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Credit Suisse Group AG (CSGN), Switzerland’s second-biggest bank, will allow bankers to swap future payments from a bonus plan for shares in the lender to help bolster capital.
Employees can choose to convert so-called Adjustable Performance Plan Awards, given as part of bonuses for 2009 and 2010, from today and until July 27, the Zurich-based bank said. Conversion would happen at 16.29 francs a share, the same price shareholders will get in the 3.8 billion-franc ($3.9 billion) mandatory convertible notes offer, the bank said. Credit Suisse rose 4.5 percent to 17.91 francs in Zurich trading.
Credit Suisse said earlier today it plans to increase capital by about 15.3 billion francs after the Swiss central bank last month called for a “marked increase.” The proposal follows the award earlier this year of bonuses tied to the bank’s efforts to cut risk-weighted assets and the creation of a staff investment fund in 2008 made up of junk-grade loans and illiquid bonds.
The Adjustable Performance Plan Awards were a cash-based deferred compensation plan, with payouts linked to the financial performance of the employees’ business areas and the company’s return on equity. All other terms of the awards, including clawback features, would remain unchanged if staff choose to get shares instead of cash, the bank said.
Credit Suisse is targeting a capital boost of about 750 million francs, assuming the awards are valued at 1.3 billion francs at the end of this year and implying a 58 percent acceptance level, the bank said. The increase will depend on the bank’s return on equity in the second half of the year and on the acceptance level.
A capital boost of 750 million francs would mean the issuance of about 46 million shares to employees in three tranches in 2013, 2014 and 2015, Chief Financial Officer David Mathers said on a conference call.
Credit Suisse Chief Executive Officer Brady Dougan said the bank’s executive board will participate in the exchange with all of its awards. The company hopes that the rest of employees would be “bullish” on the exchange and on the possible upside in the stock, he said.
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