Credit Suisse confirms 50% bonus cut, worse for MDs, amid terrible results
Credit Suisse's investment bank is being euthanised, but it's not going quietly. This might be one conclusion from this morning's set of unexpectedly terrible results.
In the fourth quarter of 2022, when other banks were enjoying the fruits of free-flowing fixed income sales and trading revenues, revenues in Credit Suisse's comparable business fell 83%. While other banks experienced low or low double figure declines in equities sales and trading (-1% at JPMorgan, -6% at Goldman Sachs), Credit Suisse's equities revenues declined 95%. CS M&A bankers performed a bit better (down 44% compared to a 51% declined at Deutsche Bank), but this was off a lower base for comparison - in the fourth quarter of 2021, Deutsche Bank's M&A revenues were more than double the previous year, but Credit Suisse's M&A revenues were up by a fraction of that amount as the bank suffered from post-Archegos staff defections.
The charts that pepper today's results show the effects of the past few years more clearly than words. Credit Suisse's sales and trading business is almost extinguished. The revenue significance of its investment bank is halved. Amid restructuring costs, the loss at the investment bank doubled in the fourth quarter and costs were four times higher than revenues.
There is a strategy behind the shrinkage. Credit Suisse said today that 80% of its planned CHF1.2n of 2023 cost cuts are already underway and that leverage exposure in the investment bank was down 40% in the final quarter, while risk weighted assets were down 13%. Headcount across the bank is down 4%, while in the unit that will be CS First Boston 20% of staff have gone.
In the circumstances, receiving any bonus at all would seem surprising, but Credit Suisse does still seem to have a bonus pool is planning to deploy it - probably to the CS First Boston bankers it wants to keep and maybe to the macro and emerging markets traders who seem to have valiantly tried to keep the fourth quarter afloat. Credit Suisse said today that the bonus pool for the whole bank is down 50% and that managing directors and directors will fare worse than the rest, while the executive board will receive no bonuses at all for last year. It has, however, increased salaries.
Out of this carnage, it's intended that a phoenix will rise. Concurrent with today's results, Credit Suisse announced the birth of its "mega boutique" CS First Boston from the ashes of its investment banking business. A "founding partner equity plan" has been devised to foster an "owner" mindset and enable "high impact recruiting" at the new firm.
For the lucky few, that sounds appealing. For the rest, the ride isn't over yet. Another loss is expected at Credit Suisse's investment bank in the first quarter, despite the input of $0.8bn from the sale of the securitized products group to Apollo. A "substantial loss" is also expected across the bank for 2023 as a whole.
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