Credit Suisse’s top executives will share a SFr350mn ($380mn) bonus pool if they pull off a radical restructuring designed to restore the fortunes of the scandal-hit bank, according to people familiar with the matter.
The board of the Swiss lender has devised the bonus plan for the top 1 per cent of staff, equivalent to around 500 senior managers, in a bid to sustain morale during a bruising period for the bank as it embarks on a sweeping overhaul.
The board is preparing to put forward a special “transformational award” as part of the pay report to be voted on at the bank’s annual meeting on April 4, the people said. It has contacted shareholders ahead of the meeting to ask if they will support the award, they added.
However, top executives at the bank are expected to miss out on a bonus this year after what chair Axel Lehmann described as a “horrifying” 2022.
Credit Suisse is due to report its second consecutive annual loss on Thursday, with the final quarter of last year overshadowed by a damaging exodus of clients following a spate of rumours over the bank’s financial health. Analysts estimate total losses for the year will hit SFr7.2bn.
Under its restructuring plan, Credit Suisse is axing 9,000 of its 52,000-strong workforce, spinning off its investment bank in a move that will also revive the First Boston name as well as beefing up its wealth management business.
According to people familiar with the matter, the long-term incentive bonus would be tied to the bank’s return on tangible equity and its spending, two metrics at the heart of the restructuring first announced three months ago.
Managers would be incentivised to achieve a group return on tangible equity of 6 per cent by 2025. Under the plan, bonuses would be awarded on a sliding scale if ROE hits between 5 per cent and 7.5 per cent.
Executives would also need to achieve a spending target that keeps the bank’s cost base below SFr14.5bn, with minimum and maximum payouts set at SFr14bn and SFr15bn, the people added.
Credit Suisse declined to comment on the proposed bonus plan.
The restructuring plan aims to reduce the group’s cost base by 15 per cent, or SFr2.5bn, to SFr14.5bn by 2025. A large part of the savings will come from shrinking the bank’s workforce.
As Credit Suisse has tried to both restore profits and retain key staff, the bank has taken a creative approach to rewarding staff.
Last year it offered an “upfront cash award” to directors and managing directors earning more than $250,000, meaning a larger proportion of their annual bonus was paid immediately in cash than previously.
Credit Suisse has begun offering the same deal to senior staff this year. Yet the small print stipulated that bankers would have to give up some of their cash bonus if they left within three years. The stipulation has already sparked the threat of lawsuits from departed employees wishing to keep hold of their awards.