  Net income 245   135   301   81   (19 )












Private Banking reported net income of CHF 581 million in the second quarter of 2005, reflecting stable lending, deposit and commission income. Compared to the strong first quarter of 2005, net income declined 15%, due primarily to a reduction in overall trading revenues as a result of lower income from trading execution. The 13% decrease in net income versus the second quarter of last year was mainly attributable to small losses during the quarter in the fair value of interest rate derivatives used for risk management purposes which did not qualify for hedge accounting, compared to large gains in the second quarter of 2004. The gross margin was 125.6 basis points for the second quarter and 131.5 basis points for the first half of 2005, achieving the segment's mid-term target of 130 basis points. The cost/income ratio was 59.9% for the second quarter, up 4.5 percentage points versus the prior quarter and up 2.0 percentage points versus the second quarter of 2004. This reflects seasonally higher expenses compared to the first quarter of 2005, strategic investments in key growth markets and lower net revenues.

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Corporate & Retail Banking generated net income of CHF 277 million for the second quarter of 2005, up slightly versus the previous quarter and up 8% compared to the second quarter of 2004. Strong revenue generation and a net release of provisions for credit losses were the main drivers of this result. The cost/income ratio of 63.9% in the second quarter of 2005 was up 2.4 percentage points from the prior quarter, which was characterized by seasonally lower expenses, and up 5.7 percentage points from the second quarter of 2004, which benefited from positive changes in the fair value of interest rate derivatives used for risk management purposes which did not qualify for hedge accounting. The segment achieved a strong return on average allocated capital of 21.4% in the second quarter.

Institutional Securities recorded a CHF 960 million charge before tax, CHF 624 million after tax, in the second quarter of 2005 to increase the reserve for private litigation involving Enron, certain IPO allocation practices, research analyst independence and other related litigation. The charge was in addition to the reserve for these private litigation matters of CHF 702 million (USD 450 million) before tax originally established in 2002 and brings the total reserve for these private litigation matters to CHF 1.4 billion (USD 1.1 billion) after deductions for settlements that have since taken place. We believe that with this measure, the litigation reserves of Credit Suisse Group adequately reflect our current assessment of the probable and reasonably estimable litigation exposure.

For the second quarter of 2005, Institutional Securities reported a net loss of CHF 408 million, including the above-mentioned charge for litigation provisions. Excluding this charge, Institutional Securities would have reported net income of CHF 216 million in the second quarter, an increase of 67% compared to the same period of last year, reflecting higher revenues and lower compensation and benefits. Compared to the first quarter of 2005, net income decreased from CHF 540 million, reflecting higher other expenses due to the litigation charge as well as a decline in net revenues resulting from the considerable slowdown in market activity in April and May. Trading revenues, particularly in fixed income, compared favorably to the second quarter of 2004 but were down from the first quarter of this year. Investment banking net revenues rose significantly versus the first quarter of 2005, with improved performances in advisory fees versus both prior periods and in debt and equity underwriting versus the first quarter of 2005. Total operating expenses increased compared to the previous quarter and the same period of 2004 due to the litigation charge. Compensation and benefits decreased slightly versus both prior periods.

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Wealth & Asset Management reported net income of CHF 245 million for the second quarter of 2005, up 81% from the previous quarter and down 19% from the second quarter of 2004, which included particularly high levels of investment-related gains in Alternative Capital. Second-quarter 2005 net revenues benefited from investment gains from private equity realizations. Total operating expenses rose 4% compared to the previous quarter and were slightly lower compared to the same period of last year.

Insurance Segments                    
                   
Credit Suisse Group Insurance Segment Results                  










in CHF million   2Q2005   1Q2005   2Q2004   Change in %   Change in %  
                vs 1Q2005   vs 2Q2004  










Life & Pensions Net revenues 3,714   6,610   3,466   (44 ) 7  
  Total op. expenses 428   427   481   0   (11 )
  Net income 116   126   67   (8 ) 73  










Non-Life Net revenues 2,979   3,049   2,977   (2 ) 0  
  Total op. expenses 713   698   783   2   (9 )
  Net income 137   125   82   10   67  












Life & Pensions' net income rose substantially to CHF 116 million in the second quarter of 2005, an increase of 73% compared to the same period of 2004. Year-to-date, net income totaled CHF 242 million, up CHF 36 million, or 17%, from the first half of 2004. The main drivers behind this result were the focus on productivity and selected areas of growth and, to a lesser extent, the slightly higher net investment income on investments backing traditional life policies. Total business volume grew by 2% compared to the second quarter of 2004 and was up 5% year-to-date. This encompasses deposits from investment-type products as well as gross premiums written from traditional insurance policies. The net investment return backing traditional life policies amounted to 4.7%, compared to 4.6% in the corresponding quarter of the previous year. Insurance underwriting and acquisition expenses decreased 5% and administration expenses were down 8% compared to the second quarter of 2004, reflecting further benefits from the ongoing implementation of cost control measures. The expense ratio consequently improved by 1.0 percentage points to 10.9%.

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Non-Life reported second-quarter 2005 net income of CHF 137 million, up 67% compared to the second quarter of 2004. For the first half of 2005, net income amounted to CHF 262 million, representing an increase of CHF 77 million, or 42%, compared to the same period of 2004. This progress was achieved despite a challenging underwriting environment, the adverse impacts of foreign exchange rates and lower net investment income. Net premiums earned decreased slightly to CHF 2,643 million versus the same period of last year. Net investment return in the second quarter was 4.2%, compared to 4.5% in the second quarter of 2004. Net current investment return increased slightly to 3.7% from 3.6%, and net realized gains decreased by 0.4 percentage points to 0.5% versus the second quarter of 2004. The combined ratio decreased by a further 2.6 percentage points to 95.1% in the second quarter of 2005 compared to the same period of 2004, and it was down by 1.8 percentage points to 97.3% for the first half of 2005. The claims ratio improved by 0.9 percentage points to 70.4% from the second quarter of 2004 due to a low level of large-scale losses and improvements in claims management. The expense ratio decreased by 1.7 percentage points to 24.7%. Administration expenses decreased 15% to CHF 273 million and insurance underwriting and acquisition expenses remained relatively stable, decreasing 1% to CHF 379 million in line with net premiums earned.

Net New Assets          
           
Net New Assets and Assets under Management (AuM)          






in CHF billion Net New Assets   Total AuM   Change in AuM  
  2Q2005   30.6.05   % vs 31.03.05  






Private Banking 12.8   602.3   6.7  
Corporate & Retail Banking 0.4   54.9   0.7  






             
Institutional Securities (1.5 ) 14.2   (11.8 )
Wealth & Asset Management 1) 4.2   519.9   5.7  






             
Life & Pensions 0.3   122.5   2.5  
Non-Life n/ a   27.4   8.7  






Credit Suisse Group 16.2   1,341.2   5.5  






1) Excluding assets managed on behalf of other entities within Credit Suisse Group n/ a: not applicable

Private Banking generated CHF 12.8 billion of net new assets in the second quarter of 2005. The segment reported a net new asset growth rate of 7.3% for the first half of the year, with strong asset inflows from strategic key markets. Wealth & Asset Management recorded CHF 4.2 billion of net new assets, driven primarily by new fund commitments in Alternative Capital. Overall, Credit Suisse Group reported CHF 16.2 billion of net new assets in the second quarter. The Group’s total assets under management stood at CHF 1,341.2 billion as of June 30, 2005, up 5.5% from March 31, 2005.

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Outlook

We expect the recovery in client activity in the banking business, which started in June, to continue. We believe that equity markets will improve in the second half of the year after a short-term correction of the recent uptrend. Interest rates will most likely move in a narrow range. Credit Suisse Group is well positioned to benefit from this economic environment.

Enquiries  
   
Credit Suisse Group, Media Relations Telephone +41 44 333 88 44
   
Credit Suisse Group, Investor Relations Telephone +41 44 333 31 69

For additional information on Credit Suisse Group’s results for the second quarter of 2005, please refer to the Group’s Quarterly Report Q2 2005, as well as the Group’s slide presentation for analysts and the press, which are available on the Internet at: www.credit-suisse.com/results

Credit Suisse Group
Credit Suisse Group is a leading global financial services company headquartered in Zurich. It provides private clients and small and medium-sized companies with private banking and financial advisory services, and pension and insurance solutions from Winterthur. In the area of investment banking, it 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 60,000 staff worldwide. As of June 30, 2005, it reported assets under management of CHF 1,341.2 billion.

Cautionary Statement Regarding Forward-Looking Information
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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Presentation of Credit Suisse Group’s Second-Quarter 2005 Results via Webcast and Telephone Conference

Date Wednesday, August 3, 2005
   
Time 10.00 CEST / 09.00 BST / 04.00 EST
   
Speakers Oswald J. Grübel, Chief Executive Officer of Credit Suisse Group
  Renato Fassbind, Chief Financial Officer of Credit Suisse Group
   
  The presentation will be held in English
  (with simultaneous interpreting into German)
   
Webcast www.credit-suisse.com/results
   
Telephone Europe: +41 91 610 5600
  UK: +44 207 107 0611
  US: +1 866 291 4166
  Reference: ‘Credit Suisse Group quarterly results’
     
Q&A You will have the opportunity to ask questions during the conference
  following the presentation.
     
Playback Video playback – available approximately three hours after the
  event at: www.credit-suisse.com/results
     
  Telephone replay – available approximately one hour after the event;
  please dial:
  Europe: +41 91 612 4330
  UK: +44 207 108 6233
  US: +1 866 416 2558
     
  Analyst & media conference ID:
  Q&A Analysts English661#
  Q&A Analysts German 309#
  Q&A Media English 728#
  Q&A Media German 699#
     
Note We recommend that you dial in approximately ten minutes before the
  start of the presentation for the webcast and telephone conference.
  Further instructions and technical test functions are now available on
  our website.

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Letter to Shareholders 2005 Q2

















Dear shareholders


During the second quarter of 2005, we made good progress in improving the operating performance of Credit Suisse Group and took important steps towards the implementation of our strategy to build an integrated global bank.


Our One Bank strategy

Our industry is increasingly influenced by globalization and technological change. As a result, our clients’ requirements are growing more complex each day and the way we operate as a bank is changing fundamentally. We need to respond to these developments and, above all, to our clients’ changing needs. In order to remain at the forefront of our industry, we must strive to continuously improve our products and services and we must place our clients at the center of all that we do. This can only be achieved if we make the best possible use of the skills and expertise of our people as well as our global presence. Over the coming months, we will therefore continue to build an integrated global bank focusing on investment banking, private banking and asset management.

During the second quarter, we took important steps towards the realization of this goal. In May 2005, we completed the merger of our two legal entities in Switzerland: Credit Suisse and Credit Suisse First Boston. The creation of a single legal entity was the prerequisite for the integration of our banking businesses. In late June, the Board of Directors appointed the members of the new Executive Board for the bank. We were able to put together an excellent team with experienced executives from across our banking businesses. The new management team will lead the bank as of January 1, 2006, when the new organization will become operational.

In June, we also announced that we will move to one Credit Suisse brand. We believe that by uniting our businesses under one brand, we will create a clearer and more consistent presence in the market. We will thus be more visible to our stakeholders and we will be able to communicate more effectively with one voice in all our markets around the world.

