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Credit Suisse Group AG (NYSE:CS)
Q2 2020 Earnings Call
Jul 30, 2020, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. This is the conference operator. Welcome, and thank you for joining the Credit Suisse Second Quarter 2020 Results Conference Call for Analysts and Investors. As a reminder, all participants are in a listen-only mode and the conference is recorded. You will have the opportunity to ask questions after the presentation. [Operator Instructions]

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

Kinner Lakhani -- Head of Group Strategy and Development

Good morning. Thank you, operator. Welcome, everyone. Before we begin, let me remind you of the important cautionary statements on slides two and three, including in relation to forward-looking statements, non-GAAP financial measures and Basel III disclosures. For a detailed discussion, we refer you to the Credit Suisse second quarter 2020 financial report, other published materials and the accompanying financial statements for the period published this morning.

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

Thomas Gottstein -- Chief Executive Officer

Thank you, Kinner. Good morning, everyone. Thank you for joining our call this morning to discuss our second quarter 2020 results, my first full quarter since becoming Group CEO on the 14th of February.

Before I start with the slide presentation, allow me to make a few remarks. Our first priority was and remains the safety and well-being of our employees, clients and communities in which we operate around the world. I want to thank all our roughly 48,000 employees for what they have achieved over the last few months in very difficult circumstances as evidenced by our second quarter 2020 figures today showing the highest second quarter net income attributable to shareholders in a decade and double-digit return on tangible equity. I also want to thank my colleagues on the Executive Board and on the Board of Directors for their partnership, which allowed us to deliver on our primary objective: providing solutions to our clients around the world and helping them navigate extremely volatile markets amid intense economic uncertainty.

Let me now take you through the slide presentation. Today, I will take you through some of the highlights of the second quarter 2020 and then explain the strategic initiatives we announced earlier today to improve effectiveness and generate efficiencies for further investments in digitalization as well as to accelerate growth as a leading wealth manager with strong global investment banking capabilities.

Let's turn to slide five. In the second quarter, we generated CHF1.6 billion in pre-tax income, up 19% year-on-year, and CHF1.2 billion of net income attributable to shareholders, up 24% year-on-year and the highest second quarter result in a decade. Our second quarter growth was supported by 11% year-on-year growth in revenues with a strong contribution from our Global Markets, Investment Banking and APAC Market franchises and solid performances in our Private Banking businesses. The increase in net income for the group was achieved despite adding CHF296 million in additional provision for credit losses last quarter for a total of CHF864 million for the first half of the year.

Our total allowance for credit losses on our balance sheet was CHF2 billion as of the end of the second quarter, of which over 1/2 [Phonetic] was nonspecific reserves including CECL. As you know, the U.S. GAAP CECL approach to provisioning leads to earlier recognition of potential credit losses. It's worth noting that 84% of our loan book is collateralized, and the Swiss Universal Bank accounts for almost 60% of our loans. Our home market, Switzerland, has a strong track record of historically low credit loss experience versus other regions.

As our total operating expenses in the second quarter rose 2% year-on-year, we reported our 15th straight quarter of operating leverage. We are expecting CHF16 billion to CHF16.5 billion of adjusted total operating expenses for the full year 2020 depending on market and economic conditions. We delivered a strong RoTE of 11% in the second quarter, 12% over the first six months of 2020 and 10.4% in the last 12 months.

Our balance sheet is the strongest it has been for many years. Our CET1 ratio increased from 12.1% in the first quarter to 12.5% in the second quarter, and our CET1 leverage ratio increased from 4.2% to 4.5%. We also maintained a strong liquidity position with one of the highest liquidity coverage ratios among international peers at an average LCR of 196% for the second quarter, up from 182% in the first quarter.

We are building on the success of our strategy and intend to continue to allocate the majority of our capital into wealth management going forward. We are also optimizing our model, which is expected to capture new growth opportunities by creating one global investment bank, combining our risk and compliance functions and creating a new Executive Board-level function, Sustainability, Research & Investment Solutions or SRI. I will provide details on each of these shortly.

Finally, our Board of Directors intends to propose to the shareholders the second half of the 2019 dividend at an Extraordinary General Meeting on November 27, 2020. Subsequent to the EGM, the Board intends to review the share buyback program. Both the dividend and the buyback are subject to market and economic conditions.

Slide six, please. As I mentioned earlier, our results today are a testament to the hard work and resilience of our employees and commitment to our clients. At Credit Suisse, roughly 90% of our staff were enabled to work remotely at the height of the pandemic, and currently, around 80% are still working from home. Free antibody testing is being offered in our home market, Switzerland, where we first launched the offer, and a global rollout of the program is being prepared. Our roughly 48,000 employees have been successfully supporting our clients. We leveraged technology and digitalization to deliver solutions, and we ensured strong technology-driven private banking engagement and high-volume execution across fixed income and equities.

As a global bank, operating in over 50 countries, we showed our commitment to our communities. In this context, I would like to commend the Swiss government and other domestic public authorities for a rapid and robust response to the pandemic. This has cushioned the economic effects, and thus far, allowed the public here in Switzerland to return to many aspects of their normal lives while maintaining heightened vigilance. Working with the government and other authorities, we were able to design a CHF20 billion loan guarantee program to small- and medium-sized companies that got money into the hands of main street-type businesses within days of the national emergency being declared in March. We are proud at Credit Suisse to have played an early role in helping to establish this program, which played to many of the strengths of the Swiss economy. We stand ready to work with the public sector as needed in the coming months.

Finally, our employees responded with significant charitable contributions, including to charities working to alleviate the impact of COVID-19, and support those segments of society that are most heavily affected by its economic effects, which were matched by the bank. Over a period of about two months, we raised CHF25 million through this initiative, the most on record for a charity fundraising program at Credit Suisse. And this money was distributed globally.

I will now go into our key results in greater detail, slide seven. This page shows the financial highlights for the quarter. I covered the key group numbers on the left side of this page already in my introduction. Our divisional results, depicted on the right side of this page, highlight the breadth of our strong performance. Each of our divisions generated strong returns on regulatory capital between 17% and 24%.

Next slide, please. Over the last five years, we have steadily grown our return on tangible equity, averaging 12% in the first half of the year amid a challenging market environment. This is the upper end of our medium-term ambition of delivering an RoTE of 10% to 12% in a normalized environment, subject to market conditions and economic conditions. For the first half of the year, we achieved CHF2.5 billion in net income attributable to shareholders, as I said, the highest in a decade.

As I stated before, Credit Suisse benefits from Switzerland -- sorry, we are on page nine now. As I stated before, Credit Suisse benefits from Switzerland's historically low credit losses compared to other regions. There are, of course, two sides to this coin: the stability of Switzerland's economy and political system also makes the Swiss franc a safe haven currency that tends to strengthen in times of global turbulence, which affects us as a company that generates significant non-Swiss franc revenues. As you see from this slide, our reported Private Banking net revenues grew by a solid 4% year-on-year during the first half of 2020 despite the significant economic slowdown. On a normalized basis and excluding the FX impact and certain other items, global Private Banking revenues were actually up 7%. The effect was most pronounced in IWM, where we reported a 1% year-on-year revenue decline in the first half of the year. Excluding the negative FX impact, which resulted primarily from the Swiss franc strength against the U.S. dollar, the Brazilian real and the euro and certain other items, revenues would have grown 4%. This highlights the underlying strength of our Private Banking divisions benefiting from our integrated and regional approach.

Slide 10, please. Our Investment Banking business has not only shown resilience, but also benefited from the market environment. Revenues were up 21% on a reported basis and would have been up 26% in the first half of 2020 compared to the same period in 2019 excluding mark-to-market effects. The revenue growth was spread across products with particularly strong growth in fixed income sales and trading.

Now turning to slide 12 and the strategic initiatives that we have announced today. We reaffirm our strategy launched nearly five years ago to be a leading wealth manager with strong global investment banking capabilities. The core of our growth strategy remains to be the bank for entrepreneurs with a focus on ultra-high net worth individuals. We continue to see potential for significant growth and attractive returns in Wealth Management with a balanced approach between mature and emerging markets. We also continue to believe in our regional wealth management model with proximity to our clients and empowering regional decision-makers.

Slide 13, please. As you can see from this slide, we have truly transformed our business since we began our restructuring in late 2015. Our success is reflected across our financial metrics. Firstly, we have significantly and successfully derisked our Global Markets business. We have significantly lowered our group cost base from over CHF21 billion in 2015 to below CHF17 billion for the last 12 months. At the same time, our look-through CET1 capital has increased by almost 30% to over CHF37 billion. Secondly, our capital allocation has shifted significantly in favor of our historically high return, less volatile Wealth Management businesses where we allocate today roughly two-third of our capital. Thirdly, as you can see, excluding significant items, our Wealth Management businesses have demonstrated strong growth in assets under management, net revenues and pre-tax income during this time. Going forward, in a normalized environment, we plan to broadly maintain this capital allocation split of two-third in Wealth Management and one-third in Investment Banking and continue to target in the medium term an RoTE of 10% to 12% and a payout ratio of roughly 50%.

Slide 14, please. In order to further optimize our business model, we now have taken steps to better align our organizational structure with secular trends such as digitalization, sustainability, growth in private markets and lower-for-longer interest rates. As I mentioned earlier, these trends have been accentuated by COVID-19. While we strongly believe in our regional approach to wealth management with proximity to clients, we are combining our Global Markets, Investment Banking and Capital Markets and APAC Markets operations into one single global Investment Bank. We will also combine our risk and compliance functions.

Finally, we are launching a newly formed Sustainability, Research & Investment Solutions unit, called SRI, at the Executive Board level, combining Impact Advisory and Finance; Investment Solutions & Products, which is currently housed in IWM; equity research, which is currently housed in Global Markets and in the APAC divisions; and finally, the Marketing and Branding operations.

In doing so, we address a certain degree of fragmentation, improved effectiveness, and together with additional efficiency plans in SUB and other corporate function areas, expect to generate run rate savings of approximately CHF400 million per annum from 2022 onwards. We expect to reinvest these savings, depending on market conditions, into our four divisions with a particular emphasis in APAC, but also in IWM and SUB as well as in our continued digitalization and sustainability efforts. These changes are intended to align our business and resources for growth. The combination of risk and compliance will enhance alignment in our control functions. The SRI will align sustainability with our thought leadership in investment solutions and in content. And the single Investment Bank will build alignment in what we deliver globally to corporate, institutional and entrepreneurial clients.

