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11/24/92


TITLE #m#gmsw#m#Credit Suisse 1st Boston's Wheat: Driving Innova-
tion In Burgeoning Derivatives Business Caren Chesler In New York
Unless you're familiar with equity index swaps, protected equity
notes and embedded options, you probably haven't heard of Allen
Wheat.  He is currently vice chairman for Europe's premier in-
vestment bank, Credit Suisse First Boston Corp., and some say
he's in line to eventually succeed the current chairman and chief
executive, Hans-Jorg Rudloff, 52.  To some, that may not sound
impressive. But Wheat has been with the company only two years,
indicating a meteoric rise through the ranks.  That climb is tes-
timony to the profit potential of the derivatives business, the
segment of securities trading in which Wheat is involved.
Derivatives is the catch-all term for betting on the future level
of an asset, wheat

whether a stock, bond, market index or commodity. While this is
most easily done on an exchange by buying a future or an option,
banks have developed a booming business in the off-exchange, or
over-the-counter, market, where they customize transactions to
fit investors' needs.

In its simplest form, an OTC derivative could be a long-dated put
option on a market index - that is, a put with a longer maturity
than that of similar options traded on an exchange. More compli-
cated transactions include equity index swaps, in which investors
swap the income stream from one investment for another income
stream determined by the price fluctuation in some market index.
Such a swap allows an investor to participate in a market without
selling existing assets. An investor holding a short-term asset
paying the one-month LIBOR rate might go to a bank, pass on those
monthly payments to the bank and receive from the bank payments
based on the performance of the Standard & Poor's 500-stock in-
dex.  Derivatives comprise one of the fastest-growing businesses
on Wall Street, and the profit potential is large for firms that
know how to hedge risks


Wheat Leads Innovation In Derivative Area


and find buyers.  Wheat, who led Bankers Trust New York Corp.'s
derivatives business at a time when the company created many of
the innovations in the industry, is considered one of the found-
ing fathers of the business.

Wheat is considered one of the most important hires in a long
time by CSFB, which is a 64%-owned unit of Switzerland's CS Hold-
ing and the parent of New York-based First Boston Corp. He was
poached from Bankers Trust to do for the Swiss bank what he did
for the American institution: make money.  A native of New Mexico
with a bachelor's degree in economics from the Wharton School of
Business and an MBA from New York University, Wheat joined Bank-
ers Trust in 1982. He defected from the company in February 1990
with 20 members of his team.  At the time, he was chairman of
Bankers Trust's entire London operation, Bankers Trust Interna-
tional.

"The part of the business he's responsible for can be a big
earner," confirmed one London-based analyst who preferred anonym-
ity.  But the investment banking business is highly political.
Wheat may have been making a large share of the banking company's
profits by the time he left - he was doubling what the capital
markets group made each year - but a reorganization of Bankers
Trust's global operations put responsibility for some of its
derivatives business in a separate group. Wheat's power was whit-
tled down, which he reportedly resented.  Wheat originally was
hired as chairman of CSFB's Asia operation and, of course, head
of its derivatives group, dubbed Credit Suisse Financial Pro-
ducts. He became vice chairman of the prestigous European invest-
ment bank and head of its fixed-income trading and foreign-
exchange activities this summer.

"There's no doubt Allen Wheat is a very capable manager, with a
good track record of originating profits," said one high-level
official at First Boston.  Others say he inspires great loyalty
among his employees. When he announced his resignation from Bank-
ers Trust, his phone reportedly rang off the hook with requests
from employees wanting to go with him.

Wheat was unavailable for an interview.  The 44-year-old execu-
tive spends most of his time in London, where he lives with his
wife and three children. He also travels frequently to Tokyo and
New York to oversee the firm's derivatives operations.  It's dif-
ficult to assess how profitable Wheat's derivatives group has
been this year. This summer, CS Holding Chairman Rainer Gut would
only say that derivatives made a "significant" contribution to
overall profits.  One London-based analyst estimated that 10% to
15% of the parent's profits come from Wheat's operation.

"And there are still some really heavy start-up costs," noted
Christopher Davis, an analyst with London-based Barclays de Zoete
Wedd Ltd.  Derivatives can be an expensive business to launch be-
cause the people who structure the transactions, who usually hold
doctorate degrees in physics, demand high salaries and technology
costs are high.  "It will obviously be more profitable this year"
as costs go down, Davis said.  Last year, $65 million of CSFB's
$215.5 million in profits came out of the derivatives group. To-
tal profits for derivatives were actually $130 million, but they
are split equally between Credit Suisse, CS Holding's commercial
bank, and CSFB, the investment bank.  The contribution of Wheat's
group should come as a welcome relief to CS Holding, which as
been plagued by problems in its investment banking operations for
the last several years.  Profitability in the European underwrit-
ing business has been declining steadily over the last decade,
and the much-heralded merger and acquisition bonanza expected to
be unleashed by European unification didn't live up to hopes.
And CS Holding had to put $400 million into First Boston two
years ago after the company was left with $1.2 billion in trou-
bled loans from takeover deals that went sour.

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