We are pleased with the progress we have made over the past few months. Our strategy has been well received by shareholders, clients and employees and its implementation is well on track.

The Board of Directors and the management team are convinced that combining our banking businesses will provide us with the necessary foundation for the future growth of our bank. From our experience in the financial services industry, we believe that the steps we are taking to build an integrated global bank will create synergies for revenue growth, improve efficiency and ultimately increase shareholder value.


Result for the second quarter of 2005

While we were preparing Credit Suisse Group for future growth, we were also mindful of our daily commitment to providing our clients with advice, services and products, and we remained focused on improving our operating performance.

For the second quarter of 2005, we reported net income of CHF 919 million, including a charge for litigation provisions in Institutional Securities in the amount of CHF 624 million after tax. For the first half of the year, our net income was CHF 2,829 million. Credit Suisse Group’s return on equity for the second quarter was 9.8% and basic earnings per share were CHF 0.82.

Our operating environment in the second quarter was characterized by an anticipated slowdown in market activity. As a result, client activity in our banking business was significantly lower in April and May than in previous months. Although we saw a market rebound in June and were well positioned to benefit from the exceptionally strong levels of client activity during that month, this did not entirely compensate for the weak net revenues in April and May. Equally, our continued and effective cost management was only partially able to offset the negative impact of lower net revenues on our net income in the second quarter.

Private Banking provides high-net-worth individuals in Switzerland and in numerous other markets around the world with wealth management products and services.

Private Banking delivered net income of CHF 581 million in the second quarter. This result was lower than the strong levels achieved in both the first quarter of 2005 and the same quarter of last year.

Although we continued to invest in key growth markets in Asia, the Middle East and Europe, total operating expenses remained virtually unchanged compared with the second quarter of the previous year.

Private Banking recorded strong asset inflows from strategic key markets. They contributed to net new assets – a key measure of our operating performance – of CHF 12.8 billion in the second quarter, compared with CHF 7.0 billion in the first quarter. This represents an annualized year-to-date growth rate of 7.3%, exceeding our mid-term target of 5% growth. Combined with a positive market performance, our strong asset inflows resulted in assets under management of over CHF 600 billion.

During the second quarter, Private Banking continued to expand its presence in key growth markets. We opened a representative office in Guangzhou, providing access to southern China. We also opened a representative office in St. Petersburg, serving clients in the rapidly developing northern Russian region.

Corporate & Retail Banking offers banking products and services to corporate and retail clients in Switzerland.

The segment reported net income of CHF 277 million for the second quarter. Strong revenue generation and the release of provisions due to the ongoing favorable credit environment were the main drivers behind this result.

Total operating expenses were virtually unchanged from the same period of last year but increased compared with the seasonally low levels experienced in the first quarter of this year.

The strategic objective of Corporate & Retail Banking is to gain market share in the high-end retail business, particularly with investment products. With this in mind, Credit Suisse launched a new investment product – Credit Suisse Triamant – in the second quarter. This product offers actively managed asset allocation, broad diversification and transparent reporting and combines the advantages of professional asset management with those of an investment fund.

Institutional Securities provides securities and investment banking services to institutional, corporate and government clients worldwide.

Institutional Securities reported a net loss of CHF 408 million for the second quarter, including the above-mentioned charge for litigation provisions in the amount of CHF 624 million after tax. In addition to the impact of this charge, the result was negatively affected by the slowdown in market and client activity in April and May referred to previously.

Investment banking net revenues increased significantly versus the first quarter of 2005. Advisory fees, which include fees from mergers and acquisitions, increased compared to both the second quarter of 2004 and first quarter of 2005. Notable M&A transactions in Europe and the Americas that were announced during the quarter include the acquisition of Allied Domecq by Fortune Brands and Pernod Ricard; the BASF AG and Shell International Ltd. sale of their joint venture Basell NV; and the acquisition of Neiman Marcus Group Inc by Texas Pacific Group and Warburg Pincus LLC.

Debt and equity underwriting increased compared to the first quarter of 2005. In equity underwriting, Institutional Securities ranked third in global IPO market share and first in Americas IPO market share for the second quarter of 2005. Key transactions for the quarter reflected the geographic and industrial breadth of the equity franchise and included IPOs for Deerfield Triarc Capital Corp. (a US real estate-related specialty finance company); Pyaterochka Holding (a Russian grocery retailer); Shanghai Electric Group Company Ltd. (the largest non-Japan Asia IPO in 2005 to date); and Lojas Renner (a Brazilian department store) for JC Penney.

Trading revenues, particularly in fixed income, compared favorably to the second quarter of 2004. In comparison with the first quarter of 2005, however, trading revenues declined.

Total operating expenses at Institutional Securities increased compared to the previous quarter and the same period of 2004 due to the charge for litigation provisions.

Wealth & Asset Management offers international asset management services – including a broad range of investment funds – to institutional and private investors, as well as providing financial advisory services to wealthy individuals and corporate clients.

Wealth & Asset Management recorded net income of CHF 245 million in the second quarter. This is a good result and represents a strong increase compared to the first quarter of this year. However, while operating expenses were slightly lower than in the second quarter of last year, net income was below the exceptional level recorded in this period, when the Alternative Capital division reported particularly high gains from private equity investments.

Net revenues benefited from a high level of investment gains from private equity in the second quarter of 2005. Furthermore, Alternative Capital recorded a solid increase in placement fees compared to the second quarter of last year. This positive effect was offset by lower fee income at Credit Suisse Asset Management, our institutional business, and at Private Client Services, our North American business serving private clients.

Net new asset inflows amounted to CHF 2.8 billion for the quarter. Assets under management stood at CHF 529.3 billion as of June 30, 2005.

In the second quarter, Wealth & Asset Management launched two initiatives aimed at advancing its international growth. In May 2005, we announced the creation of a strategic partnership, China Renaissance Capital Investment Inc. This partnership will focus on private equity investment opportunities in China. In addition, in July 2005, Credit Suisse Asset Management acquired a 25% interest in a fund management joint venture in China with Industrial and Commercial Bank of China and China Ocean Shipping Group Company Ltd.

Winterthur , Credit Suisse Group’s insurance unit, comprises two business lines. The Life & Pensions business line is a leading provider of life insurance and pension solutions for private and corporate clients. The Non-Life business line provides insurance products for private clients and small and medium-sized corporate clients.

In the second quarter Winterthur further improved its result. Net income for Life & Pensions was CHF 116 million. Non-Life reported net income of CHF 137 million for the period. Overall, our insurance business is now benefiting from the efficiency measures we have implemented over the last two years. These measures have led to improvements in insurance underwriting and acquisition expenses and lower administration expenses at Life & Pensions and to an improved combined ratio at Non-Life.


Strong capitalization basis for share buyback

Credit Suisse Group remains among the best-capitalized financial services providers worldwide. This is underscored by the fact that as of June 30, 2005, our BIS tier 1 ratio was 10.9%. In view of our strong capitalization, the Board of Directors proposed the approval of a share buyback program in the amount of up to CHF 6 billion to the Annual General Meeting on April 29, 2005. Following shareholder approval, we launched our share buyback program on May 9, 2005. As of August 3, 2005, we had repurchased 14.9 million shares with an aggregate value of CHF 742 million via a second trading line on virt-x.

We believe that our overall performance in the second quarter and first half of 2005 reflects the fundamental strength of our core businesses. Our results also show that we need to further drive our profitable growth and improve on our financial performance. Our goal is to build a global integrated bank to enable us to realize our full potential and to create the foundation for the future growth of Credit Suisse Group.

On behalf of the Board of Directors and the management team, we would like to take this opportunity to thank our shareholders for the trust they have placed in us. We also wish to thank all our employees for their relentless hard work and commitment.

Yours sincerely

 
Walter B. Kielholz Oswald J. Grübel
Chairman of the Board of Directors Chief Executive Officer
August 2005



For a detailed presentation of Credit Suisse Group's second quarter 2005 results please refer to the quarterly report.



















Quarterly Report 2005 Q2








Credit Suisse Group financial highlights 
6 months
in CHF m, except where indicated2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Consolidated income statement
Net revenues14,10117,06213,733(17)331,16330,5472
Income from continuing operations before cumulative effect of accounting changes9201,9161,500(52)(39)2,8363,431(17)
Net income9191,9101,457(52)(37)2,8293,318(15)
Return on equity
Return on equity - Group9.8%20.6%16.6%15.2%19.0%
Return on equity - Banking9.1%22.9%19.0%15.9%21.6%
Return on equity - Winterthur11.3%12.0%7.7%11.6%10.0%
Earnings per share
Basic earnings per share in CHF0.821.641.262.492.82
Diluted earnings per share in CHF0.791.631.222.412.76
Net new assets in CHF bn16.215.49.131.624.7



in CHF m, except where indicated30.06.0531.03.0531.12.04Change in % from 31.03.05Change in % from 31.12.04
Assets under management in CHF bn1,341.21,271.61,220.75.59.9
Consolidated balance sheet
Total assets1,287,1691,159,7111,089,4851118
Shareholders' equity38,15438,52436,273(1)5
Consolidated BIS capital data
Risk-weighted assets 238,181215,279199,2491120
Tier 1 ratio10.9%12.1%12.3%
Total capital ratio14.0%15.7%16.6%
Number of employees
Switzerland - banking segments19,77319,67619,55801
Switzerland - insurance segments5,9536,0026,147(1)(3)
Outside Switzerland - banking segments22,35821,91021,60623
Outside Switzerland - insurance segments13,49713,17713,22122
Number of employees (full-time equivalents)61,58160,76560,53212
Stock market data
Market price per registered share in CHF50.5551.3547.80(2)6
Market price per American Depositary Share in USD39.1442.8042.19(9)(7)
Market capitalization55,44357,29453,097(3)4
Market capitalization in USD m42,92947,75446,865(10)(8)
Book value per share in CHF34.7934.5332.6517
Shares outstanding1,096,802,7591,115,749,4501,110,819,481(2)(1)















Cover photo: Joseph C.H. Chu, Greater China Controllers, Allen Kwan, Information Technology Client Services and Thuy–Anh Nguyen, Structuring Group, Credit Suisse First Boston, all based in Hong Kong.







Quarterly Report 2005 Q2
Message from the Chief Executive Officer
Dear shareholders, clients and colleagues
Credit Suisse Group
Factors affecting results of operations
Summary of segment results
Credit Suisse Group consolidated results
Credit Suisse Group structure
Risk Management
Private Banking
Corporate & Retail Banking
Institutional Securities
Wealth & Asset Management
Life & Pensions
Non-Life
Investments for Life & Pensions and Non-Life
Condensed consolidated financial statements – Credit Suisse Group
Consolidated balance sheets (unaudited)
Consolidated statements of changes in shareholders’ equity (unaudited)
Comprehensive income (unaudited)
Consolidated statements of cash flows (unaudited)
Consolidated statements of cash flows – continued (unaudited)
Summary of significant accounting policies
Basis of presentation
Share-based compensation
NEW ACCOUNTING PRONOUNCEMENTS
Segment Reporting
Interest and dividend income and interest expense
Trading activities
Commissions and fees
Loans
Restructuring liabilities
Accumulated other comprehensive income
Earnings per share
Pension
Guarantees and commitments
Guarantees
Other commitments
Variable interest entities
Collateralized debt obligations
Commercial paper conduits
Financial intermediation
Litigation
Foreign currency translation rates
Information for investors
Enquiries






Cover photograph
The renowned Swiss photographic artist Beat Streuli (born 1957) captured images of Credit Suisse Group employees at various international locations during January and February 2005. The Group’s financial publications for 2005 are illustrated with the work that resulted from this project.