Let me go into each of these aspects in greater detail, Slide 15, please. Firstly, our single Investment Bank will create a globally integrated client-centric platform built on sales and trading, underwriting and advisory to maximize global connectivity. It will be led by Brian Chin. Brian has successfully led Global Markets and strongly improved returns. We will integrate capital markets origination and execution. This function will be led by David Miller in addition to the capital-light advisory business, where we tend to make further investments. David has done an excellent job leading our Investment Banking unit and has been a main driver of this combination. I thank him for his contribution and look forward to continuing to work with him in a great partnership.

Given the success of ITS, our International Trading Solutions, and which is our trading and sales collaboration between Global Markets, SUB and IWM, we are creating GTS, Global Trading solutions, by combining ITS with our successful APAC Solutions businesses. This should allow us to align our global technology, risk and execution efforts in this area. GTS will have close regional connectivity to Wealth Management and bring global products to local markets. In addition, we shall integrate the APAC Equities into -- sorry, we shall integrate our APAC Equities business into our global Equities franchise, ensuring global solutions for large institutional clients without compromising client proximity across Asia.

The new IB division should also enable a more dynamic allocation of capital, consolidate our support functions and optimize global risk, technology and execution platforms. This series of refinements should allow us to deliver our medium-term ambition for a return on regulatory capital in excess of 10% for the investment bank. Secondly, we shall be integrating our risk and compliance functions under the leadership of Lara Warner, who, as you know, has been our Chief Risk Officer for over a year now and has previously successfully led the compliance function. We expect to leverage scalability and technology and data platforms used by both units and strengthen our digital capabilities. This should reduce fragmentation and complexity, address a certain degree and duplication across nonfinancial risks and allow us to consistently execute and deliver our control framework across all risk types while increasing coordination and the speed of decision-making.

Thirdly, we are excited to launch our new Sustainability, Research & Investment Solutions unit to build on our strong research and CIO capabilities to deliver unique global insights and investment solutions with a single best-in-class House View. We expect a function to also drive a globally consistent sustainability strategy. It will be led by Lydie Hudson, who has been our Chief Compliance Officer,and who previously successfully led our change program within Global Markets. This decision should allow us to further develop differentiated investment and advisory solutions across wealth management, corporates and institutional clients. It is also intended to increase connectivity of research, fully integrate ESG principles into our research approach and drive unique and market-leading insights across both public and private companies in all relevant sectors.

Page 16. These organizational refinements are aimed at accelerating growth across our four divisions with a medium-term ambition for return on regulatory capital of greater than 20% for our three Wealth Management businesses combined and greater than 10% for the Investment Bank.

In APAC, we intend to broaden our successful coverage of ultra-high net worth and entrepreneur clients with investments in relationship managers and bankers by expanding our wealth-linked client solutions and deepening our onshore franchises to tap faster-growing markets particularly in Greater China. As part of this strategy, last month, we completed the transaction to become a majority shareholder in our China securities joint venture, Credit Suisse Founder Securities, in which we aim to take full ownership.

In IWM, we aim to double the revenue growth contribution from ultra-high net worth strategic clients over the next three years. We will expand our systematic solution delivery through the newly established International Financing Group. We are also looking to build on the success of IBCM in APAC and Switzerland, which, by the way, will both stay in these two respective divisions and where we have number one positions by integrating our IBCM, EMEA mid-market capabilities into IWM to increase connectivity with entrepreneurial clients especially in M&A. Furthermore, we will optimize our regional Private Banking coverage and create a more systematic solution delivery model.

For our SUB, we will continue to build on our high-touch strategy for ultra-high net worth, corporate and institutional clients by leveraging digital solutions for our high-tech, retail and smaller corporate clients in our Direct Banking business area that we launched last year. We are now aiming for a reduction in the cost/income ratio from the high to the mid-50s. This is intended to be achieved as we optimize and improve collaboration with subsidiaries and front-to-back efficiencies. At our Investment Bank, we expect to leverage our newly established globally integrated platform to capture growth opportunities, particularly in the asset-light areas of advisory, M&A, ESG and Private Markets.

Slide 17, please. Now let me put a special emphasis on the topic of sustainability. With the establishment of the SRI unit, we are now seizing the opportunity to drive a cohesive approach to position Credit Suisse as a progressive sustainability leader meeting the evolving needs of our stakeholders and society in general. Whilst we have already made great progress in the last few years, as seen on the left side of the slide, we are announcing new steps to become a leader in sustainability across our Wealth Management and Investment Banking client franchises.

Sustainability will be represented in the Executive Board, underlying the significant importance and opportunities we see in this area and Iris Bohnet will take the newly created role of Board of Directors Sustainability Leader to drive our sustainability agenda and support execution. That said and aligned with the establishment of SRI, we today announced a series of sustainability goals including to provide at least CHF300 billion of sustainable financing over the next 10 years in areas such as renewables, lower carbon solutions, green bonds, transition bonds and other projects that contribute to the delivery of the Paris Climate Change Agreement, the United Nations Sustainable Development Goals and to financing our clients' transition to a sustainable future. Furthermore, we are further tightening our exclusion guidelines around coal mining, coal power, Arctic oil and gas and other fossil fuel industries to transition toward lower carbon solutions that contribute to the achievement of the Paris Climate Agreement. In particular, we will generally not provide lending or capital markets underwriting to any company deriving more than 25% of their revenue from thermal coal extraction or from coal power, and we will not provide financing related to offshore and onshore oil and gas projects in the Arctic region. We are aligning our industry groups to better pursue opportunities in the energy transition space by combining our oil and gas and our power and renewables businesses in IB. We are also enacting energy transition plans for each of our high-carbon industries to ensure clients that we are working with in these industries have plans to address their footprint.

Next page, please. Let me summarize our financial ambitions. We aim to achieve 10% to 12% RoTE over the medium term in a normalized environment, subject to market and economic conditions; run a CET1 ratio of around 12% and a CET1 leverage ratio of around 4%. As mentioned, in terms of our capital distribution, we expect approval of our second half 2019 dividend at an EGM on November 27. After the EGM, the Board intends to review the share buyback program, subject to market conditions. Looking forward into 2021 and beyond, we expect to distribute at least 50% of net income through dividends and share buybacks in a normalized environment. We are currently accruing for a 2020 dividend consistent with this policy, namely, a dividend that we expect to grow by at least 5% per annum.

And with that, I would like to hand over to David for the discussion of our second quarter financial results in more detail.

David Mathers -- Chief Financial Officer

Thank you, Thomas. Good morning, everybody. And I'd now like to take you through the numbers in some more detail, please. So as Thomas has already summarized, our businesses performed robustly in the second quarter, notwithstanding the ongoing economic stress and the market uncertainty resulting from the pandemic. But before I do get into details, I think I'd just emphasize that with a CET1 ratio of 12.5% and a total allowance for credit losses on the balance sheet of CHF2 billion, we feel well prepared for the continued economic stress that we will see in the second half of this year as a consequence of the COVID-19 pandemic.

Let's turn to the financials. So overall net revenues in the second quarter of 2020 were CHF6.2 billion, and that's an increase of 11% year-on-year.

Now if we look at the business lines on the slide, you can see that in the second quarter, our Investment Banking & Capital Markets division saw an increase in revenues of 61% compared to the second quarter of 2019. And our Markets revenues across both Global Markets and Asia reported an increase of 33%. Now while our Wealth Management-related revenues did fall overall by 2% compared to the same quarter in 2019, as Thomas has already mentioned, this was impacted by the strength of the Swiss franc in which we report by comparison to the U.S. dollar and certain other currencies, primarily the euro and the Brazilian real. On a constant currency basis, our Wealth Management-related revenues would have increased by 1%.

Now we continue to take an appropriate stance with regard to the provisioning for our credit exposures against the economic stresses resulting from the pandemic. With regard to CECL, our total debt exposures were roughly constant, although we did see some deterioration in the economic projections compared to the end of the first quarter. As I'll discuss in some more detail, we did see an uptick in certain of our specific provisions but not as much as in the first quarter. Net-net, as I've already mentioned, we come into the third quarter with a total allowance for credit losses on our balance sheet of CHF2 billion.

Now total operating expenses in the second quarter were 2% higher than the same period last year at CHF4.3 billion. That mainly reflects two factors: first, increased compensation accruals due in part to the substantial pickup in trading activity and transaction activity in the quarter; and second, a CHF53 million increase in certain expenses, resulting from the mark-to-mark movements on deferred comp instruments relating to the narrowing of our credit spreads in the quarter. Overall, we generated pre-tax income of CHF1.6 billion in the quarter, an increase of 19% year-on-year.

Now our effective tax rate for the quarter was 25%. Now if you include the benefit of the tax reversals that I discussed three months ago, that takes our year-to-date tax rate to 10%. Now I'd reiterate and maintain the 20% to 25% guidance that I gave for the full year, although, clearly, given our performance in the second quarter, I would expect the rate for the full year to be very much at the lower end of this range for 2020. If we look to 2021, on the basis of our current plans, I'd expect our tax rate to be somewhere in the mid-20s for next year. But this will, of course, depend on any taxation changes in the countries in which we operate, and in particular, it's clearly possible that there could be a change in U.S. tax rules following the elections this autumn.

Our net income attributable to shareholders stood at CHF1.2 billion, and that's an increase of 24% year-on-year. That equates to a return on tangible equity of 11% for the second quarter, which takes the total for the first half to 12%, which is in line with our medium-term guidance of an RoTE of between 10% and 12%.

Let's look at the CET1 ratio. So the CET1 ratio for the quarter was 12.5%, and that compares to 12.1% at the end of the first quarter. I'm sure you'll recall that in April I warned that our capital ratio could fall in the second quarter compared to the first, reflecting the concerns we had that we could see a further increase in lending in our corporate bank drawdowns in the period as well as the adverse impact of market and credit risk volatility on our RWA.

Now if we look at the second quarter, we did see the risk-weighted asset inflation that we expected, both from the phase-in of the SA-CCR reforms here in Switzerland as well as the increase in RWAs from the volatility of March. We also did see some impact from ratings migration. But overall, our CET1 ratio at the end of the second quarter benefited from very strong levels of capital generation, a reversal and not an increase in our corporate bank drawdowns and from the reductions in our leverage finance exposure as we completed deals during the second quarter. I think we're also more successful than I would have expected in mitigating some of the volatility-driven increase in RWAs. And the net effect is that RWAs fell from CHF301 billion to CHF299 billion over the period.

