Bloomberg News

Credit Suisse Cuts 2011 Bonus Pool 41% on Securities Losses

February 09, 2012

(Updates with comment from recruiter in fourth paragraph.)

Feb. 9 (Bloomberg) -- Credit Suisse Group AG, Switzerland’s second-biggest bank, cut its 2011 bonus pool by 41 percent after its securities unit posted a second consecutive quarterly loss.

The bonus pool, including pay deferred into future years, was cut to about 3 billion Swiss francs ($3.3 billion) from 5 billion francs awarded for 2010, the Zurich-based bank said today, as it reported its first quarterly loss in three years. Half the pool will be paid out in cash. The pool for executive board members will be reduced by 57 percent and all of the bonuses will be deferred, Credit Suisse said.

The world’s biggest lenders, including Deutsche Bank AG and JPMorgan Chase & Co., are curbing pay as they grapple with shrinking revenue. Larger Swiss rival UBS AG this week cut its 2011 bonus pool 40 percent to 2.57 billion francs after its investment bank also posted a second straight quarterly loss.

“I haven’t seen anything like it in 15 years,” said Jason Kennedy, chief executive officer of the Kennedy Group, a London- based recruitment firm. “Investment-banking employees are numb to compensation cuts. There’s often nowhere else for them to go.”

The cut to the bonus pool for the investment bank is bigger than for Credit Suisse overall, CEO Brady Dougan told analysts at a conference in Zurich. The securities unit reported a pretax loss of 1.31 billion francs as revenue slumped 64 percent in the fourth quarter.

‘Very Committed’

Deutsche Bank, Germany’s biggest bank, said last week it shrank its 2011 bonus pool by 17 percent, while deferring a larger portion of the awards into future years. Lazard Ltd., the largest independent merger adviser, said this week it cut discretionary bonuses for 2011 by about 20 percent.

“We’re very committed to pay for performance,” Dougan said in a Bloomberg television interview. “We’ve also taken a number of steps to ensure that the form of compensation is something that actually achieves the strategic goals and is aligned with shareholders.”

Credit Suisse, which in 2008 awarded employees bonuses linked to a pool of toxic assets, told senior staff last month that it will be paying part of their variable compensation for 2011 in bonds linked to derivatives. About 500 million francs in notes, named Partner Asset Facility 2, will be awarded to more than 6,000 senior employees throughout the bank. The bonds were designed to help the bank cut risks and improve its capital position.

“We’re able to use an element of compensation to” reduce risk, said Dougan. “It’s actually a fairly thoughtful and forward-looking way of doing it.”

The bank said it would absorb the first $500 million of losses on the bonds, which will pay a coupon of 5 percent for franc holders and 6.5 percent in dollars for holders elsewhere.

Dougan, Chief Financial Officer David Mathers and personnel chief Pamela Thomas-Graham won’t be getting the bonds to avoid a conflict of interest, people briefed on the plan said last month.

--With assistance from Mark Barton in Zurich. Editors: Dylan Griffiths, Jon Menon.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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