Message from the Chief Executive Officer



Oswald J. Grübel
Chief Executive Officer
Credit Suisse Group





Dear shareholders, clients and colleagues


For the second quarter of 2005, Credit Suisse Group reported net income of CHF 919 million. This includes a charge for provisions for certain litigation in Institutional Securities in the amount of CHF 624 million after tax. For the first half of 2005, net income was CHF 2,829 million.

Private Banking delivered net income of CHF 581 million in the second quarter, which was lower than the strong levels achieved in both the first quarter of 2005 and the second quarter of last year. Private Banking’s second quarter 2005 result reflects stable income from lending, deposits and commissions. Total operating expenses remained virtually unchanged compared to the previous year despite continued investments in key growth markets in Asia, the Middle East and Europe. Strong asset inflows from strategic key markets contributed to net new assets of CHF 12.8 billion in the second quarter, compared to CHF 7.0 billion in the first quarter.

Corporate & Retail Banking reported net income of CHF 277 million as it benefited from strong revenue generation and from the net release of provisions for credit losses due to the ongoing favorable credit environment. Total operating expenses were virtually unchanged from the same period of last year, but increased compared to the seasonally low levels experienced in the first quarter of this year.

Institutional Securities reported a net loss of CHF 408 million for the second quarter. This result reflects the above-mentioned charge for provisions for certain litigation in the amount of CHF 624 million after tax. In addition to the impact of this charge, net income was negatively affected by the anticipated slowdown in market and client activity in April and May. Trading revenues, particularly in fixed income, compared favorably to the second quarter of 2004 but were down from the first quarter of 2005, reflecting the weaker markets. Investment banking net revenues rose significantly versus the first quarter of 2005, with improved performances in advisory fees versus both prior periods and in debt and equity underwriting versus the first quarter of 2005.

Wealth & Asset Management delivered good results, with net income of CHF 245 million. This represents a strong increase compared to the first quarter of this year, although net income was below the exceptional level recorded in the second quarter of 2004. Net revenues benefited from a high level of investment gains from private equity realizations. Net new asset inflows amounted to CHF 2.8 billion.

Winterthur delivered an improved performance in the second quarter of 2005. Net income for Life & Pensions was CHF 116 million, with progress in insurance underwriting and acquisition expenses as well as lower administration expenses. Non-Life reported net income of CHF 137 million for the second quarter, reflecting an improved combined ratio.

On May 9, 2005, following approval by the Annual General Meeting, Credit Suisse Group launched its share buyback program in the amount of up to CHF 6 billion. As at August 3, shares with an aggregate value of CHF 742 million had been repurchased via a second trading line on Virt-x.

In the second quarter of 2005, we took significant steps towards building an integrated bank offering investment banking, private banking and asset management services on a global basis. In May, we completed the merger of the two bank legal entities in Switzerland, and in late June, the members of our new bank Executive Board were appointed. In addition, we announced that our integrated bank will operate under the new Credit Suisse brand from the beginning of next year.

My management team and I are convinced that the measures we are introducing to enhance cooperation between our banking businesses will capture synergies for revenue growth, improve efficiency and ultimately benefit our clients, shareholders and employees.


Outlook

We expect the recovery in client activity in the banking business, which started in June, to continue. We believe that equity markets will improve in the second half of the year after a short-term correction of the recent uptrend. Interest rates will most likely move in a narrow range. Credit Suisse Group is well positioned to benefit from this economic environment.

Yours sincerely

Oswald J. Grübel
August 2005



Credit Suisse Group


Credit Suisse Group recorded net income of CHF 919 million in the second quarter of 2005 versus CHF 1,457 million in the second quarter of 2004, a decrease of CHF 538 million, or 37%. In the first half of 2005, net income amounted to CHF 2,829 million compared to CHF 3,318 million in the first half of 2004, a decrease of CHF 489 million, or 15%. Net income in the second quarter was impacted by a charge of CHF 624 million after tax (CHF 960 million before tax) in Institutional Securities to increase the reserve for certain private litigation. Second quarter results included increased net income in Corporate & Retail Banking and the insurance segments, offset in part by lower results in Institutional Securities, Private Banking and Wealth & Asset Management, compared to the second quarter of 2004.





Factors affecting results of operations


Across all segments, the second quarter business environment was generally challenging, with client activity in April and May substantially below the levels seen in the first quarter, but with marked improvements as the quarter came to a close.

The broad US equity markets showed minor increases during the second quarter, major European markets, including Switzerland, saw greater advances than the US, and Asian markets continued their mixed performance. Most markets globally peaked at the end of the second quarter and closed slightly below their quarterly highs. Investors found market conditions challenging due to concerns about inflation, the pace of short-term interest rate hikes by the US Federal Reserve Board, uncertainty regarding central bank target rates in Europe and significant volatility in oil prices.

The European Central Bank and Bank of England continued to hold their benchmark rates steady at 2% and 4.75%, respectively. The US Federal Reserve raised interest rates by 50 basis points for the second quarter in a row, while the price of 10-year US treasury notes increased, lowering long-term bond yields. This flattening of the yield curve provided a challenging environment in both the banking and insurance segments. In the US, negative developments in the auto, airline and insurance sectors led to risk aversion and the widening of credit spreads in the first part of the quarter. Credit spreads then narrowed beginning in mid-May, although not fully returning to previous levels, resulting in a more positive environment by the end of the quarter. Prompted by an interest rate differential between the US and Europe, the US dollar surged, closing more than 7% higher at the end of the period against both the Swiss Franc and the Euro than at the beginning of the second quarter.

The global credit environment remained positive with low default rates and an increased number of upgrades and a reduced number of downgrades by rating agencies, although the gap between upgrades and downgrades showed some signs of narrowing. This continued to have a favorable impact on the Group’s provision for credit losses.

Industry-wide announced mergers and acquisitions activity increased compared to the second quarter of 2004 and the prior quarter. Industry-wide volumes for investment grade debt increased, volumes for high-yield debt declined and volumes for equity issuances were flat compared to the second quarter of 2004.




Summary of segment results


Private Banking reported net income of CHF 581 million in the second quarter of 2005, a decrease of CHF 84 million, or 13%, compared to the second quarter of 2004. Lending, deposit and commission income remained stable, however this was offset by a decrease in the fair value of interest rate derivatives used for risk management purposes that do not qualify for hedge accounting, with a small loss being recorded in the second quarter of 2005 versus a large gain in the same period of 2004. During the second quarter of 2005, Private Banking continued to expand its presence in key growth markets, with the opening of representative offices in Guangzhou, China and St. Petersburg, Russia.

Corporate & Retail Banking reported net income of CHF 277 million in the second quarter of 2005, an increase of CHF 21 million, or 8%, compared to the second quarter of 2004. Strong revenue contribution and a net release of credit provisions contributed to this result. To support its strategic aim of gaining market share in high-end retail business, particularly in investment products, a new innovative investment product for retail clients was launched in the second quarter.

Institutional Securities had a net loss of CHF 408 million in the second quarter of 2005, compared to net income of CHF 129 million in the second quarter of 2004, driven by a charge of CHF 624 million after tax (CHF 960 million before tax) to increase the reserve for certain private litigation, partially offset by higher revenues and lower compensation and benefits.

Wealth & Asset Management reported net income of CHF 245 million in the second quarter of 2005, a decrease of CHF 56 million, or 19%, compared to the strong second quarter of 2004, which included an exceptionally high level of private equity investment-related gains in the Alternative Capital business.

Both Institutional Securities and Wealth & Asset Management maintained a disciplined approach to compensation expenses, with the compensation to revenue ratio for the combined segments (excluding minority interest revenues) at 51.9% in the second quarter of 2005 compared to 53.2% in the second quarter of 2004.

Life & Pensions reported net income of CHF 116 million in the second quarter of 2005, an increase of CHF 49 million, or 73%, compared to the second quarter of 2004. The main drivers were a focus on productivity and selected areas of growth and, to a lesser extent, slightly higher net investment income on investments backing traditional life policies.

Non-Life reported net income of CHF 137 million in the second quarter of 2005, an increase of CHF 55 million, or 67%, compared to the second quarter of 2004. Non-Life’s net income rose primarily due to improved underwriting results and reduced charges for discontinued operations and restructuring.




Credit Suisse Group consolidated results



Net revenues

The Group reported net revenues of CHF 14,101 million, an increase of CHF 368 million, or 3%, compared to the second quarter of 2004.

Net interest income remained largely unchanged at CHF 3,302 million. Private Banking reported a decrease of CHF 135 million with stable lending and deposit income, offset by lower dividends received on the own equity trading portfolio in the second quarter of 2005 compared to the second quarter of 2004. In 2004 most dividends were received in the second quarter, whereas during 2005 receipt of dividends was spread evenly over the first two quarters. The decrease in Private Banking was partially offset by increases in both insurance segments due to an increased asset base and higher dividend income from equity securities.

Commissions and fees remained flat at CHF 3,483 million with all segments largely unchanged compared to the second quarter of 2004.

Trading revenues increased CHF 203 million, or 29%, to CHF 915 million, driven mainly by an increase in fixed income trading revenues in Institutional Securities as well as market appreciation of investment securities backing unit-linked policies in Life & Pensions. This was partially offset by lower results in Corporate & Retail Banking which were due to large gains in the second quarter of 2004 from positive changes in the fair value of interest rate derivatives used for risk management purposes that did not qualify for hedge accounting, compared to a small loss in the second quarter of 2005.

Net realized gains/(losses) from investment securities increased by CHF 243 million, or 123%, to CHF 441 million, due mainly to an increase in Life & Pensions as a result of an increase in the net investment return on investments backing traditional life policies.

Insurance net premiums earned decreased CHF 318 million, or 7%, to CHF 4,373 million, compared to the second quarter of 2004, primarily driven by lower premiums for vested benefits within the Swiss group life business, which was partially offset by growth in Germany and Japan.

Other revenues were CHF 1,587 million compared to CHF 1,354 million in the second quarter of 2004. Wealth & Asset Management reported an increase of CHF 143 million resulting mainly from minority interests arising on consolidated investments, as discussed under Minority interests below. Additionally, Life & Pensions recorded an increase of CHF 87 million, related largely to higher net realized gains on other invested assets, which was partially offset by a decrease in Institutional Securities due to decreased gains on private equity-related investments.


Total benefits, claims and credit losses

The Group reported a net release in provisions for credit losses of CHF 29 million in the second quarter of 2005, compared to a net expense of CHF 133 million in the second quarter of 2004, largely reflecting an ongoing favorable credit environment.

Compared to the second quarter of 2004, policyholder benefits, claims and dividends increased by CHF 254 million, or 5%, to CHF 5,111 million. Life & Pensions reported a decrease of CHF 313 million in policyholder claims and benefits mainly reflecting lower costs for disability coverage. This was partially offset by an increase in dividends to policyholders of CHF 172 million, reflecting improved performance, which in most major markets is legally required to be passed on to policyholders. Investment income credited to policyholder account balances, reported by Life & Pensions, increased by CHF 420 million, or 174%, to CHF 661 million, due mainly to stronger market appreciation of investments backing unit-linked policies in the general account and, to a lesser extent, traditional life policies.


