EFTA01385512.pdf

> Financials Deutsche Bank 0 Credit Suisse Kinner Lakhani, BUY, close CHF17.81 CHF21 tgt, 18% upside ■ CS has superior Wealth Management operating momentum of 13% Quarterly adjusted cost trends show strong execution CAGR PBT over the next 3 years supported by its Relationship Manager investments, One Bank strategy and strong cost control ■ 2015 ■ 2016 2017 ■ It has strong cost control with a targeted 2018 cost base of <CHF17bn, 5.5 c20% down on 2015, with recent new guidance of CHF16.5-17bn over 2019-20. 4.9 4.8 5.0 ■ Attractive capital return based on c50% payout ratio through 2019 and 4.4 4.5 2020 — primarily through share buybacks and special dividends — implying a 'yield' of over 5-6% 4.0 ■ There is upside potential to our forecasts. This comes from three 3.5 sources: (i) Lower funding costs of CHF1.1bn by 2019E (Dec-17 Investor 1O 2Q 3O 4O Source: Deutsche Sank eds. company data. Nolo' based on adj total operating expenses at constant FX rates. 4017 is a company est Day). improving by CHF0.5bn vs. Dec-16 Investor Day (ii) NII benefit from forward rate curves of CHF0.45bn over 2018-20; and (iii) Lower Group tax rate of c23%, from c28%, in the event of US tax reform. 3Q17-2020E CET1 glide path: attractive capital return to come - Lower tax alone could drive an earnings upgrade of c7% while better NIl 18% 3.3% trends could drive a c10% upgrade. This could increase our fair value of the stock from CHF21 to CHF24. 16% 14% 12% (0.4%) ■ (1.7%) ■ CS trades on only c10x adj. 19E PIE and 1.0x 19E P/TB, while offering a 10% -4.516/6.0% (2.5%) 8% dividend 10.5% 19E RoTE. 6% yield in 19F_/20E ■ Catalysts: US tax reform passage, further delivery towards targets 4% 2% 0% Related DB Research: 3O17 CET1 Net change, 2018E CET1 Earnings, Dividends, Regulation 2020E CETI Credit Suisse: From momentum to capital return (Lakhanit capital ratio 4O17-2018E captial ratio 2019-2020E 2019-2020E and others, capital ratio 2019-2020E European Banks Strategy: Road to Recovery — Intrinsic Value (Lakhani) Source: Deutsche Bank ests. company data. Note: based on adj total operating expenses at constant FX rabs, 4017 is a company est Deutsche Bank Research• Ettopean Equity Focus —Jammu 2018 1:; CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086798 CONFIDENTIAL SDNY_GM_00232982 EFTA01385512