Credit Suisse increased pay in its investment bank last quarter, but it’s nothing to get excited about
Credit Suisse’s second quarter results haven’t exactly been a well-kept secret. After the leak that its investment bank had done well during the period, there was the revelation that senior staff were being targeted for job cuts and last week it said that it was targeting an extra CHF1bn in cost-savings as well as raising extra capital.
Nonetheless, this morning its Q2 earnings were officially released, quietly on its website. As predicted, revenues in its investment bank increased to CHF2.9bn, from CHF2.8bn in 2010, largely as a result of 96% year-on-year rise in fixed income sales and trading revenues (after a torrid Q2 in 2011) and the strengthening of the US dollar against the Swiss franc compared to this time last year.
Headcount has been slashed more liberally; the investment bank employed 21,900 people at this point last year and now has 20,600 employees. However, 800 people have departed since the end of Q1, which suggests that redundancies have been sped up.
More interestingly, compensation appears to be holding up well year-on-year. The headline figure that pay has slid by 30% since Q1 is largely down to the fact that the bank paid out CHF418m in Partner Asset Facility 2 (its derivatives-based compensation scheme) expenses during the period.
Year-on-year, pay is broadly stable. On a per head basis, Credit Suisse has accumulated CHF171.5k in the first half of this year for its investment bank, compared to CHF177.5k in 2011. This quarter, it set aside CHF70.7k per employee, which is a 6% increase on the CHF66.8k per head during Q2 2011.
Despite this, Credit Suisse insists that it has decreased the amount of money it set aside for compensation and that the increase is again down to the appreciation of the US dollar on the Swiss franc.There's also the fact that it's been stripping out a lot of highly-paid executives within its investment bank. As there's no separate figure for redundancy costs, so it's likely that this could account for the increase in comp expenses.
Within fixed income trading, corporate lending, global rates, emerging markets and global credit products appear good places to be. Prime services also remains a strong part of the business, the bank said.
There are plenty of negatives, however. Equity underwriting fees have slid by 67% year-on-year, debt capital markets by 22% and M&A by 14%.
This doesn’t necessarily mean these divisions will be hit by any deeper cuts. As we mentioned, 10-15% of MDs are going, and 30% of directors were targeted within Credit Suisse’s M&A and capital markets divisions already.
What’s more, as we reported on our German site, the next round of cost-cutting will focus on operations and middle office staff.