Now if we look forward to the balance of the year that there is still considerable economic uncertainty, I think our capital position means that I'm confident to reinstate the previous guidance we gave at our Investor Day last December of a ratio for our CET1 of approximately 12% for the end of the year.

In terms of capital distribution, we expect to maintain our long-standing dividend policy and to continue to accrue for a dividend as we did in the first quarter in anticipation of an increase of at least 5% in the 2020 total compared to 2019.

With regard to the second installment of the 2019 dividend, please note that we have announced today that we're planning to hold an Extraordinary General Meeting on the 27th of November. Following a final review by the Board, we would expect that shareholders will be asked to vote on the approval of the payment of the second half of the 2019 dividend at that meeting. Now as Thomas has already said, we remain committed in the medium term to a payout ratio of at least 50% following next year of a gradual increase in the dividend and share buybacks. And following the EGM that we planned for the end of November, the Board intends to review the resumption of the share buyback program.

Let's turn to leverage. During the second quarter, our CET1 leverage ratio increased by approximately 30 basis points to 4.5% and our Tier 1 leverage ratio by approximately 40 basis points to 6.2%. That was driven by the strong earnings generation I mentioned already and by a partial reduction of the elevated leverage exposure that we had at the end of the first quarter particularly in Global Markets, due to improved netting and reduced margin requirements and fails as well as lower leveraged finance exposure. Now given the economic stress, we have continued to take a conservative approach to our liquidity requirements, and you'll note that our LCR ratio increased to 196% over the quarter, which I would expect to be among the highest of the major banks.

Let's turn to look at tangible book value per share, please. What we show here is the progression of tangible book per share for the first six months. This grew from CHF15.88 to CHF17.03 during the period, an increase of 7%. I'd like to make three key points about this: first, you can see the net income generation of CHF1.0 per share; second, you'll see that we have seen volatility in our tangible book value per share due to the moves in the value of our own credit with the widening in the first quarter followed by a narrowing in the second quarter, leading to a net addition of CHF0.71 overall; and finally, the strength in the Swiss franc against other currencies has had an adverse impact of CHF0.43 over the six months period.

Let's turn to cost now, Slide 24. We remain committed to our program of continuous improvements in productivity. And as Thomas has already summarized, we're planning further measures to support this. So far, expenses have fallen from CHF8.5 billion in the first half of 2019 to CHF8.4 billion for the first six months of 2020. We saw some increase in expenses in the second quarter compared to the first as a consequence of the moves in the value of our own credit as well as revenue-related expenses, predominantly comp-linked, for which we have accrued to reflect the strong revenue performance this quarter. This has been partly offset by reduced travel and related expenses.

Now our expectations for costs for the full year will clearly depend on the level of business activity, but I would expect our adjusted cost number in the year to be in the range of CHF16 billion to CHF16.5 billion.

So next, I'd like to talk in some more detail about our loan book and our provisions for credit losses. I thought it'd be useful to give some detail on the disclosure, which we've included now in page 71 of our financial report, and that relates to the composition of our loan book. Firstly, you can see the majority, 84%, are collateralized loans at amortized costs. I think the second point is something I'm sure you're all familiar with, the largest component of our loans are made here in Switzerland with 59% of group gross loans residing in the Swiss Universal Bank. I've said before that one clear point of differentiation for us is that we do not have a significantly large exposure to U.S. consumer lending, and our credit exposure is instead biased toward our more resilient Swiss home market. The Swiss economy continues to benefit from low levels of unemployment, low levels of consumer indebtedness and to a low credit loss experience compared to other markets. But I think it's also fair to say that the Swiss government has moved quickly to protect its citizens and its economy from the worst of the COVID-19 pandemic, and we would continue to expect the Swiss credit experience to be substantially better than the rest of the world in the coming months.

Let's turn now to look at the quarter-on-quarter move in credit provisions. What I'm showing here is an updated version of the slide that I presented three months ago. As I'm sure you remember, the first quarter marks the introduction of the current expected credit loss rules under U.S. GAAP, which came into effect on the 1st of January. It's worth remembering that Credit Suisse is unusual in being a European-based bank reporting under U.S. GAAP rather than IFRS, and therefore, subject to the much more conservative CECL rules. As you know, CECL generally upfronts more of the impact of credit losses than IFRS.

If you look at the summary, remember the rules that I've shown here for the first three months of the year, at the end of which our allowance for credit losses stood at CHF1.7 billion. Now the level of the CECL provision depends overall both on the absolute level of our credit exposure that we have and the economic outlook for that credit exposure. What we've seen in the second quarter is that our exposure has been broadly stable and that the outlook that is clearly worse at the end of the second quarter than at the end of the first has not seen the pace of deterioration that we saw in the first quarter. After all, I think at the end of December 2019, no one had actually heard of COVID-19. So therefore, our additional provision for credit losses was substantially lower in the second quarter than in the first at CHF296 million, of which CHF130 million was related to CECL and CHF166 million was related to specific provisions. And that takes our total to CHF2 billion at the end of June.

Now I just wanted to update the comparison that we gave at the end of the first quarter, which shows here the level of credit losses that we have against the loan books for our Global Markets and our IBCM businesses, and that should be broadly comparable to the loan exposures of those peer banks that have already reported and for which we have the necessary data. As at the end of the second quarter, this figure stood at 2.2%, which exceeds that of all those peers who've reported so far and have published comparable data. The increase compared to the first quarter reflects both the increased credit provisions we've taken, but also the reduced exposures for this calculation as we've seen corporates who've refinanced themselves in the debt capital markets and paid down corporate loans in the period.

Now before I turn to the divisional summary, I did want to discuss the accounting implications of the restructuring measures that Thomas has already briefed you on. Just to recap, we're amalgamating IBCM, Global Markets and APAC Markets into a single global investment bank. We're combining and integrating our risk and compliance functions. We are creating a new function called Sustainability, Research & Investment Solutions. And we're accelerating our efficiency and digitalization initiatives here in Swiss Universal Bank. These measures will require a restatement of our earnings onto the new divisional basis, which we would expect to provide to you at the beginning of October. We will be taking some restructuring charges as a result of these measures expected to be approximately CHF300 million to CHF400 million. And these should generate approximately CHF400 million of run rate savings. The program will run over the course of the next 12 months with a full run rate savings achieved from 2022 onwards.

Let's turn now to our divisional performance and start with the Swiss Universal Bank. Our Swiss Universal Bank generated pre-tax income of CHF687 million, an increase of 5% compared to the same period last year. That includes a gain of CHF134 million from the revaluation of our equity investment in the Pfandbriefbank in the second quarter of 2020. Revenues increased by 2% to CHF1.5 billion driven by higher revenues from International Trading Solutions, or ITS, and increased revenues in our ultra-high net worth segment as well as by the revaluation gain. We've taken additional provision for credit losses of CHF30 million compared to CHF124 million that we took in the first quarter, and this increment was primarily driven by our consumer finance business in Switzerland.

Operating expenses was 3% lower than the second quarter of 2019 at CHF787 million, the result of ongoing cost discipline which helps our cost/income ratio to fall to 52%.

If we turn to Private Clients, net revenues increased by 3% year-on-year driven by the strong performance of the ultra-high net worth segment where revenues rose by 12% and by the Pfandbriefbank gain. But this was partly offset by lower revenues from our investment in the Swisscard credit card issuing joint venture.

In terms of net new assets, we saw further outflows of CHF1.6 billion due to deleveraging by certain of our ultra-high net worth clients this quarter. But I would note that client business volume, which include net loans, assets under management and assets under custody, was up by 4% Q-on-Q. Corporate & Institutional Clients reported stable net revenues year-on-year with increased ITS and Swiss Investment Banking revenues as well as higher fees from lending activities, which offset reductions in FX transactions. C&IC saw net new assets of CHF1.6 billion for the quarter, mainly reflecting continued momentum in our pension fund business.

Now I'm not going to cover the next slide in detail, but you can see that notwithstanding the adverse economic environment and acknowledging the Pfandbriefbank gain, the return on regulatory capital was stable at 20% for the year -- sorry, for the quarter, and we saw continued growth in pre-tax income and net margin.

With that, let's turn to the next slide to look at IWM. In terms of performance, the division has seen significant increase in underlying client activity this quarter. Comparisons with the same quarter last year are complicated by the fact that most of the businesses IWM transacts in is in U.S. dollars, the Brazilian real and the euro, all of which have fallen significantly against the Swiss franc, and this has had the effect of reducing revenues by CHF71 million year-on-year. If we exclude for this and for the real estate gains from the same period last year, the division's revenues was down about 1% compared to the 7% headline rate we report today. This underlying performance also reflects a fall in recurring revenues due to the delayed impact of the fall in markets in the first quarter together with pressure on net interest income due to the reductions in U.S. dollar interest rates. Overall, we saw a 22% decline in pre-tax income for the division, which fell from CHF444 million to CHF348 million year-on-year.

Our Asset Management revenues fell by 7% with pre-tax income lower at CHF80 million, although I would note that the comparative figure did include a very substantial sales gain from a private equity investment in the second quarter of 2019. We've seen good inflows in the quarter with contributions from emerging markets in Europe taking the NNA total to CHF1.8 billion in Private Banking. In Asset Management, we saw net new assets of CHF4.1 billion with strong institutional flows driven by Index Solutions and Credit.

Let me turn now to Asia Pacific. Our Asia Pacific division reported a strong performance for the second quarter with pre-tax income improving by 26% year-on-year to CHF298 million, the highest level since 2015, with net revenues up by 17% year-on-year at CHF1.1 billion. With our costs broadly stable, the cost-to-income ratio fell by 10% year-on-year. Predominantly driven by strong markets and IBCM performances, which offset an increase in credit provisions, these numbers delivered a return on regulatory capital of 22% for the quarter.

If we look at Wealth Management & Connected, our pre-tax income was CHF123 million. That included a CHF33 million recovery of the unrealized mark-to-market gains on our fair value lending portfolio in our financing business, but this was offset by hedging losses and costs of CHF72 million.

