Bloomberg News

Credit Suisse May Cut 2011 Bonus Pool 25%, Morgan Stanley Says

January 31, 2012

Jan. 31 (Bloomberg) -- Credit Suisse Group AG, Switzerland’s second-biggest bank, may cut its 2011 bonus pool by 25 percent as its securities unit reports a loss for a second consecutive quarter, Morgan Stanley analysts estimated.

About 800 million Swiss francs ($876 million) of the 3.78 billion-franc pool may be paid out in bonds made from derivatives, analysts Hubert Lam and Huw van Steenis said in a note today.

The Zurich-based bank declined to comment on the estimates. Credit Suisse hasn’t disclosed how much it plans to pay out in such bonds, named Partner Asset Facility 2, which were created to help cut risks and improve the bank’s capital position under stricter requirements.

Credit Suisse reduced its 2010 bonus pool by 27 percent to about 5.05 billion francs, as net income fell 24 percent to 5.1 billion francs. Morgan Stanley analysts expect 2011 profit to drop by almost half to 2.64 billion francs, with fourth-quarter earnings of 45 million francs for the group and a loss at the investment bank in the three months through December.

The fourth-quarter estimates “reflect the challenges Credit Suisse’s investment bank faces, where costs are not flexible enough to offset lower revenues,” the analysts wrote. “The evidence is weaker revenues in the fourth quarter from U.S. banks that have reported, especially in credit and equities where Credit Suisse has high exposure.”

The analysts have an “equal-weight” rating on Credit Suisse shares and said they prefer UBS AG, which they rate as “overweight” because of its stronger capital position.

--Editors: Dylan Griffiths, Jon Menon.

To contact the reporter on this story: Elena Logutenkova in Zurich at

To contact the editor responsible for this story: Frank Connelly at

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