Credit Suisse Group AG

SIX:CSGN

Earnings Call Transcript 2022-Q1

[Operator]

Good morning. This is the conference operator. Welcome, and thank you for joining Credit Suisse Group's First Quarter 2022 Results Conference Call for analysts and investors. [Operator Instructions] And the conference is recorded. [Operator Instructions]

I will now turn the conference over to Kinner Lakhani, Head of Investor Relations and Group Strategy and Development. Please go ahead, Kinner.

[Kinner Lakhani, executive]

Thank you, operator. Before we begin, let me remind you of the important cautionary statements on Slides 2 and 3, including in relation to the forward-looking statements, non-GAAP financial measures and Basel III disclosures. For a detailed discussion of our results, we refer you to the Credit Suisse first quarter 2022 earnings release published this morning. Let me remind you that our first quarter 2020 financial report and the accompanying financial statements for the period will be published on or around May 5.

I will now hand over to our Group CEO, Thomas Gottstein; and our Group CFO, David Mathers, who will run you through the numbers.

[Thomas Gottstein, executive]

Thank you, Kinner, and thank you all for joining our first quarter 2022 results presentation. We greatly appreciate your participation and engagement.

Let me begin by addressing the broader economic and geopolitical environment. Financial markets enter 2022 dealing with some of the highest inflation rates in a generation, putting significant pressure on central banks and weighing on the purchasing power of many of our fellow citizens.

In addition, Russia's invasion of Ukraine has led to a catastrophic humanitarian crisis. Credit Suisse and its employees would like to express our sympathy and support towards the Ukrainian people as we continue to show our solidarity through support for aid groups and other organizations. The Ukrainian crisis has also had a significant impact on the global economy, financial markets and many businesses, including our own during the first quarter, as you will have seen in the reports from many of our global peers.

As I've said previously, in the context of our long-term strategic plan, the year 2022 is one of transition for us at Credit Suisse. We are determined to continue with the implementation of our strategy as announced in November last year and remain focused on refining and reinvigorating our franchise consistent with our approved risk appetite.

The financial performance in the first quarter of 2022 highlights our work in progress and what more we need to do. As we disclosed last week, we reported a loss in the first quarter. This was partly a consequence of our decision to increase provisions relating to developments in a number of previously disclosed legacy legal matters. This is in line with our proactive approach to resolving legacy litigation matters, many of which go back more than 1 decade. Our results were also negatively impacted by Russia related losses of CHF 206 million.

As you will see in the slides, we have already made significant concrete progress in executing our strategy across our divisions with a simplified structure that went live on January 1.

Before I turn to the presentation, as you have seen today, we have announced a series of appointments to the Executive Board as well as management changes. We are delighted to welcome Francesca McDonagh as incoming CEO of the EMEA region; Edwin Low, CEO of the Asia Pacific region; and Markus Diethelm as General Counsel. They will take up their roles in the coming weeks and months.

David, who has served as Chief Financial Officer since 2010 has indicated his wish to seek alternative opportunities outside of Credit Suisse. While I have accepted his request with regret, I look forward to working with him over the coming months until a successor is found. And on a personal note, I would like to add that I will not only miss him as a competent CFO, but as a friend and colleague. But we still have several months to go, David.

I would also like to thank Romeo and Helman for their service to bank over the many years, and I'm very pleased that Helman will serve as Senior Adviser to me, focusing on the core clients around the APAC region as well as serving on our Asia Advisory Council. The determined delivery of our strategy over the coming quarters is the absolute focus of the Board of Directors, the Executive Board and all our employees.

With that, let me turn to the slides, starting with our key messages from the first quarter on Slide 4. We recorded CHF 0.4 billion pretax loss in the first quarter as our reported results were negatively impacted by CHF 0.7 billion of legal provisions, by CHF 0.2 billion Russia-related losses and by CHF 0.4 billion market value losses related to our old fund stake. These were offset somewhat by real estate gains and a net release of provision for credit losses. On an adjusted basis, we reported pretax income of CHF 0.3 billion.

Overall, we saw net revenues decline year-on-year, mainly due to a particularly strong comparable in the first quarter of 2021, especially in the Investment Bank and Wealth Management. We also experienced significant industry-wide headwinds in the form of more challenging market conditions due to higher inflation and interest rates as well as Russia's invasion of Ukraine impacting a number of our businesses.

In the first quarter, we reduced our Russia-related net credit exposure by 56%, and we continue to make further progress in exposure reductions. David will discuss this in greater detail later.

We have continued to run our businesses with a strong capital base. Our CET1 ratio was 13.8% in the first quarter of 2022 compared to 12.2% in the same period 1 year earlier. Our CET1 leverage ratio was 4.3%, also up from prior year levels. We stand by our medium-term guidance of a CET1 ratio of at least 14% pre-Basel III reforms and a CET1 leverage ratio of around 4.5%.

While our performance has been impacted by significant headwinds, our focus remains on executing the strategy we set out in November 2021. I will go into details a bit later. But as you can see from the middle of the slide, we have made considerable progress on key aspects of our integrated strategy.

Regarding risk, the strengthening of both our first and second lines of defense are on track. We are confident that our strengthened risk culture should help us build a stronger and customer-centric bank that puts risk management at the core to deliver sustainable growth and value for investors, clients, and colleagues.

Next slide, please. Here, you see some of the factors affecting our reported and adjusted results in the quarter. Our adjusted results were characterized by recent client activity and capital markets issuance in volatile market conditions. They also -- sorry, by reduced client activity and capital market They also reflect the cumulative reduction in risk appetite in 2021, the impact of the flattening yield curve on corporate center treasury results and increased cash accruals for compensation due to the normalized deferral level.

Let me turn now to the divisional breakdown. Next slide, please. In terms of adjusted pretax income and net revenues, Wealth Management had a challenging start to the year with adjusted PTI adversely impacted by lower transaction activity and further reduced lending volumes. The results were also impacted by Russia-related effects and APAC Financing Group mark-to-market losses, which combined, were approximately CHF 130 million. Still we increased investments, including in talent and saw positive net new assets across regions, reflecting our client franchise strength.

Our Investment Bank results were impacted by our continued efforts toward our planned exit from Prime Services, the slowdown in capital markets as well as the Russia-related impact on our GTS results. It is important to remember that our franchise mix, which particularly benefited us in the first quarter of 2021, was less supportive in the recent environment given our much more limited exposure to macro and commodity sectors that performed particularly well in the first quarter. Despite this effect, the IB posted solid performances across equity derivatives, securitized products and M&A. The advisory pipeline was up quarter-on-quarter as well as year-on-year.

Our Swiss bank had a good performance with stable net revenues from higher recurring commissions and fees and strong net new assets from the institutional client business. Asset Management had lower pretax income and softer revenues due to the market environment and reduced activity levels. However, recurring management fees were broadly stable with higher investment and partnership income.

Next slide, please. We made a number of decisive actions throughout 2021 to strengthen risk and compliance teams, systems and processes. As you know, we underwent a comprehensive risk review across the entire group, which was completed in the fourth quarter. Our derisking measures have improved our risk profile but also have negatively impacted our top line in the short term.

For example, the derisking measures in Wealth Management that you see on the left of the slide led to a reduction of roughly CHF 25 million in net revenues during the first quarter. In the investment bank, the derisking led to approximately CHF 250 million in reduced revenues. Notwithstanding the expected impact from our planned exit from the remaining part of Prime, our growth ambitions are fully aligned with our risk appetite.

Strengthening risk management and addressing legacy issues remain a focus even as we implement our growth strategy. Here you see selected updates of our progress on risk and compliance topics and our proactive approach to resolving litigation cases, whether by settlement or dismissal, which you can see on the right side of this page.

Next slide, please. We are focused on refining and reinvigorating our franchise in order to drive forward our vision for Credit Suisse. We are convinced it is the right strategy even in the midst of volatile markets and economic conditions, which are challenging.

