EFTA01385512

> 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% CAGR PBT over the next 3 years supported by its Relationship Manager investments, One Bank strategy and strong cost control ■ It has strong cost control with a targeted 2018 cost base of <CHF17bn, c20% down on 2015, with recent new guidance of CHF16.5-17bn over 2019-20. ■ Attractive capital return based on c50% payout ratio through 2019 and 2020 — primarily through share buybacks and special dividends — implying a 'yield' of over 5-6% ■ There is upside potential to our forecasts. This comes from three sources: (i) Lower funding costs of CHF1.1bn by 2019E (Dec-17 Investor 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. - Lower tax alone could drive an earnings upgrade of c7% while better NIl trends could drive a c10% upgrade. This could increase our fair value of the stock from CHF21 to CHF24. ■ CS trades on only c1 0x adj. 19E PIE and 1.0x 19E P/TB, while offering a 10.5% 19E RoTE. ■ Catalysts: US tax reform passage, further delivery towards targets Related DB Research: Credit Suisse: From momentum to capital return (Lakhanit European Banks Strategy: Road to Recovery — Intrinsic Value (Lakhani) Quarterly adjusted cost trends show strong execution 5.5 5.0 4.5 4.0 3.5 1O ■ 2015 2Q ■ 2016 2017 4.9 4.8 4.4 3O 4O Source: Deutsche Sank eds. company data. Nolo' based on adj total operating expenses at constant FX rates. 4017 is a company est 3Q17-2020E CET1 glide path: attractive capital return to come 18% 16% 14% 12% 10% (0.4%) 3.3% ■ (1.7%) -4.516/6.0% (2.5%) 8% 6% dividend yield in 19F_/20E 4% 2% 0% 3O17 CET1 Net change, capital ratio 4O17-2018E Source: Deutsche Bank ests. company data. 2018E CET1 Earnings, captial ratio 2019-2020E Note: based on adj total operating Dividends, Regulation 2020E CETI 2019-2020E and others, capital ratio 2019-2020E expenses at constant FX rabs, 4017 is a company est Deutsche Bank Research• Ettopean Equity Focus —Jammu 2018 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) CONFIDENTIAL 1:; DB-SDNY-0086798 SDNY_GM_00232982 EFTA01385512