A Year of Change for Credit Suisse Group.

ZURICH, Switzerland--(BUSINESS WIRE)--March 5, 1997--In 1996, CREDIT SUISSE GROUP posted consolidated operating income of Sfr 12.890 billion, a 17% increase on the previous year.

All major areas of business contributed to this healthy growth. Net operating profit after tax stands at Sfr 1.795 billion. This result contrasts with the loss of Sfr 2.432 billion which the Group posted owing to the restructuring of operations and the introduction of a new credit risk management system. For 1996, the payment of an unchanged dividend of Sfr 4 per share is proposed.

Investment in the future

In 1996 Credit Suisse Group announced the implementation of a forward-looking structure and far-reaching organisational changes:

-- introduction of a new strategic organisation and of market and customer-driven structures

-- formation of the Credit Suisse and Credit Suisse First Boston legal entities and, in particular, of four customer-based business units

-- launch of a comprehensive programme for the long-term improvement of productivity

-- implementation of a forward-looking framework for the management of credit risk

-- spin-off of selected non-core businesses, notably Electrowatt Ltd.

As Rainer E. Gut, chairman of the board, emphasised at the Credit Suisse Group press conference, despite the major restructuring, customers' business needs were successfully given priority at all times. This dedicated focus on the customer is reflected in the 17% increase in operating income to just under Sfr 13 billion. All major business sections and areas of the Group contributed to this result.

Good operating result(1)

Of the consolidated operating income of Sfr 12.890 billion, trading income advanced most strongly, posting an increase of 33% to Sfr 3.901 billion. Income from commission and service fee activities climbed by 18% to Sfr 4.942 billion, while interest income rose by 6% to Sfr 3.488 billion. At 38% of operating income, commission and service fee activities remain the most important source of earnings. Trading accounted for 30% of operating income and interest business for 27%. -0-

(1) The 1995 results have been restated to conform with the Swiss accounting rules for banks. For this reason, comparison with the previous year's figures is of only limited use. -0-

Operating expenses rose by 20% to Sfr 8.338 billion, partly owing to currency movements but mainly as a result of higher staff expenses. In the second half of 1996, restructuring costs - some of which are charged to the current statement - represented a further major item of expenditure. Staff members at end-1996 totalled 34,821. In Switzerland there was a net reduction of 440 jobs, a figure which takes into account the permanent employment of more than 500 apprentices, trainees and graduate trainees and the hiring of a further 300 apprentices. This compares with an increase in staff abroad of 950.

The growth in staff numbers abroad can be attributed to the healthy business performance put in CS First Boston Inc. and Credit Suisse Financial Products as well as to the strategic expansion of Credit Suisse's international operations. These factors led to a marked rise in performance-related bonus payments and to salary adjustments in line with changing conditions on the international markets. Together with additional payments for the increased workload of many members of staff as a result of the restructuring, it explains the higher level of staff expenses.

In 1996 Credit Suisse Group posted a gross operating profit of Sfr 4.552 billion, an increase of 12%.

Owing to the continued difficult economic environment in Switzerland and the persistently adverse conditions on the Swiss property market, depreciation, write-downs provisions and losses in the operational income statement climbed by 25% to Sfr 2.084 billion.

Pre-tax operating profit therefore amounted to Sfr 2.468 billion, up 3% on the previous year.

Of total tax expenditure of Sfr 833 million, Sfr 673 million relate to the ordinary result, with Sfr 160 million payable in Switzerland and Sfr 513 million abroad. The rise in ordinary taxes outside Switzerland reflects the strong growth in earnings, especially in the U.S.A. and the U.K.

Net operating profit after tax therefore amounted to Sfr 1.795 billion, Sfr 1.638 billion after deduction of minority interests.

Return on equity in respect of the operating result stood at 10.1%, 9.6% after minority interests.