Please allow me to give you just a few examples of our determined execution of this strategy. We have achieved $2.5 billion reduction in allocated capital in the Investment Bank since the fourth quarter of 2020, which amounts to over 80% of our more than USD 3 billion ambition. We launched an outsourcing agreement on April 1, 2022, to generate procurement savings and aim to step up synergies from unified operating platforms and technology platforms and the divisions in the coming quarters. This should help us meet our ambition of CHF 1 billion to CHF 1.5 billion in structural cost savings per annum by 2024 to invest in our growth ambitions.

In Wealth Management and Private Banking Switzerland, we achieved mandate penetration of approximately 33% in the first quarter, near our 33% to 35% ambition. In the Investment Bank, we reached an 84% reduction in Prime balances since the first quarter of 2021, with our goal of a full Prime services exit by the end of 2022 at the latest, which should allow us to generate significant cost savings.

We added approximately 50 managing directors in the Investment Bank, underscoring our commitment to attract talent. In our Swiss bank, we reached 125,000 clients for our digital offering, CSX, as of the first quarter 2022 with an ambition to reach 200,000 by year-end.

Let me discuss each division in more detail. Starting with Wealth Management on Page 10. We aim to progressively deploy resources in wealth management under the new divisional leadership of Francesco De Ferrari to accelerate growth. We have made meaningful progress in laying the foundations for integrated wealth management and defined and initiated 10 execution priorities that reflect the changing geopolitical climate. These include client segments, priority markets, products and solutions, simplification and people.

We have also started execution on our initiative road map. Examples include the exit of private banking activities in Sub-Sahara Africa markets, excluding South Africa and accelerated digital outreach in the core high net worth individual segment. We invested in 50 relationship managers net, mainly in Asia Pacific, Switzerland and EMEA. I would also point out that higher U.S. dollar interest rates should provide benefits to the bank through incremental net interest income of an estimated CHF 550 million through 200 -- sorry, through 2023, which David will address later.

As with each of our divisional slides, you can see our key medium-term ambitions at the bottom of the page, which remain unchanged. Let me turn to the investment back.

Christian Meissner and his team have made continued progress reshaping the investment bank. And on this page, you see some of our specific actions. We have released capital from Prime and derisked the franchise. We have increased connectivity to Wealth Management in GTS to build a global franchise. We are investing in capital-light investment banking and capital markets business.

In the first quarter, we grew market share in both EMEA and APAC with top 5 market positions in both. We are driving growth in our market-leading credit and securitized products businesses.

Slide 12. On the Health & Stein Swiss business has been a resounding success and is an anchor for our transformative agenda. The division continues to focus on growing our market-leading mid and upmarket franchises in private, corporate and institutional banking. We have seen strong growth in our digital offering, notably CSX, and we are simplifying and digitalizing front-to-back processes. We are well-positioned to capitalize on the post-COVID normalization in credit cards, FX and in leasing.

Next page, please. Under the leadership of Ulrich Korner, we have also made solid progress executing our ambitious strategy in Asset Management with a focus on talent and technology. We have strengthened and simplified the organization with a number of key leadership hires. We joined the Net-Zero Asset Managers initiative, underscoring the manner in which our group-wide sustainability strategy is embedded across divisions, including asset management. and we have strengthened risk management and our control environment.

Next slide, please. Our investments in technology are a significant focus of our ambition to simplify our business model, drive digitalization and maximize our client experience. We have started implementing the engineering strategy in our recently established Chief Technology and Operations organization under the leadership of Joanne Hannaford. We recently announced the CTOO organization and leadership team and are focusing on agility, digital transformation and productivity across our 3 group strategic pillars. Many of the underlying efforts have started and are progressing well.

Next slide, please. Credit Suisse continues to emphasize the importance of sustainability as a core element to our value proposition for our clients, shareholders, employees and society as a whole. We made significant progress executing our 5-pillar strategy in 2021. And many of our objectives and achievements are outlined in our 2021 Sustainability Report. Let me outline some of our achievements here. We reached sustainable assets under management of CHF 144 billion at the end of the first quarter, up from CHF 118 billion in the first quarter of 2021. We also increased sustainable AUM penetration as a share of total assets under management. We are proud to have earned the Sustainability Bond of the Year Sovereign Award for our role as sole structure and the ranger of the blue bond for the Nature Conservancy.

And on the right side of this page, you see our progress and our way forward. Emma Crystal, our new Chief Sustainability Officer, is driving these efforts in close collaboration with all 4 businesses. We remain committed to supporting our clients transition and expanding our sustainable investment and financing offering as we make further progress towards our ambition of providing at least CHF 300 billion in sustainable financing by 2030.

I would now like to hand over to David, who will go over our results in more detail.

[David Mathers, executive]

Thank you very much, Thomas, and good morning to everybody. So I'd like to go through the key financials and provide some more details on our performance at the group and at the divisional level. Just to be clear, this is, of course, the first time that we're presenting these numbers under the new divisional structure, which took effect from the 1st of January 2022.

Now before I turn to the numbers, I'd just like to make a few introductory points. You'll recall that last week, on April 20, we issued a trading update, which flagged an increase to our legal provisions of approximately CHF 600 million in relation to the developments in a number of previously disclosed matters, all of which originated more than a decade ago. We also highlighted the negative impact of over CHF 200 million relating to the effects of Russia's invasion of Ukraine. Now in the adjusted numbers, we will, as usual, exclude all the major litigation provisions, but to be clear, we are not excluding the Russia-related impact in the adjusted definition.

Now second, I'd like to make a broader point on Russia's invasion of Ukraine. Now whilst the tragic humanitarian aspects this conflict remain, of course, front of mind, the disruption to financial markets as well as the breadth and the depth of the sanctions introduced by the Swiss, U.K., European and U.S. authorities in response to this have also been significant. In keeping with our peers, therefore, I will be providing further detail on the impact this has had within our different business lines in the first quarter.

Third, I'd just note that as we continue to execute on the strategic plan with the investment spending, internal reorganization and the capital reallocation associated with this, our risk appetite and our risk management remain key focuses. Now this combines clearly with a period of reduced risk appetite and lower activity from our clients, the overall impact of which has been a decline in revenues across our major business lines.

Now as I'm sure you know, the first quarter of '21 was particularly strong in terms of our underlying performance that is excluding the Archegos charge and the comparison to this quarter's figures should be seen in that context.

Let me just start then with a summary of the group's results, and let me first remind you of the 3 significant items for the quarter that we highlighted in last week's statement. First, since the listing of Allfunds in April last year, we have seen and continue to see mark-to-market volatility in the stock market price of this publicly listed entity, of which, as you know, we own about 8.6%.

In the first quarter, we booked a loss of CHF 353 million as a consequence of the fall in Allfunds share price during the first quarter. As you'll note, we listed this risk in our 2021 annual report, which we published last month. I would remind you though that this has been and remains a successful transaction and that Credit Suisse has, to the end of March 2022, booked a cumulative gain of CHF 971 million, even including the loss in the first quarter.

Second, we booked gains of CHF 164 million in the quarter as we continue to optimize our real estate portfolio. And third, our provision for credit losses includes a release relating to Archegos of CHF 155 million. You may remember that we recorded a similar net gain relating to the Archegos exposure of CHF 235 million in the third quarter of last year, and we clearly continue to seek further recoveries from the state.

Now going through the key reported figures then, our net revenues were CHF 4.41 billion, 42% lower year-on-year, with declines across Wealth Management, the Investment Bank and Asset Management offset to a degree by the resilient performance in our Swiss bank. With regard to the provision for credit losses, we had a net release of CHF 110 million driven by the Archegos related release of CHF 155 million that I've already mentioned, but offset clearly by new provisions of CHF 58 million relating to Russia's invasion of Ukraine.