Total operating expenses

The Group reported total operating expenses of CHF 7,178 million in the second quarter of 2005, an increase of CHF 924 million, or 15%, compared to the second quarter of 2004, reflecting a significant increase in litigation provisions in the amount of CHF 960 million.

Insurance underwriting, acquisition and administration expenses were CHF 1,038 million, a decrease of CHF 73 million, or 7%, compared to the second quarter of 2004 reflecting improvements in most market units within both insurance segments.

Banking compensation and benefits remained essentially flat at CHF 3,098 million. A modest increase was recorded in Private Banking in connection with its strategic investments in international markets, which was partially offset by generally lower performance-related compensation within most segments.

Other expenses amounted to CHF 3,041 million, an increase of CHF 1,045 million, or 52%, primarily reflecting a significant increase in litigation provisions, as discussed below under Loss contingencies, as well as higher commission expenses and professional fees in Institutional Securities.


Loss contingencies

Based upon the applicable accounting standards and the most recent information available, the Group recorded a charge of CHF 960 million (USD 750 million) before tax, CHF 624 million after tax, in the second quarter of 2005 in Institutional Securities to increase the current reserve for private litigation involving Enron, certain IPO allocation practices, research analyst independence and other related litigation. The charge was in addition to the reserve of CHF 702 million (USD 450 million) before tax originally established in 2002 and brings the total reserve for these private litigation matters to CHF 1.4 billion (USD 1.1 billion), after deductions for settlements that have since taken place. On the basis of facts known, Credit Suisse Group believes that the currently recorded provision is adequate to cover the probable and reasonably estimable contingencies related to these matters. However, estimates are, by their nature, based on subjective judgments, and additional provisions, or releases of such provisions, may be required in the future based on a variety of factors, including, among other things, developments in or settlements of such litigation.


Income tax expense

The Group recorded income tax expense of CHF 213 million compared to CHF 441 million in the second quarter of 2004, a decrease of CHF 228 million, or 52%. Institutional Securities recorded an income tax benefit of CHF 239 million compared to an expense of CHF 14 million due mainly to the impact of the significant charge relating to private litigation in the second quarter of 2005. This was partially offset by an increase of CHF 92 million in Non-Life which was driven by higher pre-tax profits in most markets as well as taxes on dividends from consolidated participations.

The Group tax expense is not impacted by investments that are required to be consolidated under the relevant accounting rules as income from these investments is non-taxable. The amount of non-taxable income relating to these investments varies from one period to the next and in the second quarter of 2005 amounted to CHF 714 million. Due mainly to this effect, the Group’s effective tax rate in the second quarter of 2005 was 12% compared to the Swiss statutory rate of 22%.


Minority interests

Credit Suisse Group’s net revenues and operating expenses include the consolidation of certain entities and private equity funds primarily under Financial Accounting Standards Board Interpretation No. 46 Revised (FIN 46R). Consolidation of these entities does not impact net income as the amounts recorded in net revenues and expenses are offset by equivalent amounts recorded in minority interests.

Minority interests of CHF 708 million were reported in the second quarter 2005, an increase of CHF 160 million, or 29%, compared to the second quarter of 2004, due to significant investment-related gains in the current quarter. This also resulted in an increase of CHF 407 million, or 135%, compared to the previous quarter.


Equity capital

Credit Suisse Group’s consolidated BIS tier 1 ratio was 10.9% as of June 30, 2005, down from 12.1% as of March 31, 2005. Following approval by the Annual General Meeting, the Group launched a share buyback program and during the second quarter own shares in the amount of CHF 523 million was repurchased. While tier 1 capital remained stable, risk weighted assets increased by approximately 10%, due largely to generally increased activity and was evenly impacted by balance sheet and off-balance sheet positions. In addition, approximately one quarter of the increase was related to fluctuations in the US dollar. The Group’s shareholders’ equity as of June 30, 2005 decreased slightly to CHF 38.2 billion from CHF 38.5 billion as of March 31, 2005.

Compared to March 31, 2005 Winterthur continued to improve its capital position, reporting shareholders’ equity of CHF 9.4 billion, an increase of CHF 0.9 billion.


Net new assets

The Group reported net new assets of CHF 16.2 billion in the second quarter of 2005, an increase of CHF 0.8 billion compared to the first quarter of 2005.

Private Banking reported strong net new asset inflow of CHF 12.8 billion for the second quarter of 2005, with key markets in Asia and Europe continuing to report strong growth rates. Wealth & Asset Management recorded net new assets of CHF 4.2 billion, driven mainly by new fund commitments in Alternative Capital.

As of June 30, 2005, the Group’s total assets under management amounted to CHF 1,341.2 billion, an increase of 5.5% compared to March 31, 2005, benefiting from strong asset inflow, higher market performance and the strengthening of the US dollar.


Credit Suisse Group structure


Credit Suisse Group comprises three divisions with six reporting segments: Credit Suisse, including the segments Private Banking and Corporate & Retail Banking; Credit Suisse First Boston, including the segments Institutional Securities and Wealth & Asset Management; and Winterthur, including the segments Life & Pensions and Non-Life.

The organizational chart presented below reflects the legal entity, division and segment structure that are operational since May 16, 2005. The Bank is comprised of former Credit Suisse First Boston and former Credit Suisse, which were merged on May 13, 2005. The merger of these Swiss legal entities constitutes the first step towards the creation of an integrated organization.

It is planned that the merged bank will combine the Credit Suisse and Credit Suisse First Boston divisions in 2006 in order to better address client needs in a rapidly changing market environment. The objective of the new integrated bank is to operate more efficiently and provide enhanced advisory services and products with a sharper focus on client needs. The new integrated bank will be structured along three lines of business. Private Banking will include international and Swiss wealth management as well as services for private clients and large, small and medium-sized corporate clients including pension funds in Switzerland. Corporate & Investment Banking will include the products and services provided to corporate and investment banking clients. Asset Management will include asset management products and services.





The following table sets forth an overview of segment results:
2Q2005, in CHF mPrivate BankingCorporate & Retail BankingInstitutional SecuritiesWealth & Asset ManagementLife & PensionsNon-LifeCorporate CenterCredit Suisse Group
Net revenues1,8108583,3351,5703,7142,979(165)14,101
Policyholder benefits, claims and dividends3,1111,985155,111
Provision for credit losses16(44)(1)0000(29)
Total benefits, claims and credit losses16(44)(1)03,1111,985155,082
Insurance underwriting, acquisition and administration expenses38365231,038
Banking compensation and benefits5802911,897275553,098
Other expenses5042571,9943484560(167)3,041
Restructuring charges00000101
Total operating expenses1,0845483,891623428713(109)7,178
Income/(loss) from continuing operations before taxes and minority interests710354(555)947175281(71)1,841
Income tax expense/(benefit)12377(239)8159125(13)213
Minority interests, net of tax6092621017(28)708
Income/(loss) from continuing operations581277(408)245116139(30)920
Income/(loss) from discontinued operations, net of tax00000(2)1(1)
Net income/(loss)581277(408)245116137(29)919



The following table sets forth details of BIS data (risk-weighted assets, capital and ratios):
Credit Suisse Group
in CHF m, except where indicated30.06.0531.03.0531.12.04
Risk-weighted positions 224,770202,943187,775
Market risk equivalents13,41112,33611,474
Risk-weighted assets 238,181215,279199,249
Tier 1 capital25,93426,02224,596
of which non-cumulative perpetual preferred securities2,1862,1472,118
Tier 1 ratio10.9%12.1%12.3%
Total capital33,27033,84733,121
Total capital ratio14.0%15.7%16.6%
As of January 1, 2004, Credit Suisse Group bases its capital adequacy calculations on US GAAP, which is in accordance with the Swiss Federal Banking Commission (SFBC) newsletter 32 (dated December 18, 2003). The SFBC has advised Credit Suisse Group that it may continue to include as Tier 1 capital CHF 2.1 bn (March 31, 2005 and December 31, 2004: CHF 2.1 bn) of equity from special purpose entities, which are deconsolidated under FIN 46R.



The following table sets forth details of assets under management and client assets:
in CHF bn30.06.0531.03.0531.12.04Change in % from 31.03.05Change in % from 31.12.04
Private Banking
Assets under management602.3564.3539.16.711.7
Client assets637.1596.1569.46.911.9
Corporate & Retail Banking
Assets under management54.954.553.90.71.9
Client assets112.8102.3102.110.310.5
Institutional Securities
Assets under management14.216.115.2(11.8)(6.6)
Client assets112.6104.595.17.818.4
Wealth & Asset Management
Assets under management 1)519.9492.0472.95.79.9
Client assets536.7508.9488.95.59.8
Life & Pensions
Assets under management 122.5119.5115.52.56.1
Client assets122.5119.5115.52.56.1
Non-Life
Assets under management 27.425.224.18.713.7
Client assets27.425.224.18.713.7
Credit Suisse Group
Discretionary assets under management662.4620.7595.86.711.2
Advisory assets under management678.8650.9624.94.38.6
Total assets under management 1,341.21,271.61,220.75.59.9
Total client assets1,549.11,456.51,395.16.411.0



The following table sets forth details of net new assets:
6 months
in CHF bn2Q20051Q20052Q200420052004
Private Banking12.87.07.919.818.7
Corporate & Retail Banking0.41.0(0.3)1.40.6
Institutional Securities(1.5)(0.5)(0.6)(2.0)1.2
Wealth & Asset Management 1)4.25.12.09.32.0
Life & Pensions0.32.80.13.12.2
Credit Suisse Group16.215.49.131.624.7
1) Excluding assets managed on behalf of other entities within Credit Suisse Group. This differs from the presentation of the Wealth & Asset Management segment results, in which such assets are included.










Risk Management


Credit Suisse Group’s overall position risk, measured on the basis of Economic Risk Capital (ERC), increased 11% in the second quarter of 2005 compared with the previous quarter. The increase was mainly due to higher risk levels at Credit Suisse First Boston as well as the strengthening of the US dollar. The more narrowly defined average Value-at-Risk (VaR) in US dollar terms for the Group’s trading books decreased by 6% during the second quarter of 2005 due to a reduction in the VaR for mortgage exposures following a reduction in the market volatility observed over the last two years. The loan portfolios across the Group continued to benefit from a favorable credit environment, resulting in a net release of credit provisions of CHF 29 million for the second quarter of 2005.



Economic Risk Capital trends

Credit Suisse Group assesses risk and economic capital adequacy using its Economic Risk Capital (ERC) model. ERC is designed to measure all quantifiable risks associated with the Group’s activities on a consistent and comprehensive basis. Credit Suisse Group assigns ERC for position risk, operational risk and business risk. Position risk measures the potential annual economic loss associated with market, credit and insurance exposures that is exceeded with a given, small probability (1% for risk management purposes; 0.03% for capital management purposes). It is not a measure of the potential impact on reported earnings, since non-trading activities generally are not marked to market through earnings.

Over the course of the second quarter of 2005, Credit Suisse Group’s 1-year, 99% position risk ERC increased by 11%, mainly due to higher risk levels at Credit Suisse First Boston as well as the strengthening of the US dollar.

