The Swiss bank is reportedly poised to slash bonuses after kissing off $4.7 billion in Archegos' collapse.
Staff at the Zurich-based bank face dramatic bonus cuts as Credit Suisse attempts to digest twin catastrophes Archegos and Greensill, according to the «Financial Times» (behind paywall) on Tuesday. The outlet reported that Credit Suisse's investment bankers, where the hedge fund's collapse hit, will bear the brunt of this.
«The cut will affect senior staff a lot more than junior because more of our pay is by bonus,» the «FT» quoted a Credit Suisse investment banker. «So we will take a massive hit, not only on the cut to the pool, but also our deferred comp in shares, which are plunging, so it is a double whammy. We all recognize here we will have a massive staff retention issue.»
Quandary With Staff
The episode illustrates Credit Suisse's quandary: slashing bonuses or postponing their accrual is in keeping with what the bank’s regulator and investors will want this year, but will further deflate key talent the Swiss bank relies on to navigate through the tumultuous coming months.
Credit Suisse has investors stumped on how it can pull off a loss of «only» 900 million Swiss francs ($973 million) after the $4.7 billion hit from Archegos, as finews.com reported earlier on Tuesday. The Swiss lender lowered its total bonus pool by seven percent last year, according to the «FT», but investment banking staff won double-digit payouts after the unit lifted its revenue sharply.
Radical Measures
The bank reneged on most of its shareholder payout and halted stock buybacks, but neither measure affect its quarterly profit. Credit Suisse will also eschew a vote asking for shareholder backing at its annual meeting, after two top executives stepped down.
Both are highly unconventional measures which underscore the severity of its current crisis. Top executives face lower bonuses this year, and Chairman Urs Rohner, who is emblematic for Credit Suisse's missteps piling up, will waive part of his 4.7 million franc pay. The bank's share price is more than 70 percent lower than in 2011, when Rohner took over.
