What are the challenges to expanding in Asia at the moment?
Obviously, we had all hoped the headwinds to the banking business — low levels of client activity, low interest rates, market volatility and political uncertainty — around the world would subside. It now seems clear though that these secular trends may persist for an extended period. Against the background of these challenging operating conditions, the uncertain economic outlook globally and the increased regulatory scrutiny of cross-border activities, our traditional private banking business model is clearly in flux. To produce superior returns for shareholders and maintain client market share momentum in light of these challenging secular trends is a formidable task indeed.
For Credit Suisse, our status as a first-mover in adapting our business model to these new realities puts us in a position of financial strength. We were early to adapt our overall strategy to operate with a lower risk profile, greater capital efficiency and a relentless focus on clients. We were among the first, as early as 2008, to recalibrate our business approach accordingly and we have been executing it ever since. This early transition positions us for improved profitability and more sustainable returns once the economic climate improves and client investment appetite returns. Already today, during an extended period of unprecedented market volatility and fundamental industry change, we can see the benefit of this strategy as evidenced by a best-in-class average return-on-equity of 14.9% since the beginning of 2009.
What steps have you taken to position your private banking business for the future?
We have anticipated many regulatory developments (too big to fail, liquidity requirements, Basel 3 and contingent capital) and implemented changes to our operating model, which puts us ahead of the curve versus our peers. Today, we continue to have a strong capital position, with a Basel 2 tier-1 ratio of 17.7%. We have already been operating under Basel 2.5 standards since the beginning of the year, and currently have a Basel 2.5 core tier-1 ratio of 10%.
We have a highly liquid balance sheet and a net stable funding ratio of 97%. We also have a high quality, clean balance sheet with minimal exposure to the peripheral European countries and our funding spreads remain among the tightest in our peer group.
All of this has been achieved despite the headwinds affecting our businesses, particularly over the past year or so. Clients, investors and counterparties appreciate the strength and consistency of our franchise and consequently since 2008, our clients have entrusted us with more than SFr158.3 billion ($176.4 billion) of net new assets (NNA).
With our integrated client-focused, capital-efficient strategy, Credit Suisse is well equipped to deal competently and effectively with the challenges ahead. We remain convinced that our strategy will provide us with substantial growth opportunities and we will achieve superior financial performance as economic and market conditions improve.
How does private banking in Asia fit within the overall Credit Suisse strategy?
Private banking continues to be Credit Suisse’s key engine of growth and value. Our business performance has been strong over the past three years. The new client assets we have raised between 2008 and the third quarter of 2011 are a multiple of our competitors. Our gross margin remains one of the best in the industry. In combination with our investment banking and asset management businesses, private banking provides a unique value proposition for our clients.
We remain committed to our long-term growth strategy and targets. We believe we can maintain our private banking franchise momentum while at the same time improving profitability in a challenging environment and amidst regulatory changes.
Asia offers tremendous potential and is experiencing rapid wealth creation. We are firmly committed to investing in and growing our regional private banking business for the longer term. We have considerable growth ambitions for the region and private banking is core to our strategy in delivering our client-focused franchise.
Private banking Asia Pacific has been among the fastest-growing of Credit Suisse’s international wealth management businesses, with double-digit growth in NNA annually since 2008. Since 2008, cumulative NNA is more than SFr41.6 billion in Asia, contributing to more than a quarter of the bank’s global wealth management NNA result.
In our latest announcement on November 1 [made alongwith third-quarter results for this year], private banking is committed to ensuring industry-leading profitability and implementing a series of growth, productivity and efficiency measures to build on our strong onshore and offshore footprint. All measures are aimed at increasing private banking’s contribution to the group’s pre-tax income, including improving the offshore delivery model, investing in the ultra-high-net-worth (UHNW) individual client segment and further gaining market share in Switzerland, while enhancing efficiency of the Swiss platform.
Credit Suisse has also committed to allocate resources to faster growing and large markets, especially in Brazil, Southeast Asia, Greater China and Russia, which we anticipate will grow from 15% of the Group’s revenues in 2010 to 25% by 2014.
We will continue to grow our Hong Kong and Singapore wealth management hubs and will continue to strategically hire senior bankers. Last year, we made 60 new private banker hires of which 70% were senior bankers.
What is the specific focus area within private banking?
Our ultra-high-net-worth-client business remains one of our key strategic focuses and we are committed to growing the contribution from this segment. We have a strong track record, benefiting from our integrated offering. Globally, UHNW assets under management represent 35% of global overall assets under management, up 10% since 2008. We have relationships with 35% of the world’s billionaires — up from 25% in 2008. Of our NNAs, 55% have come from UHNW clients since 2008. Our strategies around this segment include dedicated coverage with senior bankers, seamless collaboration across the integrated bank, a comprehensive leading-edge product suite and an unrivalled networking platform for billionaires.
