Pay Is a Battle Ground as Bankers Don't Accept Cuts, Thiam Saysby
Thiam says investment bank is `structurally quite profitable'
Credit Suisse is shrinking investment bank, focusing on wealth
Credit Suisse Group AG’s Chief Executive Officer Tidjane Thiam said investment bankers are ready for a fight when it comes to compensation cuts.
“The battle ground is remuneration,” Thiam said at a conference in Paris on Tuesday. “The business is structurally quite profitable provided the pay can go up and down. It’s the ‘and down’ that they don’t accept,” he said, referring to bankers in the securities unit.
Thiam is shrinking the investment bank and increasing the lender’s focus on wealth management as regulators step up scrutiny of riskier activities and demand higher capital buffers. The securities operations that emerged from Thiam’s strategic overhaul in October posted the lowest return on capital among the bank’s units in the first nine months of last year.
“A business model where you have a cyclical revenue stream and fixed salary base does not work,” Thiam told the audience that included International Monetary Fund Managing Director Christine Lagarde, Bank of England Governor Mark Carney and Bundesbank President Jens Weidmann. “And that’s the simple truth” but it “has not penetrated all the circles in investment banking and that’s what’s taking the return on equity to 7 percent.”
Deutsche Bank AG may cut its bonus pool at the investment bank as co-CEO John Cryan seeks to lower costs at the unit, people with knowledge of the matter said in October. At JPMorgan Chase & Co., bonuses for 2015 may remain unchanged, according to people familiar.
Credit Suisse’s bonus pool dropped to 3.27 billion Swiss francs ($3.3 billion) for 2014 from 3.61 billion francs in the previous year. The bank is scheduled to release its latest compensation figured later this year. Thiam didn’t comment on the bonus pool.
Credit Suisse said in a prospectus distributed to shareholders in November when raising capital that it may change the way it compensates its top executives as part of its overhaul. Thiam had previously called newspaper reports that Credit Suisse will cut bonuses for 2015 by as much as 60 percent “speculative.”