Credit Suisse Group AG Chairman Axel Lehmann has warned employees to brace for bonus cuts as the Swiss lender undergoes a painful and costly turnaround after a dismal year that has forced shareholders for fresh funds.
“It’s been a terrible year for Credit Suisse,” Lehmann said in an interview with Bloomberg TV at the World Economic Forum in Davos. “So I think people will have realistic expectations that don’t look good” for bonuses.
Bloomberg reported earlier this month that Credit Suisse is considering cutting its bonus pool for 2022 in half, as the bank is set to report another quarterly loss amid billions of dollars in client outflows.
Lehmann seeks to please shareholders by showing moderation in bonuses, while still maintaining important personnel, such as investment bankers who will be part of the First Boston business that is planned to be launched, and private bankers in growth areas such as the Middle East and Asia. The bank has struggled to stem an exodus of talent amid speculation about its future.
“On the one hand, you have the topic of retention and then we also have many parts of a very good group,” he said on Tuesday. “So you have to compensate fairly, but you also have to look at it from the shareholder’s point of view. When you have a big loss, it’s clear that the budget is also cut for bonuses.
Credit Suisse isn’t just signaling lower variable pay, although the reductions at the Swiss lender may be steeper than at its Wall Street peers. JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.. are all considering plans to cut bonus pools for investment bankers as much as 30%, according to people with knowledge of internal deliberations.
A halving would leave Credit Suisse’s 2022 bonus pool at about 1 billion francs ($1.1 billion), compared to 2.9 billion francs two years earlier. The Swiss lender has reduced variable compensation by more than 30% for 2021.
At the same time, Credit Suisse has shown a willingness to make extra payments outside of regular bonus rounds to retain top staff. The bank gave more than $300 million in one month last year to retain several bankers. For the 2021 bonus round, it gave additional long-term awards to senior staff to try to soften the blow of the cuts.
Retaining top talent is key as Credit Suisse seeks to rebuild client and investor confidence. Lehmann said on Tuesday that the outflow of assets that rocked the company and its backers in early October had stopped and begun to reverse, with clients scrambling to get their money back to work.
Client money “has stopped trickling in now, it’s coming back a bit,” he said. “So it’s very positive to see and I’m more optimistic for the rest of the year. It’s still early days, so it will depend on how the global economy does.
Credit Suisse is in the early stages of a costly restructuring that includes cutting 9,000 jobs and carving out a large part of its investment bank under the revived First Boston brand. It raised 4 billion francs from investors late last year by raising two branches of capital to help finance the move.
Lehmann said the bank would update investors on progress with the investment bank spinout and other changes when it publishes first-quarter results next month.
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