Within Private Banking, which like IWM was also adversely affected by the strength of the Swiss franc compared to the U.S. dollar and U.S. dollar-linked currencies, we saw lower NII and lower recurring commissions and fees due in part to the fall in average assets under management which offset increased transaction-based revenues. Our advisory, underwriting and financing revenues, which increased 9% year-on-year, reflect increased equity-linked activity. Net new assets for the quarter totaled CHF4.5 billion, representing an annualized growth rate of 9% and taking NNA for the half year to CHF7.5 billion.

If we turn to APAC Markets, the positive market environment and higher client activity drove net revenues 60% higher year-on-year, fixed income revenues increased by 151% while equity sales and trading revenues increased by 23% driven by both cash equities and equity derivatives.

Let's turn to IBCM. Our Investment Banking & Capital Markets division also saw strong second quarter revenues, up by 61% year-on-year to $732 million. With operating expenses broadly flat year-on-year, that translates into a pre-tax income of $212 million. Additional provisions for credit losses totaled $69 million,compared to $161 million in the first quarter of 2020 and are driven primarily by CECL charges due to the deteriorating economic outlook in North America. In terms of specific provisions, we saw limited adverse effects with only $7 million allocated to specific cases.

Just to update you on our leveraged finance exposure, this has fallen sharply by a further $4.3 billion since the end of the first quarter to $3 billion outstanding at the end of June. We saw strong client activity across our advisory and underwriting businesses with clients taking advantage of positive debt and equity markets to secure additional financing and to refinance their balance sheets. Our equity underwriting revenues increased by 65% year-on-year, buoyed by strong follow-on and convertible issuance performances. And we were ranked number one in IPOs for both the second quarter and the first half of the year.

Our M&A revenues also increased by 32% as we took market share on the back of completing previously announced transactions, although I would caution, as some of our peers have done, that the pipeline in terms of advisory work is less strong than it was a year ago due to the impediments that the COVID-19 pandemic makes on initiating new transactions.

Our debt underwriting revenues improved by 83% in part due to strong investment-grade debt activity. I'd note though that contributing to this performance was IBCM's share of the 73% recovery of the mark-to-market losses of $147 million that we took in leveraged finance in the first quarter. This reflects reduced credit spreads as well as the completed -- completion and syndication of a number of transactions.

Let me conclude then with a few words on the performance of Global Markets. In our Global Markets business, we saw a continuation of the elevated level activity and volatility that we benefited from in the first quarter, combined with the increase in debt and equity issuance activity supported another robust performance by the division. Our pre-tax income was up by 71% at $615 million on net revenues of just under $2 billion, an increase of 27% year-on-year. And that resulted in a return on regulatory capital of 17% for the quarter.

As we've noted already, robust ITS revenues have contributed to this performance and are a testament to the collaboration between our Markets and Wealth Management businesses. Higher trading activity and market share gains delivered strong fixed income revenues, an increase of 42%. And like IBCM, GM benefits from the write-back of the 73% recovery of the unrealized mark-to-market losses of $147 million and the leveraged finance underwriting book. In Equities, we did see share gains in cash trading and underwriting and that offset a reduced performance by equity derivatives in the second quarter.

In terms of credit loss provisions, as with IBCM, the decrease in corporate exposure due to debt paydown partly offset the adverse impact on credit loan provisions due to deterioration of the U.S. economic outlook. Our additional provisions for credit losses totaled $80 million, and that compares to $156 million in the first quarter. And again, like IBCM, these were primarily related to the CECL scenarios with only $7 million allocated to specific positions. Our expenses increased by 8% predominantly as a result of higher compensation accruals partly offset by certain efficiency measures.

With regard to risk-weighted assets, I think you've seen that we've been successful in reversing a substantial component of the volatility-driven increase that we saw in the first quarter. That was driven by a reversal of the drawdown in corporate lending as well as other mitigating steps to reduce the adverse impact of the March volatility.

And with that, I'd like to conclude my part of this presentation and hand back to Thomas. Thank you.

Thomas Gottstein -- Chief Executive Officer

Thank you, David. I would now like to close the formal part of today's call by summarizing our overall performance and priorities for 2020 and beyond.

Please go to the next slide, page 40. Thank you. As I stated earlier, our return on tangible equity over the last six months was 12% and over the last 12 months was 10.4%, exceeding our pre-COVID ambition of delivering approximately 10% for 2020. The strong results show that our operating model is working even in a challenging market environment and during a time when we built significant credit reserve. Furthermore, we have been able to grow our tangible book value per share, which was over CHF17 at the end of the second quarter. With that being said and with the organizational changes we announced today, we believe we are well positioned to continue to deliver shareholder value, invest in growth, serve our clients and navigate the challenging market environment while driving the sustainability agenda.

Thank you all for your attention. I will now hand back to Kinner for the Q&A.

Kinner Lakhani -- Head of Group Strategy and Development

Thank you, Thomas and David. So we will now begin the question-and-answer part of the conference. Operator, let's open the line, please.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Magdalena Stoklosa, Morgan Stanley. Please go ahead. Your line is open.

Magdalena Lucja Stoklosa -- Morgan Stanley -- Analyst

Thank you very much and good morning. I'd like to concentrate on your strategy in both of my kind of questions. We know your top-down targets, the return on tangible, 10% to 12%. But could you give us a sense of two things competitively. How do you think about your kind of overall Private Banking business. And let's take it kind of three years out, where would you like to take it? And where do you see that growth acceleration that you have described in the strategic document? What are you thinking about? Is it a combination of an AUM growth, better penetration, revenue growth, financing? You've also mentioned ultra-high net worth business. So there was a lot of moving parts. But could you kind of give us a sense holistically where you want that Private Bank of yours to be on a three-year view?

And my second question is similar because, of course, we have seen the combination of the global kind of Investment Bank. And when you think about that 10% return on regulatory capital medium term, where is it mostly coming from? Do you see it on the revenue side from the perspective of the 10% line or on the cost side given how you combine the businesses from pretty much three to one?

Thomas Gottstein -- Chief Executive Officer

Thank you, Magdalena. So on Private Banking, as you saw on one of the slides, that we grew in the first half by 7% on an adjusted basis in an environment which was, frankly, quite hostile and it shows that the Private Banking business as a whole and that Credit Suisse is on a healthy growth trend even in a difficult environment. Now clearly, there are some headwinds, be it on U.S. dollar interest rates, be it in our strong Swiss franc. And clearly, in the current environment, it's difficult to win new clients as clients are relatively, let's say, conservative at the moment. But nevertheless, we continue to believe in the overall growth rate of the private banking industry as a whole. And we think that Credit Suisse is extremely well positioned in all three regions, be it Asia, be it EMEA region including Switzerland and be it in Latin America. And we have continued to invest in these businesses, be it through hiring of relationship managers; be it by improving our offering, working together with the Investment Bank; and to be the bank for entrepreneurs in all of these regions.

So I have mentioned some of the initiatives like, for example, the establishment of the IFG, International Financing Group, here in Switzerland in IWM, which will incorporate all share-backed lending activities we do in this time zone, including also for institutional clients and for SUB clients. We want to improve also the collaboration of IWM with IBCM and especially for mid-market transactions for entrepreneurs in M&A but even also in the lending space for corporates where we see quite a lot of potential still to tap market share and increase market share. And from that perspective, we continue to target high single-digit revenue growth in our global Private Banking business.

On the IB side, your question was how we're going to integrate this and how we're going to drive revenues and the 10% return on capital. I mean in order to get to 10% return on capital for the full year, we have to do CHF1.6 billion PTI. We have now made CHF1.1 billion in the first six months if you take the three areas together, Global Markets, IBCM and APAC Markets. So I'm very confident that we have a good, strong base to work from. I see further growth opportunities in each of the areas, be it in Equities, be it in fixed income, be it in the M&A and underwriting business. Clearly, there are headwinds in the current environment, but we continue to expect volatility, which should generally help our trading business. We continue to see the desire of corporates to refinance themselves in the capital markets, be it in equity capital markets, be it in debt capital markets. So I do think that there continues to be very decent volumes in capital markets.

Clearly, M&A will be tough in the second half because announced M&A volumes in the first half is down over 50% globally. I'm talking about Street numbers. And there is a delay, as you know, for M&A revenues. So I think overall Street will have a tough time in the second half in terms of M&A revenues. But at the same time, we see our pipeline growing. We also saw recent announcements of M&A transactions. So from that perspective, I think momentum is building.

Magdalena Lucja Stoklosa -- Morgan Stanley -- Analyst

Can I just follow up on the Investment Banking side because I -- so I understand that this year has been kind of very strong in the first half. So the 10% return on tangible is not really a question for 2020. It was a question for kind of delivering that on a more sustainable level as we kind of look through medium term. And also, by the combination of the businesses, I'm sure that you're likely to extract some cost savings. And so the question really is how do you think about maybe the operational leverage in that business particularly with that 10% return on tangible in mind more medium term.

Thomas Gottstein -- Chief Executive Officer

Yeah. There are definitely some cost synergies by putting the two together especially in the support areas. But the combination of IBCM, Global Markets and APAC Markets is less driven, frankly, by cost consideration, that's a positive side effect, but it's more driven by the increased revenue growth opportunities that we see. We, for example, to create a global Equities platform, will help us also with our large institutional clients; or for example, to put together the underwriting business, where we had a 50-50 joint venture, will simplify things. We want to invest in M&A with an asset-light business and we continue to see opportunities there to grow. So overall, we see various areas. We are actually top six in 84% of our revenues in Investment Banking, we are in the top six position. So we have concentrated on areas where we are globally competitive. And from that perspective, we are confident to build on the success. You saw we are number one in the first six months in IPOs globally, so strong leveraged finance, strong private equity franchises. So we have a very strong base to work from.

Magdalena Lucja Stoklosa -- Morgan Stanley -- Analyst

Thank you very much.

Operator

Thank you. And your next question comes from the line of Stefan Stalmann, Autonomous. Please go ahead. Your line is open.

Stefan Stalmann -- Autonomous Research LLP -- Analyst

Good morning, gentlemen. Thanks for taking my questions. I have two, please. The first one, going back to the restructuring and the combination of the Investment Banking unit, will this also encompass the advisory, underwriting and financing activities that are currently in APAC Wealth Management, please? And is there any business in APAC Markets that will remain in the APAC division or will it be totally going to the Investment Bank -- to the new Investment Banking division?

