Credit Suisse : 2Q22 Earnings Media Release

Media Release

Zurich, July 27, 2022

Ad hoc announcement pursuant to Art. 53 LR

Credit Suisse reports net revenues of CHF 3.6 bn and pre-tax loss of CHF 1.2 bn along with a CET1 ratio of 13.5% in 2Q22

"Our results for the second quarter of 2022 are disappointing, especially in the Investment Bank, and were also impacted by higher litigation provisions and other adjusting items. The bank's performance was significantly affected by a number of external factors, including geopolitical, macroeconomic and market headwinds. These challenging circumstances led to results which overshadow the strength of our leading client franchises in all four divisions of the bank. The urgency for decisive action is clear and a comprehensive review to strengthen our pivot to the Wealth Management, Swiss Bank and Asset Management businesses, supported by a fundamental transformation of our Investment Bank, is underway. Further, we have now launched a broader cost efficiency and digital transformation program to reduce our absolute cost base to less than CHF 15.5 bn in the medium term.

Today marks a leadership change for Credit Suisse. It has been an absolute privilege and honor to serve Credit Suisse over these past 23 years. It has been my passion since day one to deliver best-in-class service to our clients. As a leader, since joining the Executive Board in 2015, I was focused on delivering results and embracing our values, including partnership, accountability and integrity."

Thomas Gottstein, Chief Executive Officer of Credit Suisse Group AG

Please refer to the additional media release published on July 27, 2022, concerning the management change and comprehensive strategic review.

Credit Suisse Group results for 2Q22

Reported
(CHF mn)	2Q22	1Q22	2Q21	1Q22	2Q21	1H22	1H21	1H21
Net revenues	3,645	4,412	5,103	(17)%	(29)%	8,057	12,677	(36)%
Provision for credit losses	64	(110)	(25)	-	-	(46)	4,369	-
Total operating expenses	4,754	4,950	4,315	(4)%	10%	9,704	8,252	18%
Pre-tax income/(loss)	(1,173)	(428)	813	-	-	(1,601)	56	-
Effective tax rate	(36)%	35%	70%	-	-	(17)%	71%	-
Net income/(loss) attributable to shareholders	(1,593)	(273)	253	-	-	(1,866)	1	-
Return on tangible equity	(15.0)%	(2.6)%	2.6%	-	-	(8.9)%	0.0%	-
Cost/income ratio	130%	112%	85%	-	-	120%	65%	-
Net New Assets (NNA) in CHF bn	(7.7)	7.9	(4.7)	-	-	0.2	23.7	-
Assets under Management (AuM) in CHF bn	1,454	1,555	1,632	-	-	1,454	1,632	-
Adjusted*
(CHF mn)	2Q22	1Q22	2Q21	1Q22	2Q21	1H22	1H21	Δ1H21
Net revenues	3,820	4,582	5,226	(17)%	(27)%	8,402	12,656	(34)%
Provision for credit losses	64	45	(95)	-	-	109	(131)	-
Total operating expenses	4,198	4,237	4,008	(1)%	5%	8,435	7,878	7%
Pre-tax income/(loss)	(442)	300	1,313	-	-	(142)	4,909	-

Capital ratios for 2Q22

13.5% 4.3% 6.1%

CET1 ratio vs. 13.7% in 2Q21

CET1 leverage ratio vs. 4.2% in 2Q21

Tier 1 leverage ratio vs. 6.0% in 2Q21

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Media Release Zurich, July 27, 2022

Summary of 2Q22 performance

As stated in our Trading Update on June 8, 2022, the second quarter was marked by challenging economic and market conditions. The combination of the current geopolitical situation following Russia's invasion of Ukraine and significant monetary tightening by major central banks in response to the substantial increase in inflation have resulted in continued heightened market volatility, weak customer flows and ongoing client deleveraging.

Our performance in the Investment Bank (IB) was impacted by significantly lower capital markets issuance activity as well as reduced client activity, partly offset by stronger M&A advisory revenues. The IB's franchise positioning was not geared towards benefiting from the volatile market conditions and our areas of strength, such as capital markets, were significantly impacted.

Our performance in Wealth Management (WM) was strained due to lower client activity, volumes and recurring revenues. However, WM and Swiss Bank (SB) benefited from the improved rates environment leading to higher net interest income.

In 2Q22 we saw net revenues decrease by 29% year on year, driven by a decline in IB net revenues, down 43%, on a USD basis; a decline in WM net revenues, down 34%; as well as a decline in Asset Management (AM) net revenues, down 25%. We had a net revenue increase in SB, up 3% year on year. Reported net revenues included a valuation loss of CHF 168 mn from our equity investment in Allfunds Group. We had adjusted* net revenues of CHF 3.8 bn, down 27% year on year; these include mark-to-market losses of USD 245 mn in

Leveraged Finance within the IB as a result of less favorable market conditions.

Reported operating expenses of CHF 4.8 bn were up 10% year on year and included major litigation provisions of CHF 434 mn, primarily relating to developments in a number of previously disclosed legal matters, including a matter concerning compliance with records preservation requirements relating to business communications sent over unapproved electronic messaging channels. Our adjusted* operating expenses of CHF 4.2 bn were up 5%, primarily driven by incremental investment spend.

