It seems that Bloomberg was wrong. Earlier this week, it reported that Credit Suisse would be cutting its bonus pool by 10% for 2021 vs. 2020 following pressure from Swiss regulator FINMA. In fact, the Credit Suisse bonus pool is down 32%.
The painful reality is revealed in today's Credit Suisse results for the fourth quarter and full year 2021. "Total variable compensation pools that relate to our 2021 performance are 32% lower than in 2020," says the bank. This follows a net loss of CHF2bn across the bank in the three months to December.
Employees in the investment bank are likely to suffer disproportionately from the diminished bonus pool. Credit Suisse cut total compensation spending (salaries as well as bonuses) in its investment bank by 12% last year. This compared to reductions of only 9% in the Swiss Universal Bank, 10% in its private clients business, 6% in the corporate bank and 7% in wealth management. Above all, Credit Suisse seems focused on keeping its staff in the Asia Pacific region happy: compensation spending there was shaved by only 2% last year, although junior bankers at CS in Singapore are already complaining to us that their bonuses are unexpectedly small.
The cuts to overall compensation spending in Credit Suisse's investment bank follow the addition of 190 extra employees last year, with the result that average compensation per head fell by 13% to CHF193k ($209k). The bank has changed the structure of bonuses this year, with directors and above receiving cash that can be clawed back if they leave within three years, plus extra deferred shares vesting over three years. Here, the bank seems to have relented: original communications to employees said the award would "cliff vest" after the three years were over. When these deferred shares are added in, Bloomberg now says the bonus pool will be down only 15%.
The reductions to the bonus pool come after Credit Suisse's investment bank alone made a CHF3.7bn loss last year, of which CHF1.9bn came in the fourth quarter. With the exception of its fixed income sales people and traders, most businesses underperformed rivals and lost market share. In some cases this was intentional: Credit Suisse began withdrawing capital from its investment bank in the final quarter, and closed the prime broking business.
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