Freshly stocked with nearly $2 billion in fresh capital after a major hedge fund hit, CEO Thomas Gottstein is already contemplating year-end bonuses.
«In terms of the balance this year, I think we'll obviously be conscious of the need to retain and motivate staff,» Thomas Gottstein told analysts following the Swiss bank’s cash call after a 4.7 billion Swiss franc ($4.4 billion) hit in the quarter from Archegos.
The Swiss lender is looking for the middle ground between keeping its key producers happy and in place while seeking prudence, «and that's a line that we're trying to walk between those two things,» the Credit Suisse CEO said.
Conciliatory Tone
The admission runs counter to speculation Credit Suisse would slash bonuses more widely in the securities unit, amid the Archegos debacle and also, in its asset management unit, the implosion of a $10.1 billion line of Greensill funds. It needed a quick infusion from its staunchest supporters to cover its risk-taking.
The Swiss bank set aside – accrued – 100 million francs less in the first quarter for bonuses, according to its financial report. This of course didn’t go unnoticed at Credit Suisse itself: various media reported that some managing directors were fuming.
Thus Gottstein – an investment banker for most of his career – sounds conciliatory to his former colleagues: «With 80 percent revenue growth, I think we have pretty much-outperformed everybody else in the first quarter» before Archegos wiped it out.
Regrettable Outliers?
The focus on the investment bank's operating performance and categorization of Archegos and Greensill as regrettable outliers is undermined by the risk the unit loaded up on in the first quarter, as finews.com reported on Friday. The unit must tame its bloated risk-weighted assets by $35 billion this year, for capital reasons.
It seems clear that Gottstein gave the unit permission to hit the gas early this year. The bet backfired, and Credit Suisse went cap in hand to shareholders, for the fourth time in nine years. To now plan bonuses for the risk-friendly investment bankers seems reckless, at best.
Back Out The Door
Credit Suisse paid out 1 billion francs in bonuses to its investment bankers last year. Even if it lowers the pool this year, nearly half of the almost $2 billion it is taking in during the cash call to keep its business going would go right back out the door as variable compensation.