And the second question relates to liquidity. You mentioned the increase of the LCR ratio during the quarter, but it's really basically back to where it was late in 2019. So from your perspective, have you actually incurred excess cost of liquidity during the second quarter? And if so, is that excess cost still sitting in the Corporate Center or have you allocated it to the divisions?

Thomas Gottstein -- Chief Executive Officer

Thank you, Stefan. So I will take the first question, and David will take the second question. So if you look at our IB business in Asia, we basically have three areas. One is what we would call the IBCM business in Asia, so M&A and Capital Markets business, which is currently in the segment Wealth Management & Connected, and that will stay 100% part of APAC. And then within the Markets business, you have, on one side, Equities, cash and prime, which will be fully part of the global Equities business, and therefore, fully part of Global Markets but with local reporting lines, obviously. And then you have APAC Solutions, which is now being merged with ITS, which -- and will be Global Trading Solution, GTS. Yves-Alain Sommerholder used to run both businesses, so he was spending 50% of his time out of Zurich running ITS and 50% out of his time in Hong Kong running ITS. He now runs both together. So this has been, if you want, already prepared and there will be local reporting lines. There is a revenue-sharing setup in the same way that we have a revenue-sharing arrangement today between Global Markets, SUB and IWM for ITS, and we'll have the same thing in Asia. So from that perspective, hopefully, that answers your question on the Asia-based Investment Bank.

David Mathers -- Chief Financial Officer

Stefan, just on the second point then, so just a few numbers then. So you're correct, the LCR ratio of 196% is very similar to the LCR ratio of 198% that we had at the end of the fourth quarter of 2019. However, due in part to the 1Q events, the net -- NCOs are actually higher, CHF83 billion in the fourth quarter of 2019, increased to CHF104 billion. So in terms of our HQLA position, the CHF203 billion average actually compares to CHF165 billion in the end of the fourth quarter of last year. So that just gives the sort of full picture in terms of the liquidity position. And I think we just regard this as a prudent thing to do. It gives us much greater reserves at the central parent entity as well as in our subsidiaries, and it prepares us for whatever stresses we may or may not see in the autumn.

In terms of your question about the increased cost to that, there is an increased cost to that. That has predominantly been allocated to divisions, particularly Global Markets and IBCM. So the numbers you see for both of them are actually after the -- that increase in costs. There are some costs also sitting in the Corporate Center, not dissimilar, I think, to the CHF90 million that UBS talked about, and those will be allocated in due course as we actually move forward. But the majority has actually gone out to the markets-based operations already and it's actually in our run rate number, Stefan.

Stefan Stalmann -- Autonomous Research LLP -- Analyst

Great. That's good. Thank you very much.

Operator

Thank you. And your next question comes from the line of Benjamin Goy, Deutsche Bank. Please go ahead. Your line is open.

Benjamin Goy -- Deutsche Bank AG -- Analyst

Yeah. Good morning. Also two questions from my side, please. First, on strategy, when I read slide 13 correctly on the capital allocation, it should stay broadly the same. But you talked in the midterm basically twice the return in Wealth Management versus the Investment Bank. So just wondering why not you are more ambitious saying three quarters, one quarter or even 80/20, really thinking out a couple of years down the line.

And then the second question following up on net interest income. To some extent, in APAC and IWM, I guess, the US dollar pressure is clearly visible on the US interest rates. Just wondering whether you have seen most of it or is there more to come in Q3, Q4 in terms of pressure.

Thomas Gottstein -- Chief Executive Officer

Thank you, Benjamin. I will take the first question again and David will take the second question. Yes. Look, the -- our business model, as we said numerous times, is to be a global leader in Wealth Management with strong Investment Banking capabilities. And it's very clear that based on these two fundamentals, we need to have the appropriate capital allocation. So to have a strong investment bank helps us directly and indirectly with our entrepreneur clients. And if you want to advise an entrepreneur around his private wealth, he usually wants to talk first about his company and how he can grow it and how he can make acquisition and how he can finance it and potentially make an IPO or whatever. So you need to have strong investment banking capabilities to holistically advise entrepreneurs, and that's why it's very important we maintain a minimum size in there. And a lot of the revenues that we're actually making in Private Banking and profitability, we are making because we have a strong investment bank, global investment bank.

And I think with the 10% target returns, which we see as a minimum for the Investment Banking business, we have a realistic number to support that business. It's above our cost of capital in the long term. And from that perspective, we think that's the right mix. There will also be, as you know, over the coming years, certain changes in Basel III RWA modeling around the FRTB, for example, and that will increase obviously the RWAs especially on the Investment Banking side and that's why we have taken this approach. And obviously, you also have to look at it not only from an RWA perspective, but also from a leverage perspective where today we are above one-third. And that's why on a mid- to long-term approach, the one-third, two-third is the right mix for us.

David Mathers -- Chief Financial Officer

So I think in terms of net interest income guidance, actually -- I've not actually been asked this question since the Investor Day back in December, so I think you may recall at that point, we indicated that as a combination of the dollarization of our operational risk RWA plus the measures we were taking here in Switzerland, that we expected our net interest income to be higher by about CHF250 million in 2020 compared to 2019. Now a lot's happened in the last six months and particularly the move in U.S. dollar rates. But it's -- I would still expect our net interest income to be up by about CHF100 million in 2020 compared to 2019. It's a combination of those measures. And you know the exemption threshold at the SNB is also -- was actually increased in the first quarter. But the benefit for that will be almost entirely in the Swiss Universal bank because you are obviously seeing the adverse impact of lower dollar rates on an NII basis in both IWM and in APAC. And I would caution that you would see further pressure on net interest income in 2021 if interest rates remain at this level as the various swaps and structures that we put in place with the dollarization begin to roll off toward the end of 2021. So that's -- I hope that's helpful in terms of the guidance. Much more resilient here in Switzerland, less so elsewhere, although clearly the reported net interest income numbers will also depend on our loan activity over the course of the next year or so.

Benjamin Goy -- Deutsche Bank AG -- Analyst

Okay. Thank you.

Operator

Thank you. And your next question comes from the line of Andrew Coombs from Citi. Please go ahead. Your line is open.

Andrew Philip Coombs -- Citigroup Inc. -- Analyst

Good morning. Perhaps just a follow-up on some of the gross margins. Notably, actually Asia Pacific, the Private Banking gross margin within that dropped down to 79, part of that's normalization and transaction activity. There's a big drop in fee and recurring income. So if you could just elaborate a bit more on what's driving that, please, as well.

And then secondly, on the costs, you're guiding to CHF16 billion to CHF16.5 billion for 2020. You're then talking about this CHF400 million of cost saves. Can I just check, is that CHF400 million of cost saves relative to the CHF16 billion to CHF16.5 billion target this year? And is that a net reduction target? Or is that prior to reinvestment spend?

David Mathers -- Chief Financial Officer

Thank you very much. I mean I think looking at different components, clearly, if we're talking about the APAC PB business, you have seen the similar pressure that we saw in IWM from the weakness of dollar and dollar-linked currencies against the Swiss franc. I mean just to remind you, we were actually trading at parity against the U.S. dollar a year ago and latest rate is, I think, somewhere between 0.93 and 0.94 today, which is quite a material move. And not relevant for APAC, but I mean, if you look to the Brazilian real, it's down about 30% against the year. So there's a lot of currency moves. And I would just remind you, we obviously report in Swiss francs, not in U.S. dollars. And that does have an impact on our APAC PB businesses across the line.

In terms of the specific line items, the pressure you're talking about in terms of recurring activity in APAC was actually linked to some of the insurance products that we actually sell in Asia Pacific and that's what caused the slowdown in the second quarter. It wasn't anything beyond that.

Andrew Philip Coombs -- Citigroup Inc. -- Analyst

Okay. And on cost?

David Mathers -- Chief Financial Officer

Sorry. On costs, your second question, well, I think we've probably summarized it already, which is we do remain committed to achieving our 2% to 3% productivity savings each year. The measures that we've announced today should generate about CHF400 million of cost saves, which we will see during '21 and realized in full by '22. But I think the question is how much we actually let drop through to the bottom line for that will depend critically on the markets we actually see over the next six to 12 months. Clearly, if conditions remain difficult, if we see a further economic slowdown, then I think the pace of reinvestment is going to be extremely limited. If, on the other hand, we continue to see a gentle recovery in economic activity, then I would expect to allow a much higher level of reinvestment of that CHF400 million number. So I mean that's why I've given guidance for this year of a range of between CHF16 billion and CHF16.5 billion because I think there is considerable uncertainty over the next six months. And clearly, part of the rationale and the reasoning for taking these measures is to actually drive further efficiency measures and to give us greater flexibility either to reduce our costs or to free up resources for growth elsewhere. We need to be nimble in the face of this environment.

Andrew Philip Coombs -- Citigroup Inc. -- Analyst

Thank you.

Operator

Thank you. Your next question comes from the line of Daniele Brupbacher, UBS. Please go ahead. Your line is open.

Daniele Brupbacher -- UBS Investment Bank -- Analyst

Yeah. Good morning. Just two smaller numbers question and then again on costs. In CIC, the Swiss business, risk costs were basically close to 0, CHF2 million, I believe. Can you just talk about what you're seeing domestically with the corporates and how's the quality outlook there and how we should think about that going forward?

And then in IWM transaction-based revenues were again relatively soft at least versus my expectation in the second quarter. If you could just talk about what is happening there and what the outlook is. I remember there were some headwinds in the first quarter regarding unrealized losses, CHF101 million, whether there was something similar in the second quarter.

Sorry. And just on the cost saves, I mean that the targets overall, they look relatively similar to what you had previously, but you seem to require restructuring charges now to deliver these cost targets. So has the nature of the cost saves changed versus previously? Or why do you need now those cost restructuring charges to deliver those cost saves.

Thomas Gottstein -- Chief Executive Officer

Yeah. So let me start with maybe the Swiss business, which I still know very well from our previous side and then maybe we'll talk about IWM and the overall cost targets. So on CIC, as you see on page 44, in the first quarter, we actually provisioned CHF112 million in the first quarter, CHF86 million CECL related and CHF26 million specific. And the second quarter, we had CHF11 million specific, but we had a reversal of CHF9 million in CECL based on an update we've done on our economic assumptions, which actually slightly improved for Switzerland.