However, the increase in litigation provisions that I've mentioned, which took the total to CHF 703 million the quarter, contributed to a 26% increase in reported operating expenses totaling CHF 4.95 billion. That means we reported a pretax loss for the quarter of CHF 428 million compared to the reported pretax loss of CHF 757 million in the first quarter of 2021.

Now on an adjusted basis, that is excluding Allfunds and the real estate gains, the Archegos release, motor litigation provisions and certain other items, we delivered a pretax income of CHF 300 million. If you were to exclude the Russia-related impact, that would have equated to an adjusted pretax income of CHF 506 million.

Now just a brief point on operating expenses. One recurring theme that you'll notice as we go through the materials is around the normalization of our compensation deferral levels and a consequent increase in cash accruals compared to last year, and I'll give some more details on this shortly.

Before we get to that, let me give you some more details on the impact of Russia's invasion of Ukraine and what has had on our first quarter performance. Now you remember that we did give some disclosures on this with the publication of our annual report on March 10, and we provided a further update since then.

Just to summarize that, on March 10, we said that our 2021 credit risk exposure was CHF 1.57 billion gross and CHF 848 million net. We've reduced these figures significantly in the first quarter with net credit exposure at the end of the first quarter, standing at CHF 373 million. That's about 56% lower than the end of 2021.

Now if we consider the impact of these events on our P&L in the first quarter, there are 3 broad themes: First, we were generally successful in reducing our exposure before the evasion, but we did see some defaults on amounts owed to us by Russian counterparties, partly due to the imposition of the sanctions and certain other developments; second, we took a limited demand of specific credit provisions across the bank; and third, a scenario review of the provision for credit losses led us to increase our nonspecific provisions. That is related to CECL accounting by CHF 44 million.

Overall, we saw a negative impact of CHF 206 million on pretax income with respect to Russia's invasion of Ukraine in the first quarter, comprising CHF 58 million in the provisions for credit losses and CHF 148 million of trading and fair value losses. Just to be clear, that was split across the divisions as follows: CHF 99 million in Wealth Management, USD 101 million in the Investment Bank, and CHF 14 million in the Swiss bank.

Now more broadly, in terms of the Wealth Management division's exposure to Russia, I think you'll recall that at the Morgan Stanley Financials Conference last month, Thomas confirmed that about 4% of our assets under management was linked to Russian clients globally. And just to say that number has not changed significantly since then.

In terms of our general position with respect to Russia, clearly we've stopped pursuing any new client business in Russia. We continue to reduce our exposure to Russia as the figures that I've just given demonstrate. We're helping our clients to unwind their own exposure, and we have moved roles out of Russia. I would make it clear that we're making no new investments in our Russian subsidiaries and have not done so since the invasion on February 24. And I'd reiterate that as a matter of principle and policy, Credit Suisse applies international sanctions worldwide, in particular, those issued by Switzerland, the European Union, the U.K. and the United States.

Let's turn to expenses now. So as I said at the end of the fourth quarter and I'd just reiterate now, we're guiding for adjusted operating expenses for 2022 to be around CHF 17 billion. The 9% increase that we see in the adjusted operating expenses compared to the first quarter of last year is primarily driven by 2 factors. First, the increased cash accruals for compensation due to the normalization of deferral rates that I referred to earlier. As you remember, as part of our response to the Archegos and the supply chain finance matters last year, we both reduced variable compensation overall and increased the amount deferred, thereby reducing the cash component and increase the amount carried forward to future years.

We do not believe this is sustainable over the long term, believe, as it does to a buildup in future compensation liabilities. And so we decided, as we highlighted at our fourth quarter results in February that we're going to revert to a deferral table in line with that of our European peers for the current year.

For the first quarter, all these changes have had the impact of increasing compensation cost by CHF 214 million overall, and that's in line with the guidance that I gave that we should expect an increase in compensation cost for the year of about CHF 1 billion.

Now just to be clear, I'd stress that at this early stage in the year, we're not forecasting a change in the economic value of the awards. This reflects the change in the deferral tables.

Now the second factor driving the year-on-year increases in expenses is incremental investments of CHF 152 million in the quarter. These relate both -- these relate to our strategic priorities, particularly in respect to the Wealth Management businesses, together with the investments in risk and compliance remediation and the supporting work on IT systems for -- to support our growth.

I'd expect the bulk of the savings from these investments to flow through in 2023, particularly from major projects like the reunification of the IT platforms across the bank, which should yield significant savings, which I'll discuss in more detail at our planned investor deep dive, which I'll talk about towards the end of my presentation.

I would add though that we are beginning to see initial cost measures savings from other measures for example, through the outsourcing of our procurement function to Chain IQ. This arrangement went live at the start of April, and we're on track to achieve about CHF 150 million of cash savings this year.

Now just to be clear, in addition to these incremental investments, we have taken restructuring expenses, which featured in the reported numbers. And that totals about CHF 79 million over the past 2 quarters, of which CHF 46 million was in the first quarter of 2022. I'll just repeat our guidance for restructuring expenses to total about CHF 400 million with the balance to be utilized over the rest of this year.

Next slide, please. And what I show here is the quarter-on-quarter decline in client business volume across Wealth Management and Private Banking Switzerland, which is 5% lower at CHF 1.24 trillion. This reduction is primarily driven by market moves in the period, partly offset by net new assets of CHF 4.6 billion in the quarter, the majority of which were achieved in Switzerland and in Asia Pacific, notwithstanding the deleveraging environment that we see in that market.

You'll note that we've allocated CHF 16 billion of AUM to align [indiscernible] other. That includes about CHF 10 billion of assets, which have been reclassified due to the impact of the sanctions imposed in connection with Russia's invasion of Ukraine earlier this quarter.

Let's now look at capital, please. Our capital and leverage ratios remain resilient. Our CET1 capital ratio was 60 basis points lower compared to the end of the fourth quarter at 13.8%. This drop below our ambition to be at 14% pre the start of the Bal 3R reforms in '24 was primarily due to internal model and parameter updates, with CHF 2 billion of the CHF 5 billion quarter-on-quarter increase in risk-weighted assets due to operational risk, excluding the related FX impact.

I would note that we did see an RWA reduction of USD 2 billion due to the Prime service exit in Investment Bank with the balance of the increase due to FX. Our CET1 leverage and our Tier 1 leverage ratios were both unchanged quarter-on-quarter at 4.3% and 6.1%, respectively.

Leverage exposure overall was down by CHF 11 billion, and that includes a reduction of USD 20 billion due to the Prime service exit. This was partly offset by a seasonal increase in business activity and by the weakening of the Swiss franc against the U.S. dollar.

I'd just like to touch briefly on the Swiss CET1 capital ratio for Credit Suisse AG, the parent company. You'll recall that in February, I mentioned that the ratio had fallen at the end of last year to 11.7%, and then with the phase in the transitional regime to 11.4% as of January 1, 2022. At the end of the first quarter, this ratio increased to 11.8% due to the combination of a dividend payment from Credit Suisse-wise, and a capital repatriation from our U.S. holding company, together totaling around CHF 2 billion.

We continue to execute on our other dividend and capital repatriation plans for 2022, although clearly, as we said before, these remain subject to regulatory approval, and I expect the bulk of them to arise in the second half of the year rather than the second quarter.

Just in terms of the group CET1, I'd just remind you that medium-term ambition remains to operate at a CET1 ratio of at least 14% pre the Bal IIIR reforms and a CET1 leverage ratio of around 4.5%.

Let me turn briefly now and let's look at net interest income sensitivity. I did want to spend a few minutes on this, particularly given the level of interest rate moves that we've seen so far this year. If you look at the current exposure to rising U.S. dollar rates on the current forward curve, we'd expect about CHF 150 million benefit in '22 compared to '21. And if you look at the current forward curve again into 2023, that should equate to a further CHF 400 million benefit for next year compared to '22.

