20080703-Citi-Credit Suisse (CSGN.VX)

2Q08 Results Preview
 Results Due 24 July — CS is scheduled to report 2Q results on Thursday 24
July around 7.00am CET.
 Limited Markdowns — CS has been among the firms less affected by
markdowns (SFr8bn over 3Q07-1Q08). Main exposures are in leveraged loans
(marked to 85% of face, indices held up in 2Q) and CMBS (89%, indices fell in
2Q). We factor in SFr1.6bn extra marks in 2Q08E.
 Capital Intact — CS’s tier 1 ratio (9.8% 1Q) is close to its 10% target and
similar to peers. Its tangible equity/assets ratio is within the US firms’ range,
and better than UBS & DB which remain below that range. CS may need to
deleverage over time, but should avoid forced equity raising.
 Private Bank Inflows — Industry-wide flows appear to be slowing; but CS may
win clients from UBS. CS has recently accelerated adviser recruitment.
 We Lower Earnings and Price Target — We lower our 2009E earnings by 10%,
and also lower our price target to