At the end of the second quarter of 2005, 52% of the Group’s position risk ERC was with Credit Suisse First Boston, 33% with Winterthur, 13% with Credit Suisse and 2% with the Corporate Center.


Trading risks

Credit Suisse Group assumes trading risks through the trading activities of the Institutional Securities segment and – to a lesser extent – the trading activities of the Private Banking and Corporate & Retail Banking segments. The other segments do not engage in trading activities. Trading risks are measured using VaR as one of a range of risk measurement tools. VaR is the potential loss in fair value of trading positions due to adverse market movements over a defined time horizon and for a specified confidence level. In order to show the aggregate market risk in the Group’s trading books, the table below shows the trading-related market risk on a consolidated basis, as measured by a 10-day VaR scaled to a 1-day holding period and based on a 99% confidence level. This means that there is a one in 100 chance of incurring a daily mark-to-market trading loss that is at least as large as the reported VaR.

Credit Suisse Group’s average 1-day, 99% VaR in the second quarter of 2005 was CHF 65 million, compared to CHF 67 million during the first quarter of 2005. In US dollar terms, Credit Suisse Group’s average 1-day, 99% VaR was USD 53 million during the second quarter 2005, compared to USD 57 million during the first quarter of 2005. The decrease in average VaR was due to a reduction in the VaR for mortgage exposures as a consequence of the reduction in the market volatility observed over the last two years (first quarter 2003 data replaced by more benign first quarter 2005 data in the rolling two-year underlying data set used to compute VaR).

The segments with trading portfolios use backtesting to assess the accuracy of the VaR model. Daily backtesting profit and loss is compared to VaR with a one-day holding period. Backtesting profit and loss is a subset of actual trading revenue and includes only the profit and loss effects due to movements in financial market variables such as interest rates, equity prices and foreign exchange rates on the previous night’s positions. It is appropriate to compare this measure with VaR for backtesting purposes, since VaR assesses only the potential change in position value due to overnight movements in financial market variables. On average, an accurate one-day, 99% VaR model should have no more than four backtesting exceptions per year. A backtesting exception occurs when the daily loss exceeds the daily VaR estimate.

Credit Suisse Group had no backtesting exceptions during the second quarter of 2005 (and no backtesting exceptions in the last twelve months). The histogram entitled “Frequency of trading revenue” compares the distribution of daily backtesting profit and loss during the second quarter of 2005 with the distribution of actual trading revenues, which includes fees, commissions, provisions and the profit and loss effects associated with any trading subsequent to the previous night’s positions.


Loan exposure

Credit Suisse Group’s total loan exposure grew 3% as of June 30, 2005 compared to March 31, 2005, with the increase concentrated at Credit Suisse.

Compared to March 31, 2005 non-performing loans increased slightly while total impaired loans at Credit Suisse Group declined 3% as of June 30, 2005. Non-performing loans increased 11% and total impaired loans at Credit Suisse First Boston increased by 10% in the second quarter of 2005, with much of the increase relating to the impact of foreign exchange translation into Swiss francs. Credit Suisse reported a small reduction in total non-performing loans and a 6% decline in total impaired loans, while Winterthur reported small reductions in both categories.

During the second quarter of 2005, the Group recorded a net release of provisions for credit losses amounting to CHF 29 million, compared to a net release of CHF 36 million recorded in the first quarter. Presented in the accompanying tables are the additions, releases and recoveries included in determining the allowance for loan losses.

Coverage of total impaired loans by valuation allowances at Credit Suisse Group and Credit Suisse was virtually unchanged at the end of the second quarter of 2005 compared to the end of the first quarter, while coverage deteriorated at Credit Suisse First Boston.

The following table sets forth the Group's risk profile, using ERC as the common risk denominator:
Change in % fromChange Analysis: Brief Summary
in CHF m30.06.0531.03.0530.06.0430.06.05 vs 31.03.05
Interest Rate ERC, Credit Spread ERC & Foreign Exchange Rate ERC4,66337Higher foreign exchange rate and credit spread risks at Winterthur
Equity Investment ERC3,8551127Higher equity trading risk at Credit Suisse First Boston plus higher equity exposures at Winterthur
Swiss & Retail Lending ERC1,667(1)(5)No material change
International Lending ERC & Counterparty ERC2,707231Higher lending risks at Credit Suisse First Boston due to syndications plus higher US dollar exchange rate
Emerging Markets ERC2,191169Higher exposures at Credit Suisse First Boston plus higher US dollar exchange rate
Real Estate ERC & Structured Asset ERC  1)4,5371332Higher residential and commercial real estate exposures at Credit Suisse First Boston plus higher US dollar exchange rate
Insurance Underwriting ERC827(2)24No change
Simple sum across risk categories20,4471014
Diversification benefit(6,392)722
Total Position Risk ERC14,0551110
1-year, 99% position risk ERC, excluding foreign exchange translation risk. For an assessment of the total risk profile, operational risk ERC and business risk ERC have to be considered. For a more detailed description of the Group’s ERC model, please refer to Credit Suisse Group's Annual Report 2004, which is available on the website: www.credit-suisse.com/annualreport2004. Prior period balances have been restated for methodology changes in order to maintain consistency over time.
1) This category comprises the real estate investments of Winterthur, Credit Suisse First Boston’s commercial real estate exposures, Credit Suisse First Boston’s residential real estate exposures, Credit Suisse First Boston’s asset-backed securities exposure as well as the real estate acquired at auction and real estate for own use in Switzerland.



The following table sets forth the trading-related market risk exposure for Credit Suisse Group on a consolidated basis, as measured by scaled one-day, 99% VaR:
2Q20051Q2005 1)
in CHF mMinimumMaximumAverage30.06.05MinimumMaximumAverage31.03.05
Credit Suisse Group 2)
Interest rate & credit spread44.273.561.644.243.377.963.558.9
Foreign exchange rate8.021.313.08.010.530.020.312.2
Equity 31.446.737.645.323.447.833.237.5
Commodity1.39.53.29.50.83.11.52.5
Diversification benefit3)3)(50.6)(51.0)3)3)(51.8)(42.1)
Total52.077.164.856.057.777.166.769.0
1) Adjusted.
2) Disclosure covers all trading books of Credit Suisse Group. Numbers represent daily 10-day VaR scaled to a 1-day holding period.
3) As the minimum and maximum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit.













The following table sets forth the gross loan exposure of the three divisions and Credit Suisse Group:
Credit SuisseCredit Suisse First BostonWinterthurCredit Suisse Group
in CHF m30.06.0531.03.0531.12.0430.06.0531.03.0531.12.0430.06.0531.03.0531.12.0430.06.0531.03.0531.12.04
Consumer loans:
Mortgages69,82868,45467,1190008,0988,2908,48577,92676,74475,604
Loans collateralized by securities16,19515,42515,01800044416,19915,42915,022
Other2,5962,2502,3198287465400003,4242,9952,859
Consumer loans88,61986,12984,4568287465408,1028,2948,48997,54995,16893,485
Corporate loans:
Real estate26,28226,45626,1355855786131,3721,3481,37628,23928,38228,124
Commercial & industrial loans37,44936,63333,12614,15514,21613,5011,4521,36295853,05652,21147,585
Loans to financial institutions8,2917,1116,2796,6475,9875,3512,1022,0842,09617,03115,18213,726
Governments and public institutions1,6461,9311,8982522504022,1742,1072,1014,0724,2874,401
Corporate loans 73,66872,13167,43821,63921,03119,8677,1006,9016,531102,398100,06293,836
Loans, gross162,287158,260151,89422,46721,77720,40715,20215,19515,020199,947195,230187,321
(Unearned income)/deferred expenses, net130136142(35)(33)(32)975104110116
Allowance for loan losses(2,115)(2,245)(2,438)(558)(543)(533)(59)(64)(66)(2,733)(2,851)(3,038)
Total loans, net160,302156,151149,59821,87421,20119,84215,15215,13814,959197,318192,489184,399
This disclosure presents the lending exposure of the Group from a risk management perspective. This presentation differs from other disclosures in this document.



The following table sets forth the impaired loan portfolio of the three divisions and Credit Suisse Group:
Credit SuisseCredit Suisse First BostonWinterthurCredit Suisse Group
in CHF m30.06.0531.03.0531.12.0430.06.0531.03.051)31.12.0430.06.0531.03.0531.12.0430.06.0531.03.051)31.12.04
Non-performing loans 1,3471,3341,4813112792683637221,6931,6501,771
Non-interest earning loans1,1011,1271,259111191313141,1261,1521,281
Total non-performing loans2,4482,4612,7403222902774950362,8192,8023,052
Restructured loans95958242171559152117
Potential problem loans8131,0121,0773533553556567711,2321,4331,503
Total other impaired loans8221,0171,1724353973726672761,3231,4851,620
Total impaired loans, gross3,2703,4783,9127576876491151221124,1424,2874,672
Valuation allowances as % of
Total non-performing loans86.4%91.2%89.0%173.3%187.2%192.4%120.4%128.0%183.3%96.9%101.7%99.5%
Total impaired loans64.7%64.5%62.3%73.7%79.0%82.1%51.3%52.5%58.9%66.0%66.5%65.0%
1) Adjusted.



The following table sets forth the movements in the allowance for loan losses of the three divisions and Credit Suisse Group:
Credit SuisseCredit Suisse First BostonWinterthurCredit Suisse Group
in CHF m2Q20051Q20052Q20042Q20051Q20052Q20042Q20051Q20052Q20042Q20051Q20052Q2004
Balance beginning of period2,2452,4382,9045435331,1996466862,8513,0384,189
New provisions10265143651917461317385319
Releases of provisions(134)(81)(91)(60)(41)(89)(4)(3)(2)(198)(125)(181)
Net additions/(releases) charged to income statement(32)(16)525(22)852(2)1(25)(40)138
Gross write-offs(119)(190)(306)(56)(33)(247)(7)0(3)(182)(223)(556)
Recoveries119761412000172320
Net write-offs(108)(181)(299)(50)(19)(235)(7)0(3)(165)(200)(536)
Provisions for interest2(2)2231911000251711
Foreign currency translation impact and other adjustments, net86(2)3732(3)00(8)4736(12)
Balance end of period2,1152,2452,6575585431,0575964762,7332,8513,790
Provision for credit losses disclosed in the Credit Suisse Group consolidated statements of income also includes provisions for lending-related exposure of CHF -4 million, CHF 4 million and CHF -5 million for 2Q2005, 1Q2005 and 2Q2004, respectively.






Private Banking


Private Banking provides high-net-worth individuals in Switzerland and in numerous other markets around the world with wealth management products and services.


During the second quarter, Private Banking continued to expand its presence in international growth markets. A representative office was opened in Guangzhou, providing access to southern China. In St. Petersburg, Russia, Private Banking opened a representative office, serving clients in the rapidly developing northern Russian region.

Private Banking reported net income of CHF 581 million in the second quarter of 2005, driven by good net revenues, as a result of stable lending, deposit and commission income. Net income decreased by CHF 84 million, or 13%, compared to the second quarter of 2004 and by CHF 104 million, or 15%, compared to the previous quarter. Strong net new asset inflows of CHF 12.8 billion for the second quarter of 2005 combined with positive market performance resulted in an increase in assets under management which exceeded CHF 600 billion at the end of the second quarter.