Now you note, and I've said this before, at some point, we would expect the European Central Bank and the Swiss National Bank to increase rates. Whilst we'd likely benefit overall from higher euro rates, you should remember that an increase in Swiss interest rates from the current level of minus 75 basis points would result in a drop in net interest income in the Swiss bank, at least, in the initial phase.

Now let me turn now to the overviews of the new business divisions, and we report this as usual, on an adjusted basis unless I state otherwise. And let's start please with Wealth Management. Net revenues of CHF 1.51 billion was 12% higher than the fourth quarter, but 22% lower compared to the strong first quarter of last year. We can see that whilst both net interest income and recurring commissions and fees declined broadly in line with the 9% fall in client business volume at 8% and 5%, respectively, transaction-based revenues fell by 38%. That reflected a substantial decline in contributions to the GTS joint ventures on the investment bank, in line with the normalization of market conditions compared to the first quarter of 2021 as well as lower brokerage and product issuance fees. Of this CHF 360 million decline in transaction-based revenues, you should note that CHF 59 million was directly linked to Russia's invasion of Ukraine.

You should also note that further weighing on the division's performance was mark-to-market losses of CHF 32 million in APAC financing compared to last year. In terms of expenses, these were 16% higher year-on-year at CHF 1.27 billion, the bulk of which was due to increased cash accruals relating to the normalization of compensation deferral levels that I've already mentioned. But we also made further investments in technology, in risk and in compliance as well as executing the increase in our relationship manager headcount.

Now provision for credit losses of CHF 24 million included CHF 40 million of primarily nonspecific provisions for expected credit losses relating to Russia's invasion of Ukraine, meaning the total impact of the invasion to the division's pretax income was CHF 99 million in the first quarter. Overall pretax income was 74% lower year-on-year at CHF 212 million, but we did, though, see net new assets of CHF 4.8 billion booked in the period, and that's a reversal clearly of the net asset outflows that we saw in the previous quarter.

Just let me turn now to the Investment Bank. Now as has been the case with our peers, Investment Bank revenues were specifically lower compared to the record first quarter of last year. Though they were 11% higher than the previous quarter, that is the fourth quarter of '21 at USD 2.02 billion, that still equates to a 53% reduction year-on-year. This reflects 3 factors: first, our decision to exit prime services, which directly resulted in a year-on-year decline in revenues of USD 173 million; second, our reductions in risk appetite and in allocated capital, which contributed to lower revenues, especially in leveraged finance; and third, the market disruptions caused by Russia's invasion of Ukraine, which contributed to significantly lower ECN market activity and reduced M&A fees.

Overall, Russia-related losses totaled USD 101 million in division, primarily due to trading and fair value losses in the GTS business. That said, our equity derivatives business, while not seeing the strength of trading in the first quarter of last year, still performed well in the first 3 months of 2022, and our fixed income results reflected normalized securitized products revenues lower than in recent periods, but still above historic levels.

Operating expenses were 6% higher year-on-year at USD 2.08 billion, largely due to the increased cash accruals relating to the normalization deferral levels that I mentioned before, but also to higher group-wide technology, risk and compliance costs. The division, therefore, delivered an adjusted pretax loss of USD 55 billion against a backdrop of reduced capital usage and lower client activity across all business lines.

I would note that the USD 174 million release in the provision for credit losses relating to Archegos as well as real estate gains, partly offset by restructuring meant that on a reported basis, our pretax income was USD 134 million.

Now just a brief word on capital. Risk-weighted assets and leverage exposure was down by 21% and 18%, respectively, year-on-year, primarily due to reductions in prime services. We've also continued to allocate capital away from the investment bank as per our strategy, and we've now reduced capital in the division by USD 2.5 billion compared to the end of 2020, putting us well on track to deliver our ambition of more than USD 3 billion reduction by the end of '22.

Let's just turn to the Swiss Bank. Now as we've already said, the Swiss Bank delivered another resilient performance in the first quarter. Net revenues were stable year-on-year at just over CHF 1 billion, with a 7% increase in recurring commissions and fees, supported by an improved performance in our investment in Swiss Guard and higher levels of assets under management, and that's offset by lower net interest income and decreased transaction-based revenues.

The provision for credit losses of CHF 23 million includes a Russia-related impact of CHF 14 million. Operating expenses were 5% higher at CHF 614 million, reflecting, again, the normalized level of deferrals at targeted investments and again, the higher group-wide technology risk and compliance costs. Overall, pretax income was 8% lower year-on-year at CHF 385 million. The division saw CHF 6 billion in net new assets, albeit entirely in our institutional client business rather than Wealth or Private Banking.

Finally, let me just turn to Asset Management. Net revenues for the division were 10% lower year-on-year at CHF 359 million, with a 48% increase in investment and partnership income, more offset by a 52% decline in performance, transaction and placement revenues. That does include a reversal of a gain that we reported a year ago in certain funds. Now taken together with the 15% year-on-year increase in operating expenses to CHF 308 million, reflecting the increased cash accruals due to normalized compensation deferral levels the group-wide investments in risk, technology and compliance and CHF 15 million of costs relating to the supply chain finance matter, pretax income for the quarter was CHF 51 million, 62% lower year-on-year. That reflects the volatile macro environment as well as reduced activity levels and risk appetite from clients.

And I'd just note that we saw about CHF 0.6 billion of outflows in the quarter, primarily from fixed income and credit, whilst we maintained good momentum and inflows in index solutions.

Now just before I pass to Thomas, one point which I alluded to before, we're planning on hosting an investor deep dive event towards the end of the second quarter, which will give us an opportunity to talk you through the progress and the plans that we have in our risk and compliance functions, our technology function and the developments in our Wealth Management division. Now these parts of the group are all headed by relatively new executive board members. And so this event will also give us the chance to introduce you more formally to David Wildermuth, Rafael Lopez Lorenzo, Jo Hannaford and Francesco De Ferrari.

And on that note, I'd like to hand back to Thomas just to conclude before we open for Q&A. Thank you.

[Thomas Gottstein, executive]

Thank you, David. Allow me to conclude by reiterating our 2022 priorities that you see on this page. First is to execute with discipline the detailed group strategy and 3-year financial plan, which we presented at our Investor Day on the 4th of November. Together with my colleagues on the EXP, we share a clear commitment to implementing the new strategy of strengthening the core, simplifying the organization and investing for growth.

Second, we will continue to improve risk and compliance with an emphasis on risk culture, whilst not losing our client focus and the entrepreneurial spirit that has been the hallmark of Credit Suisse since its foundation more than 165 years ago.

Third, we aim to reestablish franchise momentum grounded in the positive basis for growth in our 4 divisions with a regional overlay and supported by a disciplined approach to costs and investments.

With that, let me turn to Kinner to begin the Q&A.

[Kinner Lakhani, executive]

We will now begin the question-and-answer part of the conference. May I please ask everyone to stick to a maximum of 2 questions, please. Operator, let's open the line, please.

[Operator]

[Operator Instructions] And the first question comes from the line of Magdalena Stoklosa from Morgan Stanley.

[Magdalena Stoklosa, analyst]

Can you actually hear me well?

[Thomas Gottstein, executive]

Yes.

[David Mathers, executive]

Magdalena, yes.

[Magdalena Stoklosa, analyst]

Okay, lovely. I've got 2 questions, and thank you very much for the Slide 7 in the presentation, which I thought was very useful. And really, my first question is about exactly that. Could you give us a sense of the impact from the kind of derisking measures, but going forward, in Wealth, in particular, what are the milestones to the business normalization in Wealth as you see it? Is it the finalization of the FINMA outstanding investigation? Is it the additional client reviews? Could you give us a sense kind of what does it take to see the kind of normalization of Wealth business kind of going forward?

And the second one, net new money. They have been relatively strong in the first quarter. Could you give us your sense of the quality and -- the quality of the flows in wealth, but also on the institutional Suisse side.

