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Key Performance Indicators
In fourth quarter 2004, the pre-goodwill cost /
income ratio was 67.0%, up 2.6 percentage
points from the same quarter a year earlier, which
benefited from a sharp downward adjustment in
performance-related compensation and strong
private equity gains. In comparison to third
quarter 2004, the ratio was down 7.9 percentage
points, reflecting robust revenues and the final
fixing of full-year performance-related personnel
expenses. The full-year 2004 cost / income ratio
was 69.8%, little changed from the 70.1%
reported a year earlier.
The final determination of annual performance-related
payments prompted the compensation
ratio to fall to 47% in fourth quarter 2004
from 52% in third quarter.
For full-year 2004, the compensation ratio fell
to 51% from 52% in 2003, reflecting higher revenues
and the completion of our aggressive
investment banking hiring program. Payout levels
are driven by the revenue mix across business
areas and are managed in line with market levels.
Market risk for the Investment Bank, as measured
by the average 10-day 99% Value at Risk
(VaR) decreased in fourth quarter 2004 to CHF
358 million from CHF 376 million in third quarter
2004. Interest rate risks, particularly credit
spread exposure, continued to be the main contributor
to VaR, while equities VaR reduced at the
end of the quarter as a result of the satisfactory
conclusion of a number of arbitrage strategies.
At the end of fourth quarter, the Investment
Bank’s outstanding loans were at CHF 68.7 billion,
down CHF 2.3 billion from CHF 71.0 billion
on 30 September 2004. The non-performing
loans to gross loans ratio remained at 0.6%. The
impaired loans to gross loans ratio decreased
from 0.9% to 0.8%.
The level of private equity investments fell to
CHF 1.9 billion on 31 December 2004 from CHF
2.1 billion at the end of the third quarter and CHF
2.3 billion a year earlier. The decrease was mainly
due to successful divestments alongside further
writedowns. The decline in the level of investments
was accentuated by exchange rate movements.
Driven by exits and revaluations, the fair
value of the portfolio decreased to CHF 2.7 billion
in fourth quarter 2004 from CHF 2.9 billion
in both third quarter 2004 and fourth quarter
2003. Unfunded commitments continued to fall,
totaling CHF 0.8 billion in fourth quarter 2004,
down from CHF 1.1 billion at the end of September
2004 and CHF 1.5 billion at the end of 2003.
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