Net revenues of CHF 1,810 million in the second quarter of 2005 were CHF 59 million, or 3%, below the second quarter of 2004. This decrease in net revenues is caused by large gains in the second quarter 2004 of CHF 57 million from changes in the fair value of interest rate derivatives used for risk management purposes that do not qualify for hedge accounting, compared to a small loss in the second quarter of 2005. The significant decline in net interest income, down CHF 135 million, or 21%, resulted from lower dividends received on Private Banking’s trading portfolio in the second quarter of 2005 compared to the second quarter of 2004 with an offsetting effect in trading revenues. In 2004 most dividends were received in the second quarter, whereas during 2005 the dividend income was spread evenly over the first two quarters. Compared to the first quarter of 2005, lower income from trading execution resulted in an anticipated decrease of overall trading revenues by 50% to CHF 85 million. In the second quarter, Private Banking generated stable net interest income and strong commission income, which was virtually unchanged compared to both the second quarter of 2004 and the first quarter of 2005. The ongoing high level of commission income reflects Private Banking’s leading position in product innovation.

Total operating expenses amounted to CHF 1,084 million in the second quarter of 2005, virtually unchanged compared to the same period of last year but increased by CHF 24 million, or 2%, compared to the seasonally low previous quarter. Slightly higher compensation and benefits compared to the second quarter of 2004 were related to Private Banking’s ongoing strategic investment in international growth markets in Asia, the Middle East and Eastern Europe. This effect was partially offset by lower performance-related compensation accruals.

The cost/income ratio stood at 59.9% in the second quarter of 2005, 2.0 percentage points above the corresponding period in 2004 and 4.5 percentage points above the previous quarter. This reflects seasonally higher expenses compared to the first quarter of 2005, the strategic investments in new international growth markets and lower net revenues.

The gross margin for the first half of 2005 amounted to 131.5 basis points, achieving the mid-term target of 130 basis points. The reduction in Private Banking’s gross margin in the second quarter of 2005 to 125.6 basis points reflected the lower net revenues as well as the increase of the asset base towards the quarter-end, for which revenues were not fully recognized in the second quarter of this year.

Private Banking reported strong net new asset inflow of CHF 12.8 billion for the second quarter of 2005. The growth rate in net new assets for the first half of 2005 was 7.3%, which is well above our mid-term target of 5%. Strategic key markets in Asia and Europe continued to report strong growth rates.

Assets under management stood at CHF 602.3 billion at the end of the second quarter of 2005, up CHF 38.0 billion, or 6.7%, compared to the end of the previous quarter and up CHF 63.2 billion, or 11.7%, compared to year-end 2004. Strong asset inflows, higher equity markets as well as the strengthening of the US dollar contributed to this high level of assets under management.

The following table presents the results of the Private Banking segment:
6 months
in CHF m2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Net interest income5135146480(21)1,0271,059(3)
Commissions and fees1,1801,2091,178(2)02,3892,470(3)
Trading revenues including realized gains/(losses) from investment securities, net851699(50)25419034
Other revenues32203460(6)5290(42)
Total noninterest revenues1,2971,3981,221(7)62,6952,750(2)
Net revenues1,8101,9121,869(5)(3)3,7223,809(2)
Provision for credit losses163(8)43319(2)
Compensation and benefits580600564(3)31,1801,1463
Other expenses50446051910(3)9641,012(5)
Restructuring charges0000(2)(100)
Total operating expenses1,0841,0601,083202,1442,156(1)
Income from continuing operations before taxes and minority interests710849794(16)(11)1,5591,655(6)
Income tax expense123156124(21)(1)279299(7)
Minority interests, net of tax685(25)20141040
Net income581685665(15)(13)1,2661,346(6)



The following table presents key information of the Private Banking segment:
6 months
2Q20051Q20052Q200420052004
Cost/income ratio59.9%55.4%57.9%57.6%56.6%
Gross margin125.6 bp137.7 bp139.1 bp131.5 bp142.7 bp
of which asset-driven79.0 bp82.8 bp80.9 bp80.8 bp81.3 bp
of which transaction-driven44.1 bp49.4 bp47.7 bp46.7 bp52.2 bp
of which other2.5 bp5.5 bp10.5 bp4.0 bp9.2 bp
Net margin40.7 bp49.9 bp49.9 bp45.2 bp50.8 bp
Net new assets in CHF bn12.87.07.919.818.7
Average allocated capital in CHF m3,8413,5913,4143,7203,317



The following table outlines selected balance sheet and other data of the Private Banking segment:
30.06.0531.03.0531.12.04Change in % from 31.03.05Change in % from 31.12.04
Assets under management in CHF bn602.3564.3539.16.711.7
Total assets in CHF bn223.4207.5188.77.618.4
Number of employees (full-time equivalents)12,72212,55512,34213






Corporate & Retail Banking


Corporate & Retail Banking offers banking products and services to corporate and retail clients in Switzerland.


Corporate & Retail Banking again reported a record result in the second quarter of 2005 and a corresponding high return on average allocated capital.

In line with the strategic aim of gaining market share in high-end retail business, particularly in investment products, Credit Suisse launched a new investment product in the second quarter: Credit Suisse Triamant. This new product combines the advantages of professional asset management with those of an investment fund by providing actively managed asset allocation, broad diversification, and transparent reporting and underscores Corporate & Retail Banking’s strategy to provide more innovative investment products to retail clients.

Corporate & Retail Banking recorded net income of CHF 277 million in the second quarter of 2005. This result represents an increase of CHF 21 million, or 8%, compared to the corresponding period of last year and was slightly above the previous quarter. Strong revenue generation and net releases of provisions for credit losses were the main drivers of this favorable result.

Net revenues in the second quarter of 2005 amounted to CHF 858 million, down CHF 92 million, or 10%, compared to the corresponding period of 2004. This decrease was related to large gains in the second quarter of 2004 of CHF 136 million from changes in the fair value of interest rate derivatives used for risk management purposes that did not qualify for hedge accounting in the second quarter of 2004, compared to a small loss in the second quarter of 2005. Provisions for credit losses in the second quarter of 2005 resulted in a net release of CHF 44 million, compared to net provisions of CHF 60 million in the corresponding period of last year and a net release of CHF 19 million in the previous quarter. The net release in the second quarter of 2005 reflects releases of provisions and a low level of new provisions as a result of the ongoing favorable credit environment. Total impaired loans declined from CHF 3.2 billion at the end of March 2005 to CHF 3.0 billion at the end of June 2005.

Total operating expenses amounted to CHF 548 million in the second quarter of 2005 and were virtually unchanged compared to the same period of the previous year. The increase of total operating expenses by CHF 19 million, or 4%, compared to the previous quarter was primarily related to expected higher other expenses mainly based on higher IT project costs and marketing expenses compared to the seasonally low first quarter of 2005. These higher other expenses were partially offset by lower compensation and benefits.

Corporate & Retail Banking achieved a strong return on average allocated capital of 21.8% during the first half year of 2005, an improvement of 4.1 percentage points compared to the same period in 2004. The return on average allocated capital stood well above Corporate & Retail Banking’s mid-term target of 15%.

The segment’s cost/income ratio stood at 63.9% for the second quarter of 2005, 5.7 percentage points above the same period of last year, due to the above-mentioned positive changes in the fair value of interest rate derivatives in the second quarter of 2004. Compared to the previous quarter, the cost/income ratio increased by 2.4 percentage points, reflecting seasonally low expenses in the first quarter.

The following table presents the results of the Corporate & Retail Banking segment:
6 months
in CHF m2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Net interest income521507523301,0281,059(3)
Commissions and fees217224208(3)44414166
Trading revenues including realized gains/(losses) from investment securities, net83101197(18)(58)184220(16)
Other revenues3728223268654255
Total noninterest revenues337353427(5)(21)6906782
Net revenues8588609500(10)1,7181,737(1)
Provision for credit losses(44)(19)60132(63)108
Compensation and benefits291308300(6)(3)5995754
Other expenses2572212531624784721
Total operating expenses5485295534(1)1,0771,0473
Income from continuing operations before taxes and minority interests3543503371570458221
Income tax expense7775803(4)15213612
Minority interests, net of tax011(100)(100)110
Net income2772742561855144524



The following table presents key information of the Corporate & Retail Banking segment:
6 months
2Q20051Q20052Q200420052004
Cost/income ratio63.9%61.5%58.2%62.7%60.3%
Net new assets in CHF bn0.41.0(0.3)1.40.6
Return on average allocated capital21.4%22.4%20.4%21.8%17.7%
Average allocated capital in CHF m5,1854,9145,0505,0645,035



The following table outlines selected balance sheet and other data of the Corporate & Retail Banking segment:
30.06.0531.03.0531.12.04Change in % from 31.03.05Change in % from 31.12.04
Assets under management in CHF bn54.954.553.90.71.9
Total assets in CHF bn106.7102.999.53.77.3
Mortgages in CHF bn64.563.663.01.42.4
Other loans in CHF bn26.325.223.74.411.0
Number of branches214214214--
Number of employees (full-time equivalents)8,3288,2978,31400






Institutional Securities


Institutional Securities provides financial advisory, lending and capital raising services, as well as sales and trading for global users and suppliers.


Institutional Securities had a second quarter 2005 net loss of CHF 408 million compared with net income of CHF 129 million in the second quarter of 2004. The primary reason for this result was a CHF 960 million before tax (CHF 624 million after tax) charge to increase the reserve for private litigation involving Enron, certain IPO allocation practices, research analyst independence and other related litigation. Excluding this litigation charge, Institutional Securities would have reported net income of CHF 216 million in the second quarter of 2005, an increase of CHF 87 million, or 67%, compared with the second quarter of 2004.

Net revenues for the quarter were CHF 3,335 million, an increase of 6% when compared with the second quarter of 2004. Excluding minority interest revenues, net revenues increased by 5%.

Compared to the first quarter of 2005, net income decreased from CHF 540 million to a net loss of CHF 408 million, reflecting higher other expenses due to the charge for certain private litigation and a decrease in net revenues.

Provision for credit losses amounted to a net release of CHF 1 million reflecting the favorable credit environment for lenders during the second quarter of 2005. This compares to CHF 80 million of provisions in the second quarter of 2004 and a net release of CHF 19 million in the first quarter of 2005. Compared to March 31, 2005, total impaired loans increased CHF 70 million to CHF 757 million, and valuation allowances as a percentage of total impaired loans decreased 5.3 percentage points to 73.7% as of June 30, 2005.

Total operating expenses of CHF 3,891 million were CHF 1,033 million, or 36%, higher compared to the second quarter of 2004. Compensation and benefits decreased slightly, reflecting lower severance and performance-related compensation costs. Other expenses increased by CHF 1,052 million, or 112%, primarily reflecting a CHF 960 million before tax (CHF 624 million after tax) charge to increase the reserve for private litigation involving Enron, certain IPO allocation practices, research analyst independence and other related litigation. The charge was in addition to the reserve of CHF 702 million before tax for these private litigation matters, which was originally established in 2002. This brings the total reserve for these private litigation matters to CHF 1.4 billion after deductions for settlements that have since taken place. Other expenses also reflected higher commission expenses due to increased business activity and higher professional fees, compared to the second quarter of 2004. Excluding the charge for these private litigation matters, total operating expenses would have been 3% higher compared to the second quarter of 2004. Compared to the first quarter of 2005, total operating expenses increased by 29%, due to the litigation charge and higher other expenses offset in part by lower compensation and benefits.

