Bonuses slashed as Credit Suisse slides into the red
Friday 10 February 2012
Bankers at Credit Suisse are set to take the biggest cut in bonuses so far in the 2011 bank reporting season.
Across the group, which employs thousands in its Canary Wharf offices in London, the average bonus cut is 41 per cent. The 15 executive directors will take a 57 per cent cut.
That compares with a 40 per cent bonus cut recently announced by Deutsche Bank and an expected 30 per cent or so cut at Barclays Capital when Barclays reports its results today. Pressure is growing on Bob Diamond, the chief executive of Barclays, to give up at least some, if not all, of his expected £2m bonus.
Once again Credit Suisse is paying a large proportion of its bonuses in what are known as Partner Asset Facilities (PAF).
This system, first used in 2008, sees some of the banks riskier assets transferred to its top 2,000 or so highest earners as part of their long-term bonus.
Some senior employees at the bank are annoyed that they have been forced to take on extra risk when they would have preferred to have received all their bonus in Credit Suisse shares. They also fear that the PAF shares will have little upside potential but carry high downside risk.
However insiders say the first PAF scheme, made up of some $5bn worth of junk bonds and sub-prime mortgage-backed bonds, has gained some 75 per cent in value in just over three years.
Credit Suisse reported a surprise lurch into the red yesterday with a fourth-quarter loss of Sfr998m (£691m) compared with profits of just over Sfr1bn in both the third quarter and a year earlier.
The chief executive Brady Dougan, who picked up Sfr9.7m in bonuses last year, said: "Our performance for the fourth quarter was disappointing. It reflects both the adverse market conditions during the period and the impact of the measures we have taken to swiftly adapt our business to the evolving market and regulatory requirements."
Mr Dougan ordered two rounds of job cuts last year which will see a total of 3,500 people leave the bank.
But unlike its rival Swiss bank UBS, Mr Dougan said Credit Suisse had got off to a good start in 2012 with clear evidence of an uptick in business.
He said: "The economic conditions, and market conditions so far this year, are beginning to increase confidence among both our corporate clients and individual clients throughout our business. We've seen clearly better client activity, better activity in general."
Credit Suisse declined to comment on the US Department of Justice's inquiry into cross-border banking services which allegedly helped Americans avoid tax. The bank settled a similar case with the German authorities last year at a cost of €150m (£126m). Any US settlement is likely to be higher.
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