Credit Suisse's early bonus payments are a strange sign of desperation
Weird: Credit Suisse managing directors are to receive a cash award on the 1st of September to compensate for last year's 30% cut in their bonuses thanks to the UK bonus tax.
This is odd because:
- Banks are not usually given to making mass retention payments unless they're in the throes of a merger or moment of upheaval.
- Credit Suisse doesn't look like it can afford it. Its compensation ratio is already 50% and it increased headcount 10% year on year in the first half, only to see a 25% fall in revenues.
The fact that CS has been moved to make mid-year bonus payments therefore suggests a degree of disgruntlement at the bank which had previously gone unnoticed.
This may be related to the bank's plan to cut 75 UK front office staff, along with alleged reductions in commodities. It may also be related to the fact that 2009's toxic bonuses are now said to be losing money.
The MDs most in need of retention payments will be those who've joined in the last five years and didn't benefit from this year's generous 'Performance Incentive Payments' (of up to 20m) under a scheme introduced in 2005.
Nevertheless, Credit Suisse doesn't appear to have lost many staff in recent months, and in June it emerged that top M&A staff at the bank have been there for 20 years; they look unlikely to quit because of a reduction in payments last year.
The real retention risk may be in equities. Will Credit Suisse as a whole performed badly in the last quarter, its equities business did exceptionally well. Maybe Dougan fears he hasn't treated them nicely enough of late.