We reported a pre-tax loss of CHF 1.2 bn compared to a pre-tax income of CHF 813 mn in 2Q21. Our adjusted* pre-tax loss for 2Q22 was CHF 442 mn, down significantly compared to 2Q21. We reported a net loss attributable to shareholders of CHF 1.6 bn, compared to net income attributable to shareholders of CHF 253 mn in 2Q21.

We had Group net asset outflows of CHF 7.7 bn in 2Q22, compared to net asset outflows of CHF 4.7 bn in 2Q21. Our global wealth management, which includes our WM division and Private Banking Switzerland, had moderate net asset outflows for 2Q22 of CHF 1.8 bn; this was driven primarily by net asset outflows in EMEA and Switzerland partially offset by net inflows across Asia Pacific and Americas. Group AuM for 2Q22, stood at CHF 1.5 trn, down from CHF 1.6 trn at the end of 1Q22.

We maintained a resilient capital base with our CET1 capital ratio at 13.5% as of the end of 2Q22, in line with our guidance. Our CET1 leverage ratio, and our Tier 1 leverage ratio remained flat at 4.3% and 6.1%, respectively, as of the end of 2Q22.

___________________________________________________________________________________________________________

Summary of 1H22 performance

For the first half of 2022 we saw net revenues decrease by 36% year on year, driven by a decline in IB net revenues, down 48%, on a USD basis, and a decline in WM net revenues, down 39%. We also saw a decline in AM net revenues, down 18% year on year, whereas net revenues in SB were up 5% for 1H22. Our reported net revenues of CHF 8.1 bn included real estate gains of CHF 177 mn, partially offset by a valuation loss of CHF 521 mn related to our equity investment in Allfunds Group. We had adjusted* net revenues of CHF 8.4 bn, down 34% year on year. The bank's performance was impacted by the ongoing macro-economic and geopolitical challenges and market headwinds.

We had reported operating expenses of CHF 9.7 bn, up 18% year on year, primarily driven by litigation provisions of CHF 1.1 bn. Our adjusted* operating expenses were CHF 8.4 bn, up 7%, driven by increased incremental investment spend of CHF 331 mn relating to our Group strategy, as well as increased remediation spend in Risk, Compliance and Infrastructure.

We reported a pre-tax loss of CHF 1.6 bn for 1H22, compared to a pre-tax income of CHF 56 mn for the same period in 2021. Our adjusted* pre-tax loss for the first half of 2022 was CHF 142 mn, which compares to an exceptionally strong adjusted* pre-tax income of CHF 4.9 bn in the first half of 2021.

Our Group NNA for 1H22 was CHF 0.2 bn, compared to CHF 23.7 bn for the same period in 2021.

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Media Release

Zurich, July 27, 2022

Net revenues for 2Q22 and 2Q21 by region

Switzerland			Switzerland
EMEA			EMEA
Asia Pacific	26%		Asia Pacific	25%	30%
Americas	39%		Americas
	19%			17%
	16%				28%
	Net revenues per region in 2Q22			Net revenues per region in 2Q21
	CHF bn				CHF bn

Outlook

Our financial results for 1H22 have been significantly affected by the challenging economic and market environment, as well as legacy litigation provisions and losses resulting from the fall in the market value of our investment in Allfunds. The combination of the geopolitical situation following Russia's invasion of Ukraine and significant monetary tightening by major central banks in response to inflation concerns have continued to result in heightened volatility and client risk aversion so far this year. The Swiss Bank continues to deliver a resilient performance and Wealth Management is benefiting from higher interest rates. In our Investment Bank, Equity Derivatives delivered its best second quarter results in recent history1, advisory revenues increased and our Securitized Products business delivered a resilient performance, given the more difficult environment. However, the current market environment has had an adverse impact on client activity across both Wealth Management and the Investment Bank. The Investment Bank has been particularly adversely affected by the industry- wide reduction in capital market volumes and by the widening in credit spreads, which have resulted in mark-to-market losses of USD 245 mn in 2Q22 in our Leveraged Finance portfolio, primarily in unfunded loans. Furthermore, the Investment Bank has relatively limited exposure to business areas, such as interest rate trading, which have benefited from the current monetary environment.

We would expect these market conditions to continue for the coming months. In the Investment Bank, while we have a robust pipeline of transactions, these may prove difficult to execute in the current market environment. Trading so far in 3Q22 has been marked by a continued weakness in client activity, exacerbating normal seasonal declines, and we would expect this division to report a further loss this quarter. However, we would expect our Swiss Bank to continue to deliver a resilient performance, notwithstanding the decision by the SNB to increase CHF interest rates. Furthermore, while client activity remains subdued in our Wealth Management businesses and recurring revenues are expected to continue to reflect lower market levels, this division is already benefiting from higher interest rates, particularly related to our USD exposures. We would also expect an improvement in our Asset Management results in the second half of the year.