So overall, if you take it together, we have CHF114 million provision in the first half. For our corporate business, it's actually still a pretty big number. So -- and anecdotally, when I speak to our Head of Corporate Banking, be it on the large risk corporate side, be it on the SME side, we feel that our clients are overall feeling extremely well with the crisis. Clearly, there is pressure points and there are certain areas where our corporate clients or certain sectors, especially in tourism and in other areas where they are challenged, but we feel relatively comfortable with where we are year-to-date on that side.

And maybe, David, you want to take the IWM and cost target question?

David Mathers -- Chief Financial Officer

Yeah. I mean I think in terms of the transaction revenues for IWM, I think two points. Firstly, the point we've made already around the moves against these currencies. I mean 30% for the Brazilian real, and that's an important part of the IWM business. I mean I think, let's not overlook, that's a big move. 6% in the U.S. dollar, these actually do depress our reported transaction revenues when you actually look at the numbers in Swiss francs. But I would also note, which might be helpful, that we did see about a CHF21 million loss in respect of hedging of certain derivative positions in IWM, which we have noted in general terms in the MD&A. So that's probably the other factor in there. So that might help you, Daniele, in terms of the models. And that basically just relates to the moves in credit spreads in the second quarter compared to previous periods.

I think you asked a question around CHF101 million, I think. That was actually in Asset Management, not in the PB side basically. So that was an AM issue, not the PB side. We have disclosed we've seen a write-back of about CHF20 million of that CHF100 million in the second quarter, but that's clearly the other subdivision from IWM PB, if that helps. I think on the more general point around costs, I mean I think there's a few points to make. Firstly, Credit Suisse does have, I think, a very good track record in terms of delivering cost saves. We delivered over CHF4.2 billion through our committed program. And that program is very much ongoing in terms of what we're actually doing today.

Secondly, we're not changing our targets for return on tangible equity. We're not moving back from reported to adjusted or anything like that. The key metric for the bank remains the reported metrics. What we do have though is, as a consequence of the measures that Thomas has announced this morning, we will see a slight step-up in terms of those restructuring costs that ordinarily we just let flow through our P&L. And therefore, the reason why we're disclosing it today is just so you know that is coming and to make clear that essentially we will be giving that disclosure going forward. But our numbers remain measured on a reported basis. But as we're taking these bigger steps, essentially, in the interest of transparency, we wanted to let you know that there will be a slight step-up in these costs, which otherwise would actually flow through our P&L without requiring disclosure.

So it's more of a disclosure point in terms of this. We're not going back to some kind of adjusted type metric in terms of how we actually judge ourselves. It's clearly part of the ongoing measures we're actually taking. And I think that's the kind of key point. You should see it more as how we basically double down on our existing strengths across our business and give ourselves some more cost flexibility going forward.

Daniele Brupbacher -- UBS Investment Bank -- Analyst

Okay. Thank you.

Operator

Thank you. And your next question comes from the line of Andrew Lim, Societe Generale. Please go ahead. Your line is open.

Andrew Lim -- Societe Generale -- Analyst

Hi, good morning. Thanks for taking the question. So I guess with regards to strategy, management has to balance out the benefits of having a local focus versus a centralized focus. So obviously, with IB, you've gone down the centralized route and merged a lot of the disparate geographic functions. But with Wealth Management, you still remained local, which is completely the opposite of a peer of yours. So I'm just wondering what your thoughts of that in terms of doing something with the consolidation of your global Wealth Management functions. And then, secondly, obviously, you benefited on the CET1 ratio with credit drawdowns being repaid back. Just wondering if that has any follow-through into the year, the third quarter or are we mostly done in there?

Thomas Gottstein -- Chief Executive Officer

Okay. I'll take the first one, Andrew, and the second one for David. So as I said in the presentation, we are convinced that a regional approach within our Wealth Management is the right approach. So we have empowered executives in Asia, in the SUB for Switzerland, in IWM and even within those divisions than we have on the N-2 levels, people in charge for various subregions or sub-businesses in Switzerland, for example, for premium clients and then for the nonpremium clients business. So we very much believe in this regionalization empowering. And the Private Banking business is a local business, is a regional business and it's quite different from the Investment Banking business, which is a global trading, underwriting and advisory business built on strong infrastructure, etc. So we very much believe that this is the right approach.

And as I also mentioned earlier, at the time when Global Markets and IBCM were split, that was really to fix the Global Markets business. We had too much capital, too much risk-weighted assets in that area. We reduced the risk. And we want to protect the IBCM business. We did do that in the restructuring phase. And this is the right thing now to do to put the global Investment Bank back together. And from that perspective, it's a natural step. But I definitely would never want to go to a global wealth management structure.

David Mathers -- Chief Financial Officer

Okay. I think your second question then was more of a numbers question in terms of the reversal of the credit drawdowns that we saw in March. I think the answer to that is we've only seen a partial repayment of the credit facility drawdown that we saw in the first quarter. So I would assume that if conditions continue to normalize and given the continued levels of central bank intervention in debt markets, that we should see further payback of facilities as we actually go through the rest of this year. But no, it is not fair to say that we've seen the full extent of that reversal as yet. And I guess to that extent, therefore, it does remain a benefit in terms of our overall credit exposures to see.

Andrew Lim -- Societe Generale -- Analyst

That's great. Thank you very much.

Operator

Thank you. Your next question comes from the line of Jeremy Sigee, Exane. Please go ahead. Your line is open.

Jeremy Charles Sigee -- Exane BNP Paribas -- Analyst

Good morning. Thank you. Firstly, could I just pick up on that previous comment you made about capital movements looking out into 3Q and 4Q? So you said that you could get more repayment of drawdowns. Could you just walk us through any other sort of moving parts that you expect? I think there's a little bit more RWA inflation still to come through. But if you could just sort of walk us through what you think the major moving parts are potentially on capital in 3Q and 4Q, and in particular, what the risk is of the ratio slipping back to the 12% or lower levels, that would be very helpful.

And then, secondly, a sort of briefer question. You mentioned hoping to review share buybacks at the end of November. And I just wondered whether you have any indications from your regulators whether that's going to be politically acceptable at that point, whether you have any indications of that or whether it's just still wait and see.

David Mathers -- Chief Financial Officer

Okay. Well, thanks very much, Jeremy. Let me take the first one. So in terms of RWA movements for the second half, I think the -- there are probably three points I'd want to make. Firstly, we still do have the phase-in of the SA-CCR reform here in Switzerland. So that's another CHF3 billion in the third quarter and another CHF3 billion in the fourth quarter, but I think you know about that. Second point, I think it is important to point this out, that the inflation of risk-weighted assets that resulted from the volatility in March is still largely in the system and in our numbers and it will probably take another year or so for that to be completely amortized out. It doesn't just drop out in one quarter or two quarters.

So we will see, though, if volatility remains at these sorts of levels, some reduction in RWA in the third quarter and the fourth quarter and then into 2021 from that, and that is likely to be the order of -- similar sort of order of magnitude, say, CHF3 billion to CHF4 billion type magnitude.

The third component then is ratings migrations. We did see some increase in RWA in the very low billions from rating migrations in the second quarter. And we may see some further rating migrations in the third quarter, although that clearly will depend on the credit environment which we actually operate.

Now just to be clear, Jeremy, so if you add all that up, David is telling me that there is going to be some benefit because I would expect, honestly, at this point, the volatility gain to exceed the ratings migration plus you have the SA-CCR effect, why are we guiding to 12%. And I think the answer is that is intended as a conservative guidance and a reinstatement of what we actually said at the end of 2012. There's nothing more you should read into that. I think we -- I think the key message you should take away from this presentation is preparedness. We do not really know what level of infection we're going to see in the second half, how governments will choose to respond to that in terms of either lockdowns or extension of state measures or anything else. And therefore, I think being conservative on our capital guidance is the right thing to do. But I think I've given you the numbers. There's nothing else there to read into it in terms of that and that's why we went back to the 12% number, but it is intended as, I think, a conservative guidance looking forward on our CET1 ratio.

I think on the share buyback comment, I would merely say that we informed both the FINMA and all of the core college regulators of everything we've said today in advance. So I think our regulators are fully informed of this. I'm sure, basically, we'll have further discussions with them as we actually go through the preparations for the EGM on the 27th of November and everything else we say there afterwards. But this has obviously been made in the full cognizance of FINMA and the core college.

Thomas Gottstein -- Chief Executive Officer

Yes. I think the question was not only about share buyback and about dividends. And I think we have an excellent relationship with our regulator, and we were not forced to do the first half dividend split, but we -- this was a result of constructive discussions and we agreed together with a couple of other banks to do it this way, to look at how second quarter and third quarter are developing. There are other banks in Switzerland that did pay the full dividend and this was the result of very constructive discussions. We have now a situation where we have not only confirmed first quarter, but actually improved on the first quarter in terms of pre-tax income and profitability. The overall situation is much more stable, so it's a very constructive dialogue and we don't have any indications that there are any issues with us paying that second half dividend. In any event, this is the decision by the shareholders.

Jeremy Charles Sigee -- Exane BNP Paribas -- Analyst

Very helpful. Thank you.

Operator

Thank you. And your next question comes from the line of Kian Abouhossein from JPMorgan. Please go ahead. Your line is open.

Kian Abouhossein -- JPMorgan Chase & Co -- Analyst

Yes. Thanks for taking my question. The first question is regarding the Global Market trading environment. I was wondering if you -- I've seen your statement, but I was wondering if you could maybe share a little bit more color in terms of your credit business, in particular, how that's doing in July, but also how you see the second half developing considering we have seen a superb environment clearly in the second quarter and how you're thinking through the year, which would help us immensely. And in that context, your staff numbers have gone up in Global Markets 9% year-on-year. Just wondering if you could comment what that is related to.

The second question is on your overall Wealth Management business especially Asia, if you could talk a little bit about cash balances, where we stand, how they have developed, and in that context, how the client behavior is and what you're expecting in terms of transactions.

Thomas Gottstein -- Chief Executive Officer

Thank you, Kian. So generally, July numbers have started reasonably. As you would expect, there's a certain seasonable slowdown anyway that you have every year. Clearly, the volumes are not at the level that we had, to a large part, in the second quarter, but we are actually satisfied with the start generally in Global Markets in the third quarter. And that is also true for the credit trading. Staff up in GM, I will have to refer to David, but I just want to make a general comment on staff. I mean staff is up globally over the last 12 months and that's also a result of our disciplined approach of not having engaged on any structural initiatives in the first half of this year, and clearly, generally, in the industry, a lower turnover, if you want, of staff generally.