[Thomas Gottstein, executive]

Yes. Thank you, Magdalena. So first of all, as you can see on Page 7, in terms of the wealth management derisking measures, they touched really on 5 areas: ship financing, exit of Sub-Sahara Africa markets, then the Russia-related derisking, concentration risks and client risk review. And if you look at some of the lending volumes that we have also shown in David's sections, for example, on global wealth management, the reduction was quite significant in terms of lending volume. So you can see, for example, net loans are down 14% since the first quarter of '21. You can see that on Page 23.

And what we really have not yet seen is a rebound of that. It's actually quite the opposite. As you can also see on Page 23, net loans went down a further CHF 6 billion from the end of the fourth quarter. And this was partially impacted by Russia and partially by deleveraging in Asia. So in terms of the milestone to the Wealth Management normalization, you could see in our chart also on Page 6, for example, that the Russia and AFG impact was about CHF 130 million to the adjusted PTI of CHF 212 million for Wealth Management.

And then as you go through the second, third, fourth quarter, we clearly expect and would like to drive a reversal from what we've seen over the last 12 months, namely a reduction of lending volumes, but also clearly a more proactive approach generally with respect to some of the transactional revenues that are related to larger transactions for our ultra high net worth clients.

So step by step over the next few quarters, we expect to move back to a more normalized return on [indiscernible] capital towards the 18% that we have as a target for 2024. This will not be achieved in the next 1 or 2 quarters. But clearly, as we move over the next 2 years, we are moving towards that 18%. That's clearly our target under the leadership of Francesco and his team, and we are fully focused on that.

Secondly, on your question on M&A, you say it was positive. Yes, it was positive, but it's not nearly there where I would like it to be. It was marginally positive in every region. It was mainly positive in Switzerland and in Asia, but -- and also in our external asset management business, but I see substantial more opportunities, particularly also, for example, in the Middle East and in other areas. So I've never been a big fan of quarterly NNA because they are volatile by nature, but this will clearly be the midterm target of Francesco and his team both not only for assets under management but more the entire client business volume, which was always my preferred metric which includes also assets under custody and especially lending volumes, and that's where we want to grow the business and where we see midterm substantial growth opportunities.

[David Mathers, executive]

I think the only point I'd probably add Magdalena to Thomas' point, which I agree entirely, it's just obviously on the interest rate sensitivity because that is clearly most noted within the Wealth Management division given where we are in the curve because clearly, the U.S. has moved first, and that will be a benefit we should begin to see in the second half of this year and then into 2023. And I just wanted to just note that basically.

[Magdalena Stoklosa, analyst]

But Thomas, so can I just confirm that you're internally driven kind of client derisking, deleveraging that we have kind of seen in Wealth over the last 12 months is broadly done. So what we are going to see, and I know very, very gradually is the -- is more of an underlying business dynamics as we move forward. Would that be fair?

[David Mathers, executive]

That is fair, yes, absolutely.

[Operator]

And we are now taking our next question. And the next question comes from the line from Flora Bocahut from Jefferies.

[Flora Benhakoun Bocahut, analyst]

So the first question I have is regarding the cost guidance that you have provided. You gave us this guidance of adjusted cost of CHF 17 billion for this year. Indeed, if I annualize the adjusted cost you printed for Q1, this is the run rate we are heading to. The only issue is that the adjusted revenues have been running around CHF 18 billion of annualized run rate in the past 2 quarters. I understand that part of the cost guidance has to do with the variable compensation and the investments that you talked about. I know the environment has been tough in the past 2 quarters.

The only issue is it could remain so for the rest of the year. So the question I wanted to ask you is, do you stick to the CHF 17 billion cost guidance no matter what the revenues end up being this year, which means you could be hardly profit-making on an adjusted basis this year with your core Tier 1 ratio just below the target?

And the second question is actually on capital, whether you could just elaborate, please, on any capital impact that you think could come for the rest of the year, whether you expect further increase in further impact from model changes. So any other elements you have in mind as of today's standpoint on capital would be helpful.

[David Mathers, executive]

Okay. Thank you very much. Let's take the 2 questions in turn. Look, I think there is limited cost flexibility in 2022 for 2 primary reasons. Firstly, I think -- if we look back at '21, our response to Greensill and the Archegos matters was to reduce both the absolute amount of variable compensation but also to increase the amount of deferrals. And that's what drove our cost down to just over CHF 16 billion last year. That was the right thing to do in the circumstance, but it's not sustainable for long term. And it's why I guided when we spoke early this year and indeed back at the Investor Day. So we'd expect to see it about a CHF 1 billion increase in our expenses.

Now that's not to say that I'm giving any particular guidance over the economic value, the total value of awards for 2022. It's much too early in this year to make that kind of statement. And there clearly is flexibility in terms of that. But I think sitting here in the first quarter, I think it's appropriate to be prudent in terms of what I say about that.

I think the second reason is, if we think about what we're doing in terms of risk compliance and the IT to actually support it, I think clearly, those are necessary investments we need to make as we address the issues that caused so much damage in 2021 to our results and everything else.

We are obviously executing a substantial strategic cost program. So I've mentioned already the outsourcing of procurement, the CHF 150 million of cash savings that should generate. We're also putting together all of our operating IT -- operations and IT functions on Jo, so moving back to the sort of pre-2016 structure, and that should yield very significant savings. But to be clear, a majority of that actually flows through in 2023. And ditto, the exit from Prime. We will save money from that. But at the moment, we're still in the rundown of that particular business.

So there is whether we like it or not, a significant degree of short-term inflexibility in the cost base for 2022, and I think we've warned about that before in terms of where we are now. It doesn't mean there's no flexibility. But I think that's why I'm sticking to the guidance of around CHF 17 billion for this year. We're working very hard at this. We're considering what we should prioritize, what we should deprioritize, but there are certain things, particularly around the risk and control investments that really do have to actually happen.

But that is all I can really say at this point early in the year, there is clearly some flexibility around variable compensation, particularly with a much lower level of deferral. You understand that the gearing through to cash is therefore higher.

I think in terms of capital, I think our medium-term ambition remains the same. We want to have a CET1 ratio for the group of at least 14% before the Bal IV transition in 2024. We've obviously dipped slightly below that this quarter, mainly due to the CHF 600 million increase in litigation provisions, which mathematically just drops you almost exactly by 20 basis points.

I think I'd probably expect the ratio to rain somewhere in the 13.5% to 14% for the next 6 months, depending on the level of cash generation, other issues we actually deal with and how we actually allocate capital. But I'd expect our CET1 ratio thereafter to actually improve at and above our 14% medium-term target in terms of that.

I think you asked a specific question in terms of methodology. I think I said back in February that we expected about 6 billion to 7 billion of methodology changes this year. I think that's still the case. But clearly, there will be some increase in op risk RWA above and beyond that as we work through the impact of the litigation provisions that we took 2 weeks ago, but I don't have a particular view at this point in terms of that number. And that's something I'd expect to see in the second half of this year, not in the second quarter.

So I hope that's some help. On the cost point, we are super focused on moving to a more flexible structure. But as I said, a lot of this comes through in '23 rather than '22.

[Operator]

And we will take our next question. And the next question comes from the line of Alastair Ryan from Bank of America.

[Alastair Ryan, analyst]

Yes. So just on the trade-off to draw you a little bit on that, David, if I may, between the CET1 below target and sort of the risk capacity that the group has put in to work. You've got a lot of good franchises, which I think you've sort of sketched your not gearing with the risk that they might normally take at this point, absolutely understandably in the current circumstances. But just whether you'd be happy running below the capital target for longer to put some more money back to work or whether the capital targets more of a constraint, you're still a good surplus to requirements, but below your goals?

