Credit Suisse bonuses: The cash, the stock, the retention payments
Credit Suisse’s annual report is out today – which means its compensation report, too.
As expected (and as its full year results revealed a few months ago), Credit Suisse paid out a lot less than in previous years, with the bonus pool down 50%. More people received zeroes: only 75% of all Credit Suisse staff received bonuses for 2022, down from 88% the previous year. Only 1,155 material risk takers and controllers (senior staff) received bonuses, down from 1,432 in 2021; 400 MRTCs received no bonuses at all for last year.
But there was good news too: “retention” awards for senior bankers were up. If Credit Suisse likes you, it wants you to stay.
Credit Suisse bonuses – at a glance
Overall, Credit Suisse has barely cut spending on pay.
As the chart above shows, total spending on compensation was largely flat on 2021. However, total bonus spending (“variable compensation”) was down dramatically and fell 50%. The bonus pool for Credit Suisse's Material Risk Takers and Controllers (MRTCs), essentially the bank's managing directors and top traders and controllers, was down 41%.
If Credit Suisse bonuses fell so dramatically, why did compensation spending remain constant? Well, mostly due to two things – an increase in spending on fixed compensation (salaries) and on “other” variable incentives, driven by retention awards to staff the bank wants to keep.
Credit Suisse bonuses - the cash
Credit Suisse is paying a higher proportion of its bonuses in cash. 70% of 2022 bonuses were cash awards, compared to 46% last year. As we noted yesterday, this is a good thing: Credit Suisse's stock price isn't exactly healthy.
Nearly 68% of Credit Suisse's cash bonus awards this year were deferred, possibly reflecting the payment of cash bonuses deferred in three tranches to associates and VPs.
As we've reported elsewhere, Credit Suisse's cash bonuses for staff earning over $250k are subject to a clawback, plus income tax if staff leave within three years. The entire bonus is clawed back if the recipient leaves within 12 months, 50% if they leave within 24, and 25% if they leave within 36 months.
Credit Suisse bonuses – the shares
Although cash bonuses at Credit Suisse increased last year, the bank still paid stock bonuses too. As the chart above shows, it issued far more shares to pay staff last year than in 2020 and 2021. However, because the fair value of each share awarded has plummeted, the value of these awards was barely higher than in 2021.
Credit Suisse stopped paying performance share and contingent capital awards in 2022.
Credit Suisse bonuses – the “transformation” and “retention” awards
Credit Suisse is also being generous with retention bonuses, which come in various forms.
The Swiss bank wants to pay some special, one-off “transformation awards” for 500 employees with “senior leadership positions”. It intends to ask its shareholders for CHF30.1m for these awards at its 2023 Annual General Meeting, with a maximum award of CHF70m “if all performance conditions are met.” Credit Suisse wants to pay half these awards with cash and half with shares.
However, Credit Suisse has also spent CHF497m on “Strategic Delivery Plan” awards, which are going to “most” directors and managing directors to keep them long term. And it's spent a further CHF367m in retention pay to “key talent and senior management… mostly to employees in the Investment Bank division.”
The retention bonuses are worth an average of CHF321k per head for last year. The transformation award is worth another CHF60k.
Credit Suisse bonuses and salaries per head
What happened to average pay per head at Credit Suisse last year? The chart above shows that average total compensation (salary plus bonus) for both MRTCs and average employees barely changed. For MRTCs, who are mostly managing directors and directors in the investment bank, the fall in the standard bonus pool was massaged by an increase in "other" compensation thanks to the bank's generous retention packages. Credit Suisse is still looking after top staff (and it's looking after Michael Klein most of all).
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