David Mathers -- Chief Financial Officer

Yeah. And I think, specifically, I think we referred to this, I think, a couple of quarters ago. We've actually done a significant amount of in-sourcing both in IT and in our HR functions. So what you're seeing there is the allocated component of that flowing through to GM in respect to their use of corporate functions. I think I'd also point out, I mean, those costs -- or those heads are almost entirely in our lower cost operations, particularly in India. They're not an increase in staff in some of the higher cost locations. So that's what's actually driving that.

I think your second question, Kian, was actually around cash balances, so I'll just give you a few numbers. I mean it has something in common with other things we've seen, which is they've fallen but they're still not back to where they were pre-COVID. So at this point, basically, in terms of PB AUM, it's running at 30%, is actually wholly in money market liquidity. That compares to 32% at the end of the first quarter but basically also compares to 28% in the second half of 2019. So as you see, generally speaking, there has been some drop in cash balances but not back to the levels we saw before. I think you asked specifically about Asia. Asian cash balances are actually around 25%. But the same comment applies basically. It was 27% basically because they dropped back somewhat and that's kind of true across our Wealth Management businesses. So reduced, but not by any means back to pre-COVID-19 levels.

Kian Abouhossein -- JPMorgan Chase & Co -- Analyst

That's super helpful. May I just ask also on transaction margins or transaction activity, I should say within the Asian client base, in particular, do you see any trend changes?

David Mathers -- Chief Financial Officer

I think it's -- I mean it's definitely been resilient and that's continued so far in July. I mean I think Asia Wealth Management is probably one of our strongest transactional areas so far this quarter.

Thomas Gottstein -- Chief Executive Officer

Absolutely. It's -- of all the three regions, it's the strongest start also the third quarter is in Asia.

Kian Abouhossein -- JPMorgan Chase & Co -- Analyst

Very helpful. Thank you.

Thomas Gottstein -- Chief Executive Officer

Thank you, Kian.

Operator

Thank you. Your next question comes from the line of Piers Brown, HSBC. Please go ahead. Your line is open.

Piers Brown -- HSBC -- Analyst

Yeah. Thanks so much for taking my questions. I've just got a couple left. The first one is just sort of on a different angle in terms of the earlier question on the regulatory dialogue. I wonder if you could just share some color on what sort of regulatory dialogue you may have had on the strategy change and whether there's anything in there which might change any of the resolvability rebates in terms of the FINMA capital requirements. That's the first question.

And then the second question is a short one in terms of the timing for booking the CHF300 million to CHF400 million restructuring charges. Should we think about being more or less front-loaded into the next couple of quarters? Or what sort of timing should we be thinking about for modeling those charges?

Thomas Gottstein -- Chief Executive Officer

Thank you, Piers. I will take again the first question and David will take the second. So of course, we discussed with our regulator and not only here in Switzerland, but also with our U.S. and U.K. regulators the plan changes and they were very supportive. And those regulatory changes actually were totally independent on any capital discussions which we're also having. But as you know, during the last two quarters, the Swiss approach was to actually get less forbearance than probably some of our European neighboring countries benefited. Quite the contrary, we continue to have, for example, the increase in SA-CCR CHF3 billion per quarter during this year. So the discussions we are having with the regulator are very constructive and we're very constructive and allowed us also to make this announcement today about those organizational changes.

David Mathers -- Chief Financial Officer

Yeah. I think in terms of two points really. One, did it make any impact on resolvability? No, there's been no change in any of the resolvability assessments for Credit Suisse. So no comment, no point -- no change in that. One point, which I think Thomas alluded to, which relates to regulatory capital relief, which I think has obviously been much more limited in Switzerland than it has been elsewhere, one point I should make, and this is coming back, I think, Jeremy, if you're still on, to the question you had about capital ratios. We did decide not to take a CHF3 billion procyclical relief at the end of the second quarter because the volatility had actually dropped so much in the second quarter. So I guess, Jeremy, there's probably CHF3 billion of RWA move there, which I should just complete on. But we took that out because, frankly, this isn't the volatility in the market to actually justify it. So as Thomas said, there's not a great deal of regulatory relief in terms of these numbers in terms of our RWA numbers, so just to be very clear on that point.

I think your second question then was actually around the time and restructuring costs. I would expect them to be accrued relatively evenly over the course of the next four quarters with the cost savings to flow through pretty much on a three-to six-month lag as we actually complete those measures. I just would reiterate, the reason we're giving you visibility on this restructuring cost issue is just so you have transparency. The metrics remain reported. But I think it'll make it easier in subsequent quarters when we actually break that out in the MDA to know that this is what we're actually telling you.

Piers Brown -- HSBC -- Analyst

Okay. Very clear. Thank you.

Operator

Thank you. Your next question comes from the line of Jernej Omahen, Goldman Sachs. Please go ahead. Your line is open.

Jernej Omahen -- Goldman Sachs Group, Inc. -- Analyst

Yeah. Good morning from my side as well. I just have two questions left actually. The first one is on page 15 when you talk about putting the various parts of the Investment Bank back together. And I think, Thomas, you outlined nicely why it was important to kind of ring-fence the various parts back in 2015. I just want to ask you one question. So you say here that reconstituting the Investment Bank is going to allow you to do a number of things, one of them is a more dynamic capital allocation. I was just wondering if you can actually contextualize this for us. What does that actually mean, right? Or a question put differently, what will Credit Suisse be able to do under the new structure that it's not able to do today?

And then the second question I have is on page 18. So you lay out your new targets. But when we look at these targets, so you got a return on tangible of 10% to 12% and you're at 12% today and 10% over the past four quarters; core Tier 1 of 12%, you're above that; and core Tier 1 leverage of 4%, you're above that. So I was just wondering, I mean, how should we think about the level of ambition that's embedded in these targets? Or are you trying to tell us that the group is over-earning today and there's going to be significant headwinds? I mean what makes this RoTE target of 10% to 12% ambitious or difficult to achieve?

Thomas Gottstein -- Chief Executive Officer

Thank you, Jernej, for these two questions. So the dynamic capital allocation was not always so easy between IBCM on one side, Global Markets on the other then APAC Markets as a third component. The way we manage RWA, we have year-end targets, but we also have quarterly updates. And the way we have to manage it depends also very much on the overall market environment. There are times when the primary business is very strong and we want to allocate more business -- more RWA to the primary business and there are times where the primary business is not very strong and we want to allocate more to the trading business, and that type of flexibility was much more difficult when you have two separate divisions. And now we have it as one division, so that will allow us to be more nimble and more, frankly, able to take faster decisions along the markets.

And the RoTE question and the target question, it's very clear that in some areas, we are above those, but RoTE last 12 months is 10.4%. We said at the Investor Day last year, we want to be 10% for 2020, and then '21, '22, 11% to 12%. And that was obviously before COVID. We have now, in my perspective, in my humble opinion, proven that our model works actually very well also in a financial crisis. And the ambition clearly is to still go to the 11% to 12% range, as we said at the Investor Day, and we are now at 10.4% on a rolling 4-quarter basis. So we want to continue to improve.

And the CET1 ratio around 12%, we just want to give ourselves a certain cushion and a certain flexibility also because you do not really -- you cannot really plan that well in a COVID-19 environment in the short term. And in the mid to long term, we have FRTB. But our view through the cycle is for a business like Credit Suisse, a 12% CET1 ratio is about right; and CET1 leverage ratio of 4%, which basically tells you a roughly 33% risk density which is more or less where we will operate on, so I think that's the reason why we have those targets.

David Mathers -- Chief Financial Officer

Yeah. I mean I think just to reinforce what Thomas has said, I think we are being cautious and we're being conservative in this. We discussed the CET1 ratio. Thomas has gone through the RoTE ratios. And you can -- obviously, we're talking about how we basically accelerate some of the measures we talked overall in terms of cost savings, or for that matter, doubling down with the expansion of ITS to form GTS. I think that's -- but I think that's appropriate in terms of where we are amid the COVID-19 pandemic. We have high levels of liquidity as well.

Now I think, as I said, if we see a continued gentle recovery, then I think that will position Credit Suisse phenomenally well with this degree of preparedness to actually run off some of those excesses and to reinvest into the business. On the other hand, clearly, if we see a significant slowdown again for whatever reason in the autumn, then I think we're very well prepared to withstand that as well. And I think that's the appropriate place for us to be. And I think speaking where we are now halfway through the year, I think we need to be cautious and balanced in terms of what we're saying. But there's nothing that we're seeing that you're not seeing.

Jernej Omahen -- Goldman Sachs Group, Inc. -- Analyst

Okay. Thank you very much.

Operator

Thank you. Your next question comes from the line of Anke Reingen, Royal Bank of Canada. Please go ahead. Your line is open.

Anke Reingen -- RBC Capital Markets -- Analyst

Hi, thank you very much for the detailed presentation. I just had a follow-up question on the CHF400 million of cost savings. Just to confirm, they are on top of your 2% to 3% annual efficiency gains you are planning. And would it be fair to conclude that considering the CHF400 million, we should be looking at a flattish cost corridor versus the CHF16 billion to CHF16.5 billion in 2020?

And then relative to previous indications, you have given us the cost sensitivity and the RoTE. But is it fair to say if you're closer to the 10% RoTE, more of the CHF400 million cost savings would come through to the bottom line -- to the net line; and the higher end, it's probably going to be absorbed?

David Mathers -- Chief Financial Officer

I mean I think it's fair enough in this sense we obviously are still very much committed to our 3% saves for 2020 compared to 2019, and that's part of our book of work. This clearly gives us the ability to extend those saves into '21 and into '22 together with everything else we're actually doing. And therefore, it gives us the ability to very much remain in that type of cost corridor. But I think we'll probably be able to give you greater guidance toward the end of the year as we see how the environment actually shapes up because, quite clearly, I think we are going to see business opportunities at Credit Suisse probably in Wealth Management as a consequence of the stressed environment we're actually seeing and I think we need to be prepared to take advantage of that, and I don't think we'd rule that out in terms of our steps going forward. But it's about giving ourselves the flexibility to do that.