[David Mathers, executive]

That's a very good question, Alastair. Look, I think the target setting for the 14% is clearly in respect to the inflation we expect to see when we finally get to the B3R transition in a couple of years' time. And we want to make sure that we have sufficient buffer for that and we don't have a rerun of what we saw with the B3 transition a decade ago.

But nonetheless, I think we've set a medium-term ambition of 14%. I've kind of said it could be in the range of 13.5% to 14% for the next 6 months. I think there is a balance in terms of that -- in terms of putting money to work within the Wealth Management lending business, in particular, and we'd obviously like to see that. But I think it is important that we remain prudent in terms of the group CET1 levels that we actually operate at. So that's the balance that I'm thinking about really in terms of how we actually operate.

I think we have taken some tough decisions in the first quarter, particularly around the litigation provisions, but I think those were the right things to say. And if the cost of that is we dropped to 13.8%, then it is where it is, I guess. But I think it is important to really put a dent into this. As Thomas said, we've actually got through a dismissal of more than 80 cases and settled 12. So I think it's finally the right time to draw a line under this issue.

[Operator]

And the next question comes from the line of Jeremy Sigee from BNB Paribas.

[Jeremy Sigee, analyst]

First one on Russia. I don't know if I missed it. Could you just -- did you give us an update on the percent of AUM with Russian clients? I think you previously said 4%. I look for what you've given update here on that number? And could you just talk a bit about how you're managing those kind of frozen clients, your ability to charge fees and net interest income and generally, kind of how you see that going forward? That's the first question.

Secondly, you mentioned in the Investment Bank, strong market share performance in EMEA and APAC. I just wondered whether you could talk about the products and geographies where you're below what you see as a normal market share and what it needs to get that back to normal?

[Thomas Gottstein, executive]

Okay. So with respect to the AUM, as you mentioned, the 4% that we outlined at the Morgan Stanley conference, and David mentioned that they have broadly been -- said they actually reduced a little bit, but not much. As you also saw, the total AUM have also reduced, given market performance and other factors. So broadly speaking, those -- that number has marginally reduced but not too much.

In terms of how we deal with the Russian clients, now obviously, you have the sanction clients and there you basically can't touch them. And basically, you -- it's just sitting there. And then you have the other Russian clients where they are legally not sanctioned, but the fact given the rules in Switzerland and the EU, which are broadly the same is basically that they cannot bring any new assets. So -- but they can obviously retrieve assets. And that's really the situation that we have at the moment with those non-sanctioned Russian clients, of which some of them are living in Russia, some of them are living in the West. So -- but they are all subject to the restrictions that we see in the EU and in Switzerland. So that's really how it works. And we do not really have any new business with Russian clients at all.

With respect to the IBCM market shares in EMEA and APAC, yes, they were marginally up, and we had some good transactions, but it's also fair to say that the overall market, as you know, is down significantly. And we always also see that the U.S. usually is 60% to 70% of the market. So -- and we have traditionally a strong leverage finance in ECM and M&A practice and especially leveraged finance in ECM was down more. And DCM investment-grade capital markets is a market where we are -- have lower market share. So -- and that -- obviously, that mix was not helpful in this first quarter, but that was just the first quarter, and we'll have to now hopefully see how capital markets activity will develop over the next couple of quarters.

[Operator]

And the next question comes from the line of Daniele Brupbacher from UBS.

[Daniele Brupbacher, analyst]

Yes. Can I ask about the Prime Services exit and what kind of side effects or multiplier effects you would expect to see in all the businesses, probably what's happened so far and what you expect going forward?

And then just a bit more general question on leverage lending given interest rate moves or expected interest rate moves. How do you think about the risks in that business for the industry overall and how you think about your own business in that context, that would be helpful.

[David Mathers, executive]

I mean I think just to kick off on the Prime business, I mean we estimate that the adverse revenue impact is about 170 million in the 1Q numbers. I think so far in terms of the revenue impact, it's probably similar or perhaps less than what we talked about back in November, i.e., there hasn't been that much of a multiplier impact. Clearly, there was a cost aspect of this as well, but realistically, those cost savings will only come in late in the year and into 2023 because we obviously need to ensure that our customers are actually dealt with fairly and properly as we actually transition this business.

I think in terms of Prime Services and Thomas may want to comment, but I'll have a first crack at the leveraged finance type point. I think our market share in leveraged finance, obviously did drop in the fourth quarter of last year. I think we're just outside the top 10. It's improved to about 5, I think, in the first quarter. I think what we are seeing as a consequence of the volatility in interest rates and to a lesser extent, credit markets in the first quarter is the market has shifted away from the sponsors business and perhaps more to corporate issuers. So it's a slightly adverse market shift for us. But I think you can see in the numbers we've given one of the appendices is that we've got about CHF 7.4 billion of leveraged finance pipeline, and that's increased steadily over the last few quarters. But I think as we commented in the outlook statement, I think clearly, we are a hostess to fortune in terms of the stability of markets to actually how well work and how fast we can actually execute that business. But Thomas, I don't know if you want to...

[Thomas Gottstein, executive]

So we are obviously actively managing our exposure. And yes, the CHF 7.4 billion that we had at the end of the first quarter compared to CHF 10.2 million we had at the end of the first quarter '21, so it's down 30%. And we are obviously observing the markets for leveraged loans and high-yield bonds and in close collaboration between both the first line and the second line. And it's a market that is clearly significantly slower and less active than it was a year ago. But at the same time, we are also more cautious, but at the same time, as it was said, it was -- it's not only sponsor deals, but it's also corporate deals, and we look at it deal by deal.

[Operator]

And the next question comes from the line of Kian Abouhossein from JPMorgan.

[Kian Abouhossein, analyst]

The first question is regarding fixed income sales and trading again. Just trying to understand how we should think about the environment, considering that first quarter was difficult, but it was not a dislocation, and your revenues declined around 50% year-on-year. And just thinking about the run rate and the potential impact of higher credit spreads that is having on your credit business, which is mainly your fixed income business.

And then the second question is related to your return on equity target in the investment bank of over 12% by 2024. I think you made clear that 2022 is a restructuring year or a transformation year. But you're clearly far off looking at the numbers today and the environment actually has been reasonably good for other players. So I'm just trying to understand the past to 12% in a more difficult revenue environment?

[Thomas Gottstein, executive]

Yes. So if you look at our fixed income sales and trading and the various components, so with credit, securitized products and GTS, then you can clearly see, if you compare it with Q1, a significant reduction. But if you go more back, let's say, the first quarter '20, then the main -- basically, we are up in securitized products. We are up about 30% compared to the first quarter '20. So we had a very decent performance there.

In other credit products, as you can remember, '20 was a very strong quarter in terms of credit trading. There, we are down. And GTS was -- which is mainly driven on the fixed income side by financing on our side as well as by FX and macro businesses, which are clearly much smaller than some of our competitors where we are also down to that comparable quarter. But it is clear that we have not the exposure that others have to certain interest rate trading business within macro, FX or commodities that some of our other peers have where they saw some benefits after dislocation created by the Russia innovation, which we do not have.

So we did obviously have the benefit as we actually predicted in our 2020 Investor Day, we said that 2021 will be the year for credit, and that is exactly what happened in the first quarter 2021, where we saw an absolute record in our fixed income sales and trading of CHF 1.6 billion compared to the CHF 800 million that we now saw in the first quarter '22. So half basically of where we were. So I don't think that the first quarter '22 is necessarily the right basis to look at for where we should be maybe in '23, '24. The first quarter of '20 was more in the CHF 1.3 billion area. We are now at CHF 800 million. So there's clearly upside from where we are now. But the same is true for capital markets, whether it's ECM, whether it's leverage finance, where we had a very, very, I would say, a slow quarter in the first quarter like many of our peers as well.

So one thing is the business mix. Clearly, we are much more geared towards creating the capital markets M&A and much less to macro. And the second is that we foresee clear improvement in some of our market shares through the investments we're making, especially around M&A and capital markets.