The balance sheet total of Credit Suisse Group was Sfr 524 billion at year-end. The increase in this figure was due principally to a further expansion in repo business (+54%), securities lendings (+19%) and the securities trading account (+37%). Just under 9% of the increase was the result of currency movements. The BIS core capital ratio (tier 1) for the Credit Suisse Group was 8.0%, while the BIS total capital ratio was 11.9%. Total shareholders' equity, including minority interests, stood at Sfr 16.4 billion.

Pro forma accounts for the business units

Indicative(2) pro forma 1996 operating results have been drawn up for the four new business units of Credit Suisse Group, in operation since January 1 1997 - Credit Suisse, Credit Suisse Private Banking, Credit Suisse Asset Management and Credit Suisse First Boston.

Credit Suisse, active in Swiss domestic banking, posted operating income of Sfr 2.7 billion. High provisions and a continued unsatisfactory cost structure meant that Credit Suisse recorded a pre-tax operating loss of Sfr 950 million.

Credit Suisse Private Banking, which offers private banking services worldwide, recorded operating income of Sfr 3.040 billion, and annual pre-tax operating profit of Sfr 1.360 billion.

Credit Suisse First Boston, a globally active investment bank, achieved operating income of Sfr 6.475 billion with annual pre-tax operating profit of Sfr 1.875 billion.

Credit Suisse Asset Management, which provides asset management services to institutional investors, recorded operating income of Sfr 660 million and posted annual pre-tax operating profit of Sfr 195 million.

A technical loss as a result of extraordinary measures

Extraordinary income totalled Sfr 1.340 billion, the result primarily of the book profit from the agreement to sell Electrowatt Ltd. Of the Sfr 160 million tax on these extraordinary items, Sfr 52 million was accounted for in Switzerland, and Sfr 108 million was charged in the United States in connection with the integration of CS First Boston Inc. into the new bank Credit Suisse First Boston.

This extraordinary income of Sfr 1.340 billion compares with extraordinary expenditure of Sfr 5.407 billion, the major components of which were: Sfr 1 billion in restructuring costs for the refocusing of the Group begun in July 1996 and Sfr 97 million for other expenses in connection with previous restructuring projects; Sfr 1.630 billion for extraordinary provisions in respect of Swiss borrowers and the change to the new credit risk management system; Sfr 459 million for extraordinary depreciation; a Sfr 1.568 billion incremental credit reserve (ICR), which together with a further Sfr 195 million was assigned to the reserves for general banking risks; Sfr 216 million for the formation of a provision for the integration of the emerging market trading activities of CS First Boston Inc. into the new bank Credit Suisse First Boston; and other extraordinary expenses of Sfr 242 million. -0-

(2) Indicative pro forma results have been prepared for the four business units. Numerous inter-company transfers are involved due to the change in the legal structures and customer reassignments which took place at the end of the year. Thus these results are an approximation of how the business units would have performed had the restructuring taken place at the beginning of 1996.

As a result of the extraordinary structural and strategic measures which have been taken, the Group recorded a technical loss at year-end of Sfr 2.432 billion, before minority interests, Sfr 2.589 billion after minority interests. The discrepancy between this and the Sfr 2.1 billion loss forecast in December 1996 results from the decision not to create a tax credit of Sfr 170 million in the United States in connection with the reorganisation and from the additional allocation of Sfr 195 million to the reserves for general banking risks.

Given the sound operating results for 1996 and the pleasing start to the current year, the Board of Directors intends - subject to the results of CS Holding (parent company) as at end-March - to propose to the annual meeting that an unchanged dividend of Sfr 4 per share be paid to shareholders.

Outlook

Lukas Muhlemann, the Group's chief executive officer, highlighted the following as the main goals for Credit Suisse Group in 1997; an increase in profitability in all business areas, a continuation of the rapid and systematic implementation of the refocusing measures and the completion of the remaining restructuring projects on schedule. In addition, the selective expansion of activities in attractive markets and product areas will be systematically pursued. Strategic collaboration with Winterthur Insurance and Swiss Re will also be further expanded.

For the current year Credit Suisse Group expects structural improvements in earning power throughout the Group and, in particular, in Swiss business.

CONTACT: Media: Karin Rhomberg, tel: [phone]

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