According to sources familiar with the matter, Credit Suisse’s top executives will be eligible for a SFr350mn ($380mn), bonus pool if the bank undergoes a radical restructuring.
In an effort to maintain morale during the difficult period of bank restructuring, the Swiss lender’s board has created a bonus plan for the top 1% of staff. This is equivalent to approximately 500 senior managers.
According to people, the board is planning to present a special “transformational” award as part of the annual pay report that will be voted upon at the bank’s annual meetings on April 4. They said that the board had contacted shareholders to find out if they would support the award.
However, the bank’s top executives will likely miss out on a bonus in this year’s bonus pool due to what Axel Lehmann, chair of the bank, described as a “horrifying 2022”.
Credit Suisse will report its second consecutive annual loss Thursday. The final quarter of the previous year was overshadowed last week by a devastating exodus of clients after rumours about the bank’s financial condition. Analysts predict that total losses will reach SFr7.2bn.
Credit Suisse will be laying off 9,000 employees from its 52,000 strong workforce. It will then spin off its investment bank and revive First Boston. This move will also help to boost its wealth management business.
People familiar with the matter say that the long-term incentive bonus would depend on the bank’s return to tangible equity and its spending. These are two metrics that were central to the restructuring announced three months ago.
Managers would be encouraged to achieve a collective return of 6 percent on tangible equity by 2025. The plan would allow bonuses to be given on a sliding scale for ROEs between 5 and 7.5%.
The bank’s cost base should be below SFr14.5bn. Executives must also set a spending goal that allows them to spend less than SFr15bn.
Credit Suisse declined comment to the proposal for a bonus plan.
The group’s cost base will be reduced by 15%, or SFr2.5bn to SFr14.5bn in 2025. The bank’s workforce will be reduced in large part to make savings.
Credit Suisse is trying to both restore profits as well as retain key staff members. The bank has adopted a creative approach when it comes to rewarding staff,it awarded a “upfront cash award” last year to directors and managing director who earned more than $250,000. This meant that a greater percentage of their annual bonus was immediately paid in cash.
Credit Suisse is offering the same deal to its senior staff this year. The small print stated that bankers would have their cash bonuses refunded if they leave within three years. This clause has already led to lawsuits by former employees who want to retain their awards.