[Kian Abouhossein, analyst]

And sorry, if I can just very briefly on the accrual of compensation, which clearly David had highlighted a few times now on this call, the normalization that you talk about is just a year-on-year comparison issue. Going forward, clearly, you will pay higher cash components, so they will be comparable. Is that what you're trying to say?

[David Mathers, executive]

Yes, I think -- well, let me see if I can be helpful, Kian. I think the -- as I said, the level of compensation into -- in response that we decided in response to Archegos and Greensill was to reduce the overall level of variable compensation, as you know, and we've summarized that in the comp report and the annual report. But what we also did, which we're also clear about is we actually reduced the amount of cash and increased demand of deferral last year for many reasons, which as you know.

Now moving into '22, that level of deferral was not sustainable. And as we said back in November and again in February, did essentially we want to normalize that. So that's what we've actually done, and that's what we've accrued to in the first quarter. As I said, I'm not making any particular statements around the economic value of awards for compensation this year. I mean if you want to push me a bit, I think I've used the basis of something similar in both compensation and the strategic delivery award as the plan for the accruals. But clearly, that's at this point in the first quarter, just a place marker shall we say, but then I've used that at the low deferral levels to actually calculate the cash accrual, which I think is a prudent thing to do, and I think it's the right thing to do. But clearly, as we actually work through this year, we'll have to decide what is the right level for economic value, and that's obviously going to depend on our performance and on the conditions in which we actually operate.

There afterwards, if you're asking the question around 2023, you're right, we will then have had that step change. And then we move forward basically. I don't think the bank's intention necessarily will be to change that deferral plan in '23 compared to '22, but that will be a decision to be made at the time. But I think clearly, once you actually get into '23, then some of the cost pressures that we've seen away from this in '22 fall away. We have clearly the savings from the integration of technology function, which will be substantial, and we'll discuss that in more detail in the deep dive later on this quarter. We'll have some relief elsewhere obviously have the accelerating benefits from the procurement outsourcing and some of the other reengineering benefits. And we'll also have the cost savings from the Prime exit, which will help the investment bank numbers. So I think certainly from a cost point of view, I think '22 is perhaps the most challenging year to be dealing with, provided that we manage things well going through the period.

[Operator]

[Operator Instructions] And the next question comes from the line of Amit Goel from Barclays.

[Amit Goel, analyst]

So 2 questions for me. So first, actually just going back to the redivisionalization and the kind of updated numbers that were released also a few -- I guess, a few weeks back. It looks also like the redivisionalization was slightly different to what was initially presented at the Investor Day in terms of some of the business movements. It seems like, obviously, the sub-high net worth businesses retained within the Swiss bank. And it seemed like there was a higher IB contribution or revenue contribution than previously anticipated. Just wanted to understand some of those dynamics and whether that changes also some of the divisional kind of aspiration or target?

And the second question just relates further to restructuring and the parent co-capital levels. So I just wanted to understand better as well, whether or not parent co-capitalization limits your ability to do further restructuring of some of the businesses if it potentially impacts to make further participation values?

[David Mathers, executive]

Should I take the second one and then pass back to Thomas for the PBS change? When I think in terms of the parent, I mean I think what we've done so far in the year is pretty much in line with what I said back in February. So I think you may recall that I was talking about something like CHF 10 billion of dividends and capital repatriation to come out of the subsidiaries and into the parent to basically strengthen the ratio from the 11.4% that we had basically as of the 1st of January this year. And so far this year, we've moved in about CHF 2 billion from both Switzerland and from CSH USA, and that's obviously increased the ratio to 11.8%.

I think if we look forward to the balance of this year, I think the other dividends and capital restructuring are on track. They do remain subject to regulatory approval and some of those approvals do have to go through a process that takes several months. So as I said before, I would expect those to come through primarily in the second half of this year rather than the second quarter of this year. And I mean I think -- so that's really as per our plan.

I think in terms of your other question really, which is -- the answer is yes. Clearly, if you have to reduce the value of those subsidiaries without further capital repatriation, that has an adverse impact on the parent ratio. So it does act as some constraint in terms of what we can do basically, but I think equally, if we actually think about the bank overall, when we talked about shifting CHF 3 billion of capital from the Investment Bank to the Wealth Management businesses, that's clearly an overall MIS sense. But in order to actually accomplish that, given that more of the investment banking business is actually in the subsidiaries compared to the branches, we also need to move capital to actually support our Wealth Management ambitions and it -- so I hope that's some help, at least.

[Thomas Gottstein, executive]

And as far as your first question is concerned, yes, indeed, we did decide to move the Swiss private banking business which is the high net worth as opposed to the ultra-high net worth or the external asset manager business back into the Swiss division. So out of the 3 businesses which we originally were planning to move into the global wealth, we moved indeed 2, namely the Swiss premium clients business, which is the ultra high net worth business and the global external asset management business in Switzerland into Global Wealth. But the Swiss high net worth business, we decided to leave in the Swiss bank because the collaboration between both that business and the corporate bank on one side, but secondly, also with the retail bank is just too close. And it -- in addition to that, they share, for example, the mortgage centers, and they are in all the 19 branches we have in Switzerland. So for all these reasons, we came to a view it's much easier if they stay in the same division. But Serge Fehr, who runs that business, he's also on the Global Wealth Management Committee, and he's very closely also liaising with our global high net worth strategy because some of the successes we have seen now in Switzerland, also with CSX, for example, is something that he can also help build out internationally with the global wealth management team. But we are and will continue to show our volumes in terms of AUM and net new assets for our Global Wealth Management business, including that business, going forward as well.

And in terms of the investment banking revenues, I think they are pretty much in line with what we showed already in November. And obviously, they were -- through the finalization of the restatement, we had to finalize the numbers for GTS and for AFG, especially those -- the AFG is the Asia Finance Group and the split between Wealth Management and Investment Banking for those 2 businesses went through a finalization iteration in the first quarter. But broadly speaking, they are absolutely in line with what we had already presented on the 4th of November at our Strategy Day.

[Amit Goel, analyst]

Okay. And those differences, they don't change the divisional targets?

[Thomas Gottstein, executive]

No. No, they don't.

[Operator]

And the next question comes from the line of Anke Reingen from Bank of -- sorry, Royal Bank of Canada.

[Anke Reingen, analyst]

The first is, thanks David, for the help. And on that note, on the strategic plan you presented last last year. I mean, most of the probably managers that were heading the divisions and the operations probably have been -- have changed since then. So as I see, I just wonder I mean what's the appetite review on the strategic path in, suppose, new people have new ideas and I see things differently. And you also mentioned before that 2021 was too inward looking and is there like a risk from the number of management changes that this will impact 2022 as well to acknowledge say it's a year of transition, but is there a risk the management changes put more pressure on this as well?

And then on your disclosure about the losses from litigation covered -- not covered by existing provisions. I mean the numbers only changed by CHF 100 million versus the year-end number. I mean, is it just -- this number is just accounting and we shouldn't really pay any attention on it? Or is it to do with flow in the first quarter while the number hasn't really changed?

[Thomas Gottstein, executive]

Let me take the first one, and David the second. Although the second, I was struggling to...

[David Mathers, executive]

Yes, I think you might have to have another go on the second one, I'm afraid. But why don't you take the first one first?

[Thomas Gottstein, executive]

Okay. I'll take the first one. So just to be clear, each of Andre Helfenstein for the Swiss business, Ulrich Korner for Asset Management and Christian Meissner for Investment Bank were at the Investor Day, so 3 out of the 4. And obviously, Francesco, who started in the 1st of January, was before he joined fully aware of all these targets and fully bought into this before he joined. So 3 out of the 4 divisional CEOs were indeed already there when we presented our and Philipp Wehle, who is now the CFO of Francesco planted the numbers and plans. So there is very much continuity, and I would not agree with the statement that we have different CEOs now executing the strategy. We have broadly the same lineup.