Total investment banking revenues include debt underwriting, equity underwriting and advisory and other fees. Second quarter 2005 investment banking revenues of CHF 948 million increased by 5% compared to the second quarter of 2004 due to increases in advisory fees. Underwriting results remained flat when compared with the second quarter of 2004. When compared with the prior quarter, investment banking revenues increased 51%, with significantly higher revenues from advisory fees and debt and equity underwriting.

Debt underwriting revenues of CHF 465 million remained flat compared to the second quarter of 2004, primarily reflecting lower results in leverage finance from a strong second quarter of 2004 and higher results in asset-backed securities and residential structured products. Debt underwriting revenues increased 52% from the first quarter of 2005, driven by higher results in leverage finance and investment grade capital markets. Strong leverage finance results were achieved primarily due to higher revenues in the syndicated loan business, reflecting an industry-wide increase in global syndicated loan volume in the second quarter of 2005 and an improvement in Institutional Securities’ global syndicated loan market share. Leverage finance revenues from high-yield underwriting were down significantly in the quarter reflecting lower levels of issuance, commensurate with an industry-wide decline in global high-yield new issuance. However, for the second quarter of 2005, Institutional Securities improved its ranking to second in global high-yield new issuance, up from number three at the end of the first quarter. Investment grade capital markets revenue increased from a year ago and the prior quarter, reflecting a greater focus on more profitable transactions. As a result, Institutional Securities ranked eleventh in global investment grade new issuance for the second quarter of 2005, up from number thirteen in the first quarter but down from third for the full year 2004.

Equity underwriting revenues of CHF 185 million in the second quarter of 2005 remained flat compared to the second quarter of 2004, consistent with industry-wide issuance volumes, and increased 34% compared to the first quarter of 2005 despite a 15% decline in the volume of industry-wide new equity issuance versus the first quarter of 2005. Institutional Securities ranked third in global IPO market share and first in Americas IPO market share for the second quarter of 2005. Key transactions for the quarter reflected the geographic and industry breadth of the equity franchise and included IPOs for Deerfield Triarc Capital Corp. (US real estate-related specialty finance company), Pyaterochka Holding (Russian grocery retailer), Shanghai Electric Group Company Ltd. (the largest non-Japan Asia IPO in 2005 to date), and Lojas Renner (Brazilian department store) for JC Penney.

Advisory and other fees of CHF 298 million increased 24% compared to the second quarter of 2004 and 63% compared to the first quarter of 2005. The increase in revenues in the second quarter of 2005 was primarily a result of increased industry-wide activity, as well as Institutional Securities’ increase in global announced mergers and acquisitions market share in the prior quarter. The increase in advisory revenues was a result of our focus on leading companies in several consolidating industries. Through the second quarter of 2005, Institutional Securities improved its ranking to number seven in global announced mergers and acquisitions (up from number eleven for the full year 2004) and number five in global completed mergers and acquisitions (up from number nine for the full year 2004). Notable transactions in Europe and the Americas that were announced in the quarter include the Fortune Brands and Pernod Ricard acquisition of Allied Domecq, the BASF AG and Shell International Ltd. sale of their joint venture Basell NV, and the Texas Pacific Group and Warburg Pincus LLC acquisition of Neiman Marcus Group Inc.

Total trading revenues include results from fixed income and equity sales and trading. Total trading revenues for the second quarter of 2005 of CHF 2,028 million increased by CHF 173 million, or 9%, compared to the second quarter of 2004. Total trading revenues declined by 29% compared to the particularly strong first quarter of 2005, reflecting a more challenging environment for both fixed income and equity trading. Institutional Securities’ second quarter 2005 average daily Value-at-Risk (VaR) was CHF 62 million, down from CHF 68 million in the second quarter of 2004 and down modestly from CHF 63 million in the first quarter of 2005, reflecting declines in interest rate and foreign exchange risk levels, offset in part by increases in equity and commodity risk levels.

Fixed income trading generated revenues of CHF 1,194 million in the second quarter of 2005, an increase of 18% from the second quarter of 2004. Credit markets were challenging during the quarter with increased volatility as credit spreads first widened then retracted during the quarter. Interest rate markets were also challenging as the yield curve flattened during the quarter. The increase in revenues primarily reflected improved results in risk taking and positioning, leverage finance, commercial structured products and emerging markets, partially offset by weaker results in interest rate products, asset-backed securities and residential structured products. The overall residential mortgage business performed well in the quarter but was down when compared to the strong second quarter of 2004. The second quarter of 2004 also included losses on certain derivatives used for risk management purposes that did not qualify for hedge accounting. Compared to a very strong first quarter of 2005, fixed income trading decreased by 38% due to a much more challenging market environment resulting in weaker performances across most fixed income products, except for Latin America trading and risk taking and positioning. The first quarter of 2005 included a CHF 125 million positive adjustment to the valuation of over-the-counter (OTC) derivatives in connection with enhancements to bring Institutional Securities’ estimates of fair value closer to how the dealer market prices such derivatives.

Equity trading revenues remained stable at CHF 834 million in the second quarter of 2005 compared to the second quarter of 2004. Higher revenues in prime services and the global cash businesses were offset by weaker revenues in the convertibles and derivatives businesses. The prime services business had a strong quarter with significant revenue growth over prior periods, due to growth in client balances and higher short-term interest rates. Alternative execution services continued to experience strong growth. Institutional Securities was ranked number one in 2004 in program trading, an integral part of the alternative execution suite of products, by top clients according to Institutional Investor , joining our algorithmic trading platform as an award-winner. The convertibles business was impacted by challenging market conditions with weaker valuations, poor liquidity, wider credit spreads and lower volatility. The derivatives business was hindered by a dramatic reduction in implied volatility levels during the quarter resulting in lower revenues. Equity trading revenues decreased by CHF 92 million, or 10%, compared to the first quarter of 2005, primarily due to weaker revenues in risk taking and positioning, convertibles, equity derivatives and the global cash business, partially offset by improvements in the prime services business.

Other (including loan portfolio) revenues of CHF 359 million in the second quarter of 2005 decreased by 5% from the second quarter of 2004 due to lower gains on private equity-related investments not managed as part of Alternative Capital, offset by higher minority interest-related revenues and a valuation adjustment relating to the sale of a financing transaction. The second quarter of 2004 included a significant gain on the sale of the TradeWeb investment.

The following table presents the results of the Institutional Securities segment:
6 months
in CHF m2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Net interest income1,1099091,0652242,0182,107(4)
Investment banking9486279025151,5751,742(10)
Commissions and fees583679617(14)(6)1,2621,380(9)
Trading revenues including realized gains/(losses) from investment securities, net4331,345199(68)1181,7781,44723
Other revenues262282351(7)(25)54445520
Total noninterest revenues2,2262,9332,069(24)85,1595,0243
Net revenues3,3353,8423,134(13)67,1777,1311
Provision for credit losses(1)(19)80(95)(20)59
Compensation and benefits1,8972,0701,916(8)(1)3,9674,167(5)
Other expenses1,9949369421131122,9301,78964
Total operating expenses3,8913,0062,85829366,8975,95616
Income/(loss) from continuing operations before taxes, minority interests and cumulative effect of accounting changes(555)8551963001,116(73)
Income tax expense/(benefit)(239)21614(23)271
Minority interests, net of tax9211153(17)7420393118
Income/(loss) from continuing operations before cumulative effect of accounting changes(408)528129120752(84)
Cumulative effect of accounting changes, net of tax0120(100)120
Net income/(loss)(408)540129132752(82)



The following table presents the revenue details of the Institutional Securities segment:
6 months
in CHF m2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Debt underwriting46530647252(1)771869(11)
Equity underwriting18513818934(2)323432(25)
Underwriting65044466146(2)1,0941,301(16)
Advisory and other fees29818324163244814419
Total investment banking9486279025151,5751,742(10)
Fixed income1,1941,9261,012(38)183,1202,8818
Equity 834926843(10)(1)1,7601,948(10)
Total trading 2,0282,8521,855(29)94,8804,8291
Other (including loan portfolio)359363377(1)(5)72256029
Net revenues3,3353,8423,134(13)67,1777,1311



The following table presents key information of the Institutional Securities segment:
6 months
2Q20051Q20052Q200420052004
Cost/income ratio116.7%78.2%91.2%96.1%83.5%
Compensation/revenue ratio56.9%53.9%61.1%55.3%58.4%
Pre-tax margin(16.6%)22.3%6.3%4.2%15.6%
Return on average allocated capital(13.7%)20.5%4.9%2.3%14.8%
Average allocated capital in CHF m11,87310,51810,58311,31510,139
Other data excluding minority interests
Cost/income ratio  1) 2)120.0%80.6%92.8%98.9%84.6%
Compensation/revenue ratio  1)58.6%55.5%62.2%56.9%59.2%
Pre-tax margin 1) 2)(20.0%)19.9%4.6%1.4%14.5%
1) Excluding CHF 97 million, CHF 111 million, CHF 53 million, CHF 208 million and CHF 93 million in 2Q2005, 1Q2005, 2Q2004, 6 months 2005 and 6 months 2004, respectively, in minority interest revenues relating primarily to the FIN 46R consolidation.
2) Excluding CHF 5 million, CHF 0 million, CHF 0 million, CHF 5 million and CHF 0 million in 2Q2005, 1Q2005 and 2Q2004, 6 months 2005 and 6 months 2004, respectively, in minority interest expenses relating primarily to the FIN 46R consolidation.



The following table outlines selected balance sheet and other data of the Institutional Securities segment:
30.06.0531.03.0531.12.04Change in % from 31.03.05Change in % from 31.12.04
Total assets in CHF bn872.3760.0707.914.823.2
Number of employees (full-time equivalents)16,94216,62616,49823






Wealth & Asset Management


Wealth & Asset Management offers international asset management services to institutional, mutual fund and private investors, provides advisory services for, and invests in, alternative investment vehicles including private equity funds, and provides financial advisory services to high-net-worth individuals and corporate investors.


The Wealth & Asset Management segment is comprised of Credit Suisse Asset Management, Alternative Capital, Private Client Services and Other.

Wealth & Asset Management reported net income of CHF 245 million for the second quarter of 2005, a decrease of 19% compared to the strong second quarter of 2004, which included a particularly high level of investment-related gains in Alternative Capital. Net income increased CHF 110 million, or 81%, compared to the first quarter of 2005.

Wealth & Asset Management’s second quarter 2005 net revenues were CHF 1,570 million, a 5% increase from the second quarter of 2004. Net revenues (excluding minority interest revenues) were down 9% primarily as a result of lower investment-related gains. Revenues before investment-related gains of CHF 663 million were flat compared to the second quarter of 2004 due primarily to higher placement fees in the private funds business of Alternative Capital offset by lower management fees in Credit Suisse Asset Management. When compared with the first quarter of 2005, revenues before investment-related gains were flat.

