BOSTON – Credit Suisse Group AG is considering cutting the bonus pool for 2022 by about half, according to people familiar with the matter, capping a grim year in which the bank was forced to raise US$4 billion after a string of losses.
The Swiss lender is set to make even more drastic cuts to variable compensation after the 32 per cent decline for 2021, according to people familiar with the matter. A cut by half would make the 2022 bonus pool about 1 billion Swiss francs (S$1.44billion), which compares with 2.9 billion francs two years earlier.
Credit Suisse’s belt-tightening is likely more severe than that at Wall Street peers including JPMorgan Chase & Co. and Citigroup Inc., which are set to cut bonuses after a slump in dealmaking and sales of new securities. It also underlines the challenges Chief Executive Officer Ulrich Koerner now faces in executing a turnaround that isn’t expected to deliver profits until 2024 while trying to hang on to already disgruntled staff.
Bonus outcomes are likely to diverge widely, given that the bank will have to balance poor performance in some units with the need to motivate staff in others. Some employees are likely to receive no bonus at all for last year, people familiar with the matter said.
The bonus pool discussions aren’t yet finaliSed and could still change, the people said. A spokesperson for Credit Suisse declined to comment on the bonus pool.
Credit Suisse shares rose as much as 3 per cent on Wednesday, one of the best performers among European banks.
For the 2021 bonus round, the Swiss bank gave its senior staff an additional long-term award to try to cushion the blow of the cut to its regular pool, conditional on the delivery of targets over the following three years. Staff making US$250,000 or more a year would also receive a larger part of their variable compensation in upfront cash, though had to agree to pay back a pro-rata portion if they left within three years.
The bank has shown further willingness to make extra payments outside the regular bonus round to retain top staff. In the middle of last year, the lender handed out deferred awards of more than US$300 million in a single month to keep bankers on side.
Seeking to draw a line under years of scandals and multi-billion-dollar losses, Credit Suisse has raised 4 billion francs in fresh capital and is cutting thousands of jobs. Senior executives in Asia and Europe have departed in recent weeks, including China head Carsten Stoehr and Italy chief Andrea Donzelli.
The lender is also carving out parts of its investment bank under the historic First Boston brand. That’s adding to upfront costs, with executives nearing a deal to buy former board member Michael Klein’s boutique investment firm for a few hundred million dollars as part of the deal, Bloomberg has reported. The new Credit Suisse First Boston brand is set to be a partnership model, giving key employees a level of ownership and share of profits.
Credit Suisse has said that the group is set to report a loss of up to 1.5 billion francs for the final three months of last year, partly on the back of historic outflows of client funds. The lender is due to report on progress in regaining those clients when it discloses fourth-quarter earnings. It has reported a loss in each of the previous three quarters. BLOOMBERG