Quite clearly, if things are difficult, then the cost measures give us that cushion. I don't think I'd mechanically link it to 10% to 12% type thing. I think that's a little bit too granular in terms of how we think. But clearly, directionally correct to the extent to which we see things more difficult, we allow the cost saves to drop to the bottom line. To the extent we see things lesser, then we'll actually choose to make reinvestment decisions.

Thomas Gottstein -- Chief Executive Officer

Yeah. Or put it in other words, I very much believe in the concept of self-funding growth. And what we are doing here is allowing us to self-fund our growth initiatives that we have globally. And if you just think, for example, the build-out in China for our onshore banking, those will be significant investments; if you think about our digitalization efforts, about our sustainability efforts, about what Philipp Wehle wants to achieve in the various regions in IWM in terms of investments, etc. So this is really about -- more about self-funding growth investments than just cost cutting.

Anke Reingen -- RBC Capital Markets -- Analyst

And just to confirm, the CHF400 million comes on top of the 2% to 3% per year?

David Mathers -- Chief Financial Officer

Well, just to be clear, what I said is we're committed to 3% for 2020 compared to 2019. We also said the CHF400 million comes through only in full in '22. So it will be clearly part of our '21 and '22 plan. So yes, I'll leave you to make your own model basically, but I think it gives us the momentum to continue what we're doing right through into 2022 now.

Anke Reingen -- RBC Capital Markets -- Analyst

Okay. Thank you very much.

Operator

Thank you.And your next question comes from the line of Amit Goel from Barclays. Please go ahead. Your line is open.

Amit Goel -- Barclays Bank PLC -- Analyst

Hi, thank you. Thanks for taking my questions. So two questions. I mean maybe they are a little bit of a follow-up on what's been said a bit before. But so just in terms of the overall profitability and the kind of 10% to 12%, so when I'm looking at the kind of the broader businesses and so with two-third of the group targeting the kind of 20% return on regulatory capital and then one-third at 10%, am I to assume then that either there's obviously maybe some conservatism or Corporate Center and/or ongoing kind of non-core-type impact? Just trying to reconcile the two parts. Obviously, I appreciate there's a difference between reg cap and seen out, but clearly, there's still a bit of a differential there.

And a second question, again, just on the cost savings and just the broader strategy you've kind of reached out for, in particular, on the IB. Just trying to understand, I mean, I guess, over the last three years since 2015 when the business was kind of split into the various parts, that kind of helped to drive better productivity and profitability and some of the cost reduction we've seen to date. Just curious in terms of going back to that combined structure, is there also some potential offsets or costs in terms of productivity, etc, that we should also be aware of?

Thomas Gottstein -- Chief Executive Officer

Thank you. Yes, of course, if you take the two-third at 20% and one-third at 10% gives you more than 12%, but yes, there is the Corporate Center that you have to factor in as a reduction. And whether it's conservative or not, we are above these numbers at the moment. That's clear. You saw that if you look at the four divisions, but at the same time, these are realistic ambitions, in my view. And I will obviously push Brian and the team to be above, 10.01%, maybe more like 11%, 12% or 13% in that area. And I know he has that ambition. And there are certain areas within the three Private Banking divisions where 20% is probably at the low end, like IWM, but typically operates more at the mid-20s in terms of returns, whereas in Switzerland, high teens. But that there are some differentiations within that as well. But I think that's an illustration how we think about the business. The Private Banking business, clearly higher return, higher growth; the Investment Banking business providing us the scale and the capabilities. And in periods like we saw now in the first half, also very good diversification as we saw. If you compare our results with some of the pure-play private banks here in Switzerland, clearly, you see the benefit of having an integrated model. As far as the IB reshuffle dis-synergies are concerned, I don't really see any. I only see synergies.

David Mathers -- Chief Financial Officer

Just a few detailed numbers, I mean. Just firstly, just in terms of completing the maths on the Corporate Center, we've not been asked about the Corporate Center, basically, but I think you will have noted the Corporate Center number was, I think, higher than consensus. So I think there's two points to note in there. One, there was just short of CHF90 million of provisions in respect of legacy litigation issues associated with the former SRU, which, as you know, is now booked as part of the ARU within the Corporate Center. And two, we've obviously seen some snapback in terms of the volatility we saw in the first quarter. So actually, net-net, if you actually strip out the CHF85 million, $90 million, plus about CHF150 million of volatility, you'll see the Corporate Center is actually running just under the CHF250 million guidance for ex vol and ex litigation Corporate Center numbers. So just to give you some context there.

So I just would perhaps helpfully guide you to the Corporate Center. It's -- I would still expect it to be in the range of CHF225 million to CHF250 million per quarter ex volatility and ex litigation. So that's just one factor. But the other factor clearly is we're obviously talking about return on tangible equity. We're not talking about return on CET1, as I think you know. But there is that material difference. I mean the tangible equity is just under CHF42 billion at the end of the second quarter whereas our CET1 is only about CHF37.3 billion. So there's about 11%, 12% of the tangible equity, which is not effective in terms of capital utilization. So if you're comparing the two, basically, that's the difference, as you said, between the return on regulatory capital and return on that. So the CC and that has been the two factors there. So hopefully, those numbers are of some use.

Amit Goel -- Barclays Bank PLC -- Analyst

Thank you.

Operator

Thank you. We will now take our last question and the question comes from the line of Adam Terelak, Mediobanca. Please go ahead. Your line is open.

Adam Terelak -- Mediobanca SpA -- Analyst

Hi. I just wanted to follow up on the cost again. Does that mean that we could end up below CHF16 billion in a more challenging environment? So clearly, the CHF16 billion to CHF16.5 billion has a decent comp accrual in it. Take that out and then add the 2% to 3% savings and CHF400 million, does that mean that the look-forward in a very more challenging environment could end up below that level?

And then, secondly, I just wanted to ask a little bit more on the capital return policy. Are you saying distribute a little bit more than 50%? Previously, you've given us three buckets being capital return, some that regards regulation and then another chunk to be deployed into the businesses. I just want to know how you're thinking about that and whether -- what sort of growth opportunities do you see in terms of loan growth or other areas to deploy the balance sheet going forward.

David Mathers -- Chief Financial Officer

Well, just on the cost progression, and again, I'll try and be helpful, Adam, just in terms of some numbers, really. The first thing, and I did indicate this in my prepared comments, you have seen significant own credit-related volatility in the expenses between both the second quarter of 2020 and the second quarter 2019, but more so between the first quarter and the second quarter. Remember, we had a gain in the Corporate Center as a consequence of the credit spread widening. And we've obviously seen that snapback basically in the second quarter. So if the first quarter costs, and we did disclose this at the time, was helped by own credit spreads, the second quarter clearly is harmed by it, so -- just to be clear on that. And we talked about CHF58 million on a 2Q year-on-year change number, but the number obviously between the second quarter and first quarter is actually substantially higher than that because we had an opposite credit in terms of that number. I think, quite clearly, in a very challenging market, our cost would be below CHF16 billion, but it would be a very challenging market given we're halfway through the year. But obviously, if we were to see a particularly bleak second half environment, the fact that we've taken a conservative approach in terms of our compensation accruals does position us better than the other way around would be as we look forward to the end of the year. But we'll see where we go from there basically.

Your second question was on capital return, I believe. Look, I think we're standing by our existing guidance. I think at that point, that does mean we assume that FRTB comes in 2023 and we have some capital need in respect of that. I think at this point, that's all I can really say. I think it's quite possible that we will see the European Union potentially draw back on FRTB and some of the other Basel III reforms, possibly phasing and things like that. And generally, the Swiss approach has been to align to the European Union. But I think, again, speaking where we are now in the midst of the COVID-19 pandemic, I think you should just say we're assuming no change in terms of the mix as we stand today, but we'll see how the situation develops over the course of the next six months to a year.

Adam Terelak -- Mediobanca SpA -- Analyst

But are you still sticking by the comment on Swiss gold-plating on operational risk?

David Mathers -- Chief Financial Officer

Which comment was that exactly, Adam?

Adam Terelak -- Mediobanca SpA -- Analyst

Heading into the Basel III finalization, there was some confidence that there may be -- that the Swiss would gold-plate already on operational risk and that you'd have some flexibility to maybe absorb the FRTB as an offset not with CMD.

David Mathers -- Chief Financial Officer

Yeah. Not a word I'd personally use, but it's certainly true that Switzerland has taken a much more conservative approach to operational risk calibration than particularly the rest of the EU, which -- where, generally, you will see that operational risk RWA as percentage of the total is a much lower part than it is for Switzerland. So Switzerland, I think, is probably more akin to the United States. And I think you have seen some rollback in the United States some of the operational risk assets. So definitely compared to EU, yes, I think you're right and we'll see how that develops. But I'll be candid, I think the COVID-19 pandemic and everything else has put some of the regulatory debate around these issues somewhat on hold.

Kinner Lakhani -- Head of Group Strategy and Development

Excellent. Well, thank you all for your time and your questions this morning. Thank you, Thomas and David. Of course, if you do have any further questions, feel free to contact IR. Thank you.

Operator

That concludes today's conference call for analysts and investors. A recording of the presentation will be available about two hours after the event. The telephone replay function will be available for 10 days. Thank you for joining today's call. You may all disconnect.

Duration: 128 minutes

Call participants:

Kinner Lakhani -- Head of Group Strategy and Development

Thomas Gottstein -- Chief Executive Officer

David Mathers -- Chief Financial Officer

Magdalena Lucja Stoklosa -- Morgan Stanley -- Analyst

Stefan Stalmann -- Autonomous Research LLP -- Analyst

Benjamin Goy -- Deutsche Bank AG -- Analyst

Andrew Philip Coombs -- Citigroup Inc. -- Analyst

Daniele Brupbacher -- UBS Investment Bank -- Analyst

Andrew Lim -- Societe Generale -- Analyst

Jeremy Charles Sigee -- Exane BNP Paribas -- Analyst

Kian Abouhossein -- JPMorgan Chase & Co -- Analyst

Piers Brown -- HSBC -- Analyst

Jernej Omahen -- Goldman Sachs Group, Inc. -- Analyst

Anke Reingen -- RBC Capital Markets -- Analyst

Amit Goel -- Barclays Bank PLC -- Analyst

Adam Terelak -- Mediobanca SpA -- Analyst

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