Second quarter 2005 investment-related gains decreased 26% to CHF 282 million compared to the second quarter of 2004, which was due to an exceptionally high level of private equity gains in Alternative Capital in the second quarter of 2004. Investment-related gains increased 169% compared to the first quarter of 2005 due to an increase in private equity realized gains. Investment-related gains for the second quarter of 2005 included gains related to the partial sale of Nycomed Holdings, the sale of American Ref-Fuel Holdings Corporation, the merger between Seabulk International, Inc. and Seacor Holdings Inc., and the valuation impact relating to the proposed sale of Mueller Water Products, Inc.

In the second quarter of 2005, minority interest revenues, arising from the consolidation of certain private equity funds primarily under FIN 46R, increased by CHF 163 million compared to the second quarter of 2004 to CHF 625 million, primarily due to significant investment-related gains.

Compared with the second quarter of 2004, total operating expenses were slightly down to CHF 623 million, reflecting lower other expenses driven by a decrease in commission and distribution expenses.

Wealth & Asset Management had an inflow of net new assets of CHF 2.8 billion during the quarter due to inflows of CHF 2.8 billion in Alternative Capital primarily due to new fund commitments and inflows of CHF 0.2 billion in Private Client Services, partially offset by an outflow in Credit Suisse Asset Management of CHF 0.2 billion. Assets under management as of June 30, 2005 of CHF 529.3 billion increased by 5.4% compared to March 31, 2005, due to market performance, foreign currency exchange rate movements and net new asset inflows, partially offset by the spin-out of the Credit Opportunities Fund in Alternative Capital, consistent with Wealth & Asset Management’s strategy announced in December 2004.

In the second quarter of 2005, Alternative Capital completed its investment period for DLJ Merchant Banking Partners III Fund and completed its fundraising for CSFB Strategic Partners III with a final closing amount of USD 2.4 billion. In May 2005, Credit Suisse First Boston announced the creation of a strategic partnership, China Renaissance Capital Investment Inc., which will focus on private equity investment opportunities in China. This initiative is consistent with Alternative Capital’s strategy of expanding the private equity business geographically. In addition, in July 2005 Credit Suisse Asset Management acquired a 25% interest in a fund management joint venture in China with Industrial and Commercial Bank of China and China Ocean Shipping Group Company Limited.

The following table presents the results of the Wealth & Asset Management segment:
6 months
in CHF m2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Net interest income31842(83)(93)2161(66)
Asset management and administrative fees599620632(3)(5)1,2191,266(4)
Trading revenues including realized gains/(losses) from investment securities, net53495380102966
Other revenues915249772267191,16494224
Total noninterest revenues1,5679181,4577182,4852,3048
Net revenues1,5709361,4996852,5062,3656
Compensation and benefits27526727630542553(2)
Other expenses 3483313605(3)679707(4)
of which commission and distribution expenses183186218(2)(16)369441(16)
Total operating expenses6235986364(2)1,2211,260(3)
Income from continuing operations before taxes and minority interests947338863180101,2851,10516
Income tax expense814210093(19)123138(11)
Minority interests, net of tax6211614622863478253048
Net income24513530181(19)380437(13)



The following table presents the revenue details of the Wealth & Asset Management segment:
6 months
in CHF m2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Credit Suisse Asset Management4704714820(2)941965(2)
Alternative Capital13213210602526422318
Private Client Services616469(5)(12)125141(11)
Other0000(1)(100)
Total before investment- related gains663667657(1)11,3301,3280
Investment-related gains 1)282105380169(26)387507(24)
Net revenues before minority interests9457721,03722(9)1,7171,835(6)
Minority interest revenues 2)6251644622813578953049
Net revenues1,5709361,4996852,5062,3656
1) Includes realized and unrealized gains/losses from investments as well as net interest income, trading and other revenues associated with Alternative Capital and Other.
2) Reflects minority interest revenues relating primarily to the FIN 46R consolidation.



The following table presents key information for the Wealth & Asset Management segment:
6 months
2Q20051Q20052Q200420052004
Cost/income ratio39.7%63.9%42.4%48.7%53.3%
Compensation/revenue ratio17.5%28.5%18.4%21.6%23.4%
Pre-tax margin60.3%36.1%57.6%51.3%46.7%
Return on average allocated capital67.9%44.2%96.6%56.9%73.8%
Average allocated capital in CHF m1,4431,2211,2461,3361,184
Net new assets in CHF bn
Credit Suisse Asset Management 1)(0.2)1.61.01.40.5
Alternative Capital2.80.60.33.41.0
Private Client Services0.23.21.43.41.8
Total net new assets2.85.42.78.23.3
Other data excluding minority interests
Cost/income ratio  2) 3)65.5%77.1%61.3%70.7%68.7%
Compensation/revenue ratio 2)29.1%34.6%26.6%31.6%30.1%
Pre-tax margin  2) 3)34.5%22.9%38.7%29.3%31.3%
1) Credit Suisse Asset Management balances for net new assets include assets managed on behalf of other entities within Credit Suisse Group. This differs from the presentation in the overview of Credit Suisse Group, where such assets are eliminated.
2) Excluding CHF 625 million, CHF 164 million, CHF 462 million, CHF 789 million and CHF 530 million in 2Q2005, 1Q2005, 2Q2004, 6 months 2005 and 6 months 2004, respectively, in minority interest revenues relating primarily to the FIN 46R consolidation.
3) Excluding CHF 4 million, CHF 3 million, CHF 0 million, CHF 7 million and CHF 0 million in 2Q2005, 1Q2005, 2Q2004, 6 months 2005 and 6 months 2004, respectively, in minority interest expenses relating primarily to the FIN 46R consolidation.



The following table outlines selected balance sheet and other data of the Wealth & Asset Management segment:
in CHF bn30.06.0531.03.0531.12.04Change in % from 31.03.05Change in % from 31.12.04
Assets under management
Credit Suisse Asset Management 1)419.8401.6386.74.58.6
Alternative Capital44.238.536.614.820.8
Private Client Services65.362.259.15.010.5
Total assets under management529.3502.3482.45.49.7
of which advisory 182.7176.7169.23.48.0
of which discretionary346.6325.6313.26.410.7
Active private equity investments1.41.31.17.727.3
Number of employees (full-time equivalents)2,9832,9752,98100
1) Credit Suisse Asset Management balances for assets under management include assets managed on behalf of other entities within Credit Suisse Group. This differs from the presentation in the overview of Credit Suisse Group, where such assets are eliminated.






Life & Pensions


Life & Pensions is a leading provider of life insurance and pension solutions to private and corporate clients. It serves its home market Switzerland and a focused portfolio of international markets in Europe and Asia through multiple distribution channels.


The second quarter 2005 saw a further improvement of the technical result for traditional products and the generation of additional business volume through unit-linked business. Net income rose substantially to CHF 116 million, up 73% compared to the second quarter of 2004. Year-to-date, net income reached CHF 242 million, up CHF 36 million, or 17% from the same period in 2004. The main drivers were the focus on productivity and selected areas of growth, as well as, to a lesser extent, the slightly higher net investment income backing traditional life policies.

Total business volume grew by 2% compared to the second quarter of 2004 and by 5% year-to-date. This encompasses deposits from investment-type products as well as gross premiums written from traditional business. Overall, business growth reflected the disciplined underwriting of traditional products in a challenging low interest rate environment and proactive diversification through unit-linked business.

Gross premiums written in the second quarter of 2005 decreased by 9% to CHF 1.9 billion when compared to the same quarter last year. This resulted from the reduction of the premiums for vested benefits within the stable portfolio of Swiss group life contracts. Year-to-date, gross premiums written grew by 2% compared to last year.

Other revenues including fees, net revenues from deposit business general and separate account, increased to CHF 129 million, up 25% from the second quarter of 2004. In the same period in 2005, the deposit business increased by 17% to CHF 1.7 billion from the same quarter last year and by 11% year-to-date. This was due to a significant increase in unit-linked business primarily in the United Kingdom and Poland.

Total net investment income increased by 31% in the second quarter to CHF 1,747 million. The major part of the additional net investment income originated from unit-linked business and was credited to policyholders. The net investment return backing traditional life policies amounted to 4.7%, compared to 4.6% in the corresponding quarter in the previous year. Net current investment return decreased slightly to 3.8% from the second quarter of 2004 but net realized gains increased by 0.3 percentage points to 0.9%.

Policyholder benefits incurred decreased by 13% from the second quarter of 2004, at a higher rate than the reduction in gross premiums written in the same period. This mainly reflects lower costs for disability coverage.

Dividends to policyholders incurred increased by 67% as a result of the improved performance in the second quarter of 2005, which in most markets is legally required to be passed on to policyholders.

Insurance underwriting and acquisition expenses decreased by 5% and administration expenses decreased by 8% compared to the second quarter of 2004, reflecting further benefits from the ongoing implementation of expense and cost control measures. The expense ratio consequently improved by 1.0 percentage point to 10.9%.

The following table presents the results of the Life & Pensions segment:
6 months
in CHF m2Q20051Q20052Q2004Change in % from 1Q2005Change in % from 2Q200420052004Change in % from 2004
Gross premiums written1,8544,9682,042(63)(9)6,8226,6832
Net premiums earned1,8384,9382,030(63)(9)6,7766,6422
Net investment income1,7471,5421,33313313,2892,91413
Other revenues, including fees, and net revenues from deposit business 129130103(1)2525920825
Net revenues3,7146,6103,466(44)710,3249,7646
Policyholder benefits incurred2,0215,2822,334(62)(13)7,3037,2930
Investment income credited to policyholder account balances66132424110417498551193
Dividends to policyholders incurred429374257156780367818
Provision for credit losses0(1)2(100)(100)(1)1
Total benefits, dividends and credit losses3,1115,9792,834(48)109,0908,4837
Insurance underwriting and acquisition expenses 1451451530(5)290317(9)
Administration expenses238259258(8)(8)4974950
Other expenses45236796(33)68116(41)
Restructuring charges003(100)05(100)
Total operating expenses4284274810(11)855933(8)
Income from continuing operations before taxes, minority interests and cumulative effect of accounting changes175204151(14)163793489
Income tax expense596871(13)(17)1271224
Minority interests, net of tax0106(100)(100)1013(23)
Income from continuing operations before cumulative effect of accounting changes11612674(8)5724221314
Income/(loss) from discontinued operations, net of tax00(7)(100)0(8)(100)
Cumulative effect of accounting changes, net of tax00001(100)
Net income11612667(8)7324220617



The following table presents key information of the Life & Pensions segment:
6 months
2Q20051Q20052Q200420052004
Total business volume in CHF m 1)3,5156,4633,4609,9789,527
Expense ratio 2)10.9%6.3%11.9%7.9%8.5%
Return on average allocated capital8.3%10.8%5.2%9.5%7.9%
Average allocated capital in CHF m5,5665,0335,5655,3175,523
1) Includes gross premiums written and policyholder deposits.
2) Insurance underwriting, acquisition and administration expenses as a percentage of total business volume.



The following table outlines selected balance sheet and other data of the Life & Pensions segment:
30.06.0531.03.0531.12.04Change in % from 31.03.05Change in % from 31.12.04
Assets under management (discretionary) in CHF bn 1)122.5119.5115.52.56.1
Technical provisions in CHF bn117.0113.9110.52.75.9
Number of employees (full-time equivalents)7,0256,9186,52428
1) Based on savings-related provisions for policyholders plus off-balance sheet assets.



The following table presents the investment income of the Life & Pensions segment:
6 months