Credit Suisse Increases Bonus Pool 6%, CEO Thiam Gets $12 Million

  • Swiss bank handed out $3.1 billion in bonuses for 2016
  • Thiam gets raise after waiving much of bonus last year

Tidjane Thiam.

Photographer: Andrew Harrer/Bloomberg

Credit Suisse Group AG increased its bonus pool 6 percent, defying a trend toward smaller payouts at many of its peers in an effort to prevent an exodus of talent from its investment banking and Asian operations.

The bank awarded 3.09 billion francs ($3.1 billion) in incentive pay for 2016, according to its annual report Friday, even as charges tied to legal settlements pushed it to a second consecutive annual loss. Credit Suisse restated its full-year earnings to reflect an additional charge of 272 million francs to settle U.S. credit union claims related to mortgage securities.

Credit Suisse is in the second year of a costly turnaround plan that has been hampered by market turmoil, surprise trading losses and legacy issues. The bank’s common equity Tier 1 capital ratio, a key measure of financial strength, fell to 11.5 percent from 11.6 percent as a result of the settlement announced Friday. The bank reiterated plans to list part of its Swiss unit, saying capital strength remains a priority.

“That said, we are now in a position where we have optionality in terms of how we execute, and we expect the capital build-up will shift more and more to capital accretion out of our businesses,” Chairman Urs Rohner said in the report.

The bank’s shares rose as much as 1.6 percent in Zurich trading after closing 2 percent lower Thursday after Bloomberg reported the bank may raise capital from shareholders instead of pursuing a partial listing of its Swiss unit.

The company made no mention of a share sale on its agenda for its annual shareholder meeting on April 28, also published Friday. “We expect today’s announcement to result in a reduced perception of Credit Suisse’s cap hike as an imminent event,” Goldman Sachs said in a note to clients.

Retaining Talent

Employees at other big European banks are looking at smaller awards this year. Hit by legal expenses, Deutsche Bank AG slashed its 2016 bonus pool by almost 80 percent, a figure unmatched in its recent history. UBS Group AG handed out the smallest bonuses in four years after profit slumped.

Credit Suisse “experienced key employee retention issues” in the first quarter of last year after slashing compensation, it said in the report. The increase in the bonus pool for 2016 should “ensure that employees who met their performance targets could be compensated in line with the market in order to retain key talent,” particularly in divisions active in investment banking.

Some top bankers and traders have left the company, while others are grumbling that Chief Executive Officer Tidjane Thiam, a former insurance executive, doesn’t understand their business or care enough about them. Traders have said morale is low at the global markets unit, which bore the brunt of 7,250 job cuts last year. The bank pledged to cut as many as 6,500 jobs this year, mainly in other areas of the bank.

Under Thiam, the bank has scaled back in investment banking to free up capital for an expansion in wealth management. A native of the Ivory Coast, the CEO has been critical of investment bankers’ pay and has said employees should accept that compensation can go down as well as up.

Thiam was awarded 11.9 million francs ($12 million) for his first full year on the job, proportionately more than the 4.57 million francs he got for his first six months at Credit Suisse in 2015. He earned 8.2 million francs in cash and shares on top of his fixed pay of 3.7 million francs. That was still less than his UBS counterpart, Sergio Ermotti, who received 13.7 million francs.

Cultural Shift

Credit Suisse praised Thiam for his progress in executing strategy, including cutting costs and building capital, and his efforts to drive a change in culture at the bank. The CEO waived part of his bonus for 2015, when the bank took a loss mainly due to restructuring charges.

The bank is increasing its bonus pool for the first time since 2013 after posting a loss of 2.7 billion francs for 2016 as it absorbed charges from a $5.3 billion settlement with the U.S. Justice Department over its pre-crisis mortgage securities business.

“It’s in the absolute interest of shareholders that we’ve settled the mortgage case in the U.S.,” Thiam said in an interview with Swiss newspaper Finanz und Wirtschaft earlier this week. “Making today’s management pay for this wouldn’t be a good incentive.”

Rohner, chairman since 2011, is set to earn 3.98 million francs, up from 3.22 million francs. He waived 50 percent of his so-called chair fee, leaving him with 750,000 francs to be paid out in stock, subject to shareholder approval.

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