If you want to get paid working for a European investment bank, you may want to think of working for Credit Suisse and avoiding Deutsche Bank. This is the message from the Swiss bank's 2013 compensation report, which is out today.
Yes, Credit Suisse is cutting staff in its investment bank. Yes, its costs are high. Yes, its fixed income business seems a little over-exposed to emerging markets. But Credit Suisse pays well, and it pays cash, and it won't try and claw back the bonuses it paid you unless things go badly, badly wrong.
This is what you need to know.
Credit Suisse pays its risk-taking types an average of CHF2.7m ($3m). This is a lot more than European rivals. UBS pays its risk takers $2.2m. Deutsche pays the average 'regulated employee' (ie. risk taker) in its corporate and investment bank $1.4m. Credit Suisse looks generous indeed.
Up to CHF250k ($281k), Credit Suisse will happily pay the entirety of its bonuses in cash. Beyond CHF250k, Credit Suisse's bonuses are deferred on a graduated basis.
Credit Suisse's CHF250k cap on all-cash bonuses looks very generous compared to Deutsche Bank, which caps all-cash bonuses at just €100k ($138k). It doesn't look quite so generous compared to UBS, which now pays all-cash bonuses up to CHF300k after increasing its ceiling by CHF50k in 2013.
Credit Suisse is also generous with its cash bonus payments overall.
While Deutsche will never ever pay an individual banker more than $412k in cash bonuses each year, Credit Suisse is capping its cash bonuses at $2.25m.
Deutsche Bank has some punitive bonus deferrals. The German bank is deferring 85% of the compensation for its 133 most senior investment bankers for five entire years, with none of that pay available until 2019.
At Credit Suisse, managing directors receive 30% of their deferred pay in share awards which vest over three years. They receive another 50% in performance share awards which vest over three years but are subject to a tame claw back provision (see point 6). And they receive another 20% in the form of contingent capital awards which vest entirely in year three (unless the group's tier one equity capital ratio falls below 7%, in which case they won't vest at all).
For the moment, Credit Suisse appears to have ditched the whole 'toxic debt bonuses' and 'partner asset facility' (PAF) payments it inflicted upon senior staff in previous years. These structures could be lucrative, but they also tied people in for periods of at least four years and they could be seized back in full if bankers left Credit Suisse within 36 months of receiving them.
Back in February, Bloomberg reported that Credit Suisse was having a regulatory few issues with its PAF awards. Today's remuneration report suggests the Swiss bank has dropped them altogether.
Once again, Credit Suisse compares favourably to Deutsche.
Deutsche Bank's claw back provisions are harsh. If the bank as a whole makes a loss, or the division you work in makes a loss - however small, Deutsche will claw back the entirety of any deferred bonuses that are due to vest in that year.
Credit Suisse is far more lenient. Yes, it will claw back the whole small portion of the bonuses it's paid in contingent capital if its core equity ratio falls below 100%, but Credit Suisse will only claw back the entirety of the performance share awards which make up the bulk of its deferred bonuses if things get very bad indeed. See the chart below.
In 2013, Credit Suisse paid sign-on bonuses averaging CHF217k to 83 people. In 2012, it paid less but hired more: 159 people got an average sign-on of CHF63k each.
In 2013, Credit Suisse paid severance payments averaging CHF114k to 2,141 people. This was a lot more generous than in 2012, when Credit Suisse paid severance payments averaging CHF70k to 3,065 people.
This sounds good - except that Credit Suisse paid bonuses to 41,723 people in total, implying there's an 83% chance that if you work at Credit Suisse and receive a bonus, it will be less than CHF250k.
The European Union has capped bonuses for material risk takers at two times (or maybe 2.5 times) fixed pay. Last year, Credit Suisse paid its risk takers bonuses around 4.5 times higher than their fixed compensation. Changes need to be made before Credit Suisse pays its bonuses for 2014....