In this environment, expense discipline is of particular importance and, as has been announced separately, the Board of Directors and the Executive Board, have now launched a broader cost efficiency and digital transformation program to reduce our absolute cost base to less than CHF 15.5 bn in the medium-term. Credit Suisse will provide further details on the progress of the strategic review, including specific performance goals, with its third quarter 2022 results.

With regard to our capital position, we would expect to operate with a CET1 ratio of between 13% and 14% for the balance of 2022 supported by continued discipline around capital usage.

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Media Release Zurich, July 27, 2022

Selected Group strategy execution measures and progress

As stated at our Investor Deep Dive in June, we remain firmly focused on the execution of our strategic plan throughout 2022 and on reinforcing our risk culture - crucially, while staying close to our clients.

Addressing our cost base remains a priority. We have announced a broader cost efficiency and digital transformation program to reduce our absolute cost base to less than CHF 15.5 bn in the medium-term. The digital transformation program includes measures such as the simplification of front to back processes, reduction in manual data handling and duplication as well as increase the use of scalable cloud- based infrastructure. The new absolute cost base ambition is net of investment spend that we continue to allocate to our core businesses. Credit Suisse will provide further details on the progress of the strategic review, including specific performance goals, with its third quarter 2022 results.

Over the course of 2Q22 we have achieved the following relating to our Group strategy:

Achieved USD 3.3 bn of our ambition to release more than USD 3 bn of allocated capital in the IB by year end 2022 ahead of schedule

Achieved a 7% year on year reduction in our Group credit portfolio, including 15% reduction in our non-investment grade portfolio, an 18% reduction in our Emerging Markets portfolio as well as a more than 70% reduction to our Russia net credit exposure since the end of 2021

Took CHF 0.4 bn in major litigation provisions in 2Q22; proactive approach to resolving legal cases

Credit Suisse has further announced that a comprehensive review to strengthen its pivot to Wealth Management, Swiss Bank and Asset Management, supported by a transformation of the Investment Bank, is underway

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Media Release

Zurich, July 27, 2022

Divisional summaries

Wealth Management (WM)

900
800
700
600
500	432	384
400
300			138	212
200				114
100
0
2Q21	3Q21	4Q21	1Q22	2Q22

Adjusted* pre-tax income QoQ in CHF million

2Q22

On an adjusted* basis, WM's pre-tax income fell to CHF 114 mn, down from CHF 432 mn or 74% year on year due to reduced client activity, lower volumes impacting revenues and higher costs. Adjusted* pre-tax income was adversely impacted by certain asset impairments and non-operational charges, including CHF 17 mn relating to certain third-party assets, mark-to-market losses in APAC Financing of CHF 21 mn, CHF 24 mn relating to the Supply Chain Finance Fund (SCFF) fee waiver program and, impacting expenses, a CHF 38 mn write-off of certain IT-related assets. The reported pre-tax loss for the quarter of CHF 96 mn, mainly reflects a valuation loss on the equity investment in Allfunds Group of CHF 168 mn.

WM had reported net revenues of CHF 1.3 bn, down 34% year on year. Adjusted* net revenues of CHF 1.4 bn were down 7% due to lower recurring commission and fees, down 14%, reflecting lower AuM at broadly stable margins, as well as lower transaction- and performance-based revenues, down 11%, due to more cautious client sentiment adversely impacting brokerage and structured product fees. These were slightly offset by higher net interest income, up 4%, primarily driven by higher deposit income reflecting higher interest rates, especially in USD.

WM had higher adjusted* operating expenses, up 18%, reflecting an impairment of CHF 38 mn related to certain IT assets, higher Group-wide technology, risk, and compliance investments as well as investments in business growth including China.

WM had net asset outflows of CHF 1.4 bn in 2Q22 mainly driven by outflows from EMEA and Switzerland, including client deleveraging, partially offset by inflows from Asia Pacific and Americas. WM recorded AuM of CHF 662 bn, compared to CHF 769 bn in 2Q21 and CHF 707 bn in 1Q22, mainly reflecting unfavorable markets movements and structural effects. Additionally, WM had client business volume of CHF 974 bn, down 16% year on year, and down 6% quarter on quarter, due to the challenging market environment.

1H22

On an adjusted* basis, WM's pre-tax income fell to CHF 326 mn, down 74% year on year. Adjusted* pre-tax income included negative impacts of CHF 50 mn relating to the SCFF fee waiver program. WM had lower adjusted* net revenues, down 15%, as well as higher adjusted* operating expenses, up 17%.

WM had reported net revenues of CHF 2.4 bn, down 39% year on year. The decline in reported net revenues was driven by a valuation loss of CHF 521 mn on the equity investment in Allfunds Group, compared to a valuation gain of CHF 461 mn in the first half of 2021. Adjusted* net revenues of CHF 3.0 bn were down 15% year on year, due to lower transaction- and performance- based revenues, down 28%, mainly from lower brokerage and product issuing fees and lower Global Trading Solutions (GTS) revenues; lower recurring commission and fees, down 10%, reflecting lower AuM as well as lower net interest income, down 2%.

WM had NNA of CHF 3.4 bn for the half year at annualized growth rate of 1%.

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