Secondly, we obviously did strengthen and appoint some additional -- the ExB members for risk with David Wildermuth, who started on the 1st of January, as did Jo Hannaford for our technology and engineering effort and they have very much had a very busy first 4 months since they joined reviewing the strategic plans, reviewing also what it means for both technology, engineering for and for David Wildermuth. He has had a lot of positive impact on our risk management approach. So this is the reason also why we will do a deep dive for you guys at the end of June to really go into each of those businesses with our new ExB colleagues, with Francesco with David with our technology effort with Jo and Rafael from compliance. All 4 will be presenting to you, and you will be able to get a feeling about the progress we've had. Rafael, as our Head of Compliance, he was already on board at the time that we presented our strategy in November. He joined, as you know, on the 1st of October, our compliance effort. So that's on your first question. And maybe you can repeat again your second question? It was difficult to understand.

[David Mathers, executive]

Let me -- was it about the reasonably possible loss, Anke?

[Anke Reingen, analyst]

Exactly on the litigation not covered by existing provisions.

[David Mathers, executive]

Thank you, Anke.

[Anke Reingen, analyst]

Yes, it declined from CHF 1.5 billion to CHF 1.4 billion.

[David Mathers, executive]

Yes. So your question is why did it only drop by CHF 100 million plus/minus, whilst the provisions went up by CHF 700 million. So look, I think -- I mean, it's always difficult to provide complete visibility on this because we are referring to a number of matters which are actually live and court at this particular moment. And therefore, it's not appropriate to comment in detail. But if I speak more generally, then I think it's clear to say that we had some positive developments on a number of the cases, where we have visibility to be able to settle and dismiss or reduce the scale a number of those things and that reduced the RPL.

However, we did have certain adverse developments during the quarter. And I think we've talked about this publicly already, but I'm not going to add to what we've said already. And therefore, we have generally reassessed our reasonably possible loss in terms of that. So there's a balance of things going on, as you might say, in the RPL disclosure. And I think that's probably all I can say given the live nature of these actions. I think more generally, I just would repeat what Thomas has already said, which is we have been making a very determined and proactive effort to seek to resolve, dismiss, reduce the scale of these cases. Things such as the RMBS case is clearly date back to pre-2008, which is a very long time. And we've managed to get more than 80 dismissed over the last 2 years. We've settled another 12. So I think we are getting through the lump of this legacy at this particular point. And hopefully, we can continue to actually work through these issues basically. But I think that's all I can really see Anke into given the live nature of the materials.

[Operator]

And the final question comes from the line of Andrew Lim.

[Andrew Lim, analyst]

So the first question is, I'm just wondering how you think about the investment bank strategically, whether there's opportunities to further deleveraging. And I asked is, of course, because it's a seasonally strong first quarter, have done well and yet you've made a loss and seems to be losing market share across all business lines. I mean it's supposed to be a year where it's transition rather than a big restructuring year. And I wonder, just feeding on from Kian's question how you think about opportunities for different business lines improving for the remainder of the year? And if not, where actually some businesses could be delevered further and you're notably in structured products -- securitized products and leverage lending and whether you think about these products actually being synergistic with the rest of the IB or even synergistic with wealth management and whether these could be delivered?

My second question is on the CET1 target that you have of 14%. We've discussed this before, but I think it's worth revisiting again. And it's optically quite high versus peers, especially Swiss peers of yours -- and I wonder whether you think whether this could be lowered, perhaps like 13% or whether there's some kind of like a steady state where all regulatory changes have been implemented, other charges can be taken into account and that you feel comfortable bringing that down to a lower level or not?

[David Mathers, executive]

Well, perhaps, should I take the second question first if that's right.

[Thomas Gottstein, executive]

Sure.

[David Mathers, executive]

So look, I think, as I said already, I think when we announced our 14% ambition, it was last November, it was very clearly set on the basis of the Basel 3R transition in a couple of years' time. And I think we guided at that point, correct me anymore here, but to about CHF 35 billion to CHF 40 billion increase in -- and I think we wanted to make sure that there were no questions around the capital ratios of the bank for that particular transition. And I think that very much remains our position.

I think if we get to 2024, and the impact is less or things have changed, then that's a decision we should make at that point. But it should be driven by, a, that regulatory change; and b, let's be clear, by the stress calculations we make in terms of our capital needs, and that's what will I think, guide the Board in terms of their views on that. But I think for this point, nothing has changed materially to justify a change and that being where we want to be for that ambition. It doesn't mean we have to be there for the end of the second quarter or the end of the third quarter, and we're still talking about a change several years away, but -- a couple of years away, but that's been our thinking in terms of the CET1 ratio, if that's helpful, Andrew.

[Thomas Gottstein, executive]

And on the deleveraging in the IB, as you know, the main areas where we are deleveraging, which is also -- which was part of our presentation in November are 3 areas: one is prime services; the second one is emerging market GTS in those markets where we do not want to strategically be active anymore going forward; and thirdly, in the Corporate Bank, which is mainly a U.S. corporate bank book. Those are the 3 areas where we are focused on the deleveraging, and that hasn't changed.

We did mention some ideas at the Investor Day about some incremental opportunities potentially in other areas where we, in principle, see ourselves as strong players and market-leading franchises. They are always there for further analysis, and we will report if and when we have any news on that. But clearly, we are focused to invest in those market-leading franchises being SP, be it leveraged finance, be it M&A, be it equity capital markets.

[Andrew Lim, analyst]

Great.

[David Mathers, executive]

Just -- I think Thomas has may I probably should just say something, which is I think I have indicated my decision to Thomas and to the Board that I do think after 12 years, it's right and proper to seek some fresh challenges and opportunities. But I would just reiterate that I've also committed to Thomas and to the Board that my first priority is to ensure a smooth and seamless transition of my CFO responsibilities. And to that end, I have committed to stay at Credit Suisse until my successors in both the CFO role and in my role as Chief Executive, CSI, are actually been selected and are in place and to support Thomas, the Chairman and the Board throughout that period. So I regret to tell you all that you'll probably be talking to me in 3 months' time, and I'm certainly going to be looking forward to seeing you at the Investor Deep Dive, but just to make that point clear.

[Thomas Gottstein, executive]

Thank you, David, indeed. Okay, with this...

[Operator]

We've got one more question from Stefan Stalmann from Autonomous Research.

[Stefan-Michael Stalmann, analyst]

There's only one left for me. You are making a change in the position of your General Counsel, and the press release is relatively silent on why that is. And also, more importantly, what do you expect to change under the new General Counsel? Maybe you can add a little bit of color on that, that would be great.

[Thomas Gottstein, executive]

Well, Romeo has also been with us over 10 years, and these discussions have started -- I mean, has been with us in the role of General Counsel on the Group Executive Board over 10 years. And these discussions also started already last year. There is no change in policy. We did decide already in 2020 to more proactively address our legacy cases, many of which date back 10 years or more, and we started to execute on that under the leadership of Romeo already in 2020 and '21. So there is no change in policy, but this was part of succession planning and materialize now. We have the fortune to have somebody very qualified with very relevant experience, be it in the U.S. or elsewhere. And with Markus detail, we have somebody who can start on the 1st of July. And that's why we made that decision. And we are both grateful to Romeo for everything is done, and we're looking forward to working with Markus from 1st July onwards.

[Operator]

Thank you. May I hand over to Kinner. Please continue.

[Kinner Lakhani, executive]

So thank you all for all your questions and your time this morning. Of course, if you have any follow-up questions, feel free to give myself or the Investor Relations team, a call in the usual way. Thank you.

[Operator]

This does conclude our conference today for the analysts and investors. A recording of the presentation will be available about 2 hours after the event of the Credit Suisse website. Thank you for joining today's call. You may all disconnect.