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Credit Suisse Chairman Sees Low Client Activity Persisting
Credit Suisse Group AG (CSGN) Chairman Urs Rohner said the low levels of client activity that hurt earnings in 2011 may persist amid uncertainty about the global economy.
“The entire finance industry recognized that clients across all businesses are avoiding risk and are barely active,” Rohner said in a speech at today’s annual shareholder meeting in Zurich. “We expect these low levels of client activity to persist for some time. The economic recovery in developed markets will remain fragile, while the trading environment will be volatile and growth will be modest.”
Credit Suisse said this week that market conditions worsened in April as a rebound in the first quarter helped Switzerland’s second-biggest bank report a profit at its investment bank after a 2011 loss. Low client activity is also squeezing margins in wealth management.
“Today’s rapidly evolving private-banking environment is characterized by an increase in both client expectations regarding products and performance and in compliance requirements,” Rohner, 52, said. “Targeted investments and strict cost management are essential in this context.”
The bank supports the Swiss government’s efforts to negotiate tax treaties with other countries to resolve issues over undeclared bank accounts, Rohner said. He said automatic exchange of information is not “a suitable instrument to regularize the past.”
Chief Executive Officer Brady Dougan in his prepared remarks said the Zurich-based bank, which is a target of a criminal investigation by the U.S. Department of Justice over former cross-border private-banking services to American customers, delivered some data to the U.S. authorities, as directed by the Swiss government.
“We take this issue very seriously and are strongly supportive of a resolution acceptable to the U.S. and Switzerland,” he said.
The executives said a business reorganization will help the bank adapt to challenges ahead. Credit Suisse decided last year to scale down its investment bank and cut jobs to boost profitability under stricter capital requirements. The bank doesn’t have “plans for any other major reductions in headcount” beyond the 3,500 job cuts announced in 2011, Dougan, 52, said in an interview this week.
“We made significant progress in adapting the business to the new market and regulatory environment,” Dougan said in the speech to shareholders. “While these actions had a negative impact on our financial results, we are confident that adapting our business model will position us for improved profitability and more sustainable returns.”
Shareholders approved Credit Suisse’s 2011 compensation report with about 68 percent in a consultative vote. Last year, about 74 percent of shareholders gave their approval for the compensation report.
Dougan reiterated that the bank tries to strike a balance between paying employees “competitively” and shareholder interests, while responding to regulatory and political initiatives. Aziz Syriani, chairman of Credit Suisse’s compensation committee, told shareholders that compensation issues are not addressed in a consistent fashion across countries and regulators.
“The key challenge in assessing performance for the purpose of fair and balanced compensation decisions is to distinguish between the performance component, for which managers and employees can be held directly accountable, and the macroeconomic factors which significantly impact overall market conditions and the competitive environment, for which the managers and employees are obviously not responsible,” said Syriani.
Several shareholders speaking at the meeting appealed to the 1,752 investors gathered at the meeting to vote against the bank’s compensation report. Rudolf Weber, an elderly shareholder from Zurich, banged his shoe against the podium in protest against Dougan’s pay.
Dougan’s pay fell by 55 percent to 5.82 million Swiss francs ($6.4 million) last year from 2010, when he also received shares valued at about 71 million francs under an incentive program created five years earlier.
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