10 things you should know about that 'big' Credit Suisse bonus pool
You've probably heard that the Credit Suisse bonus pool was up 6% for 2016. If you don't work for Credit Suisse, you probably think that was pretty generous (given the Swiss bank made a CHF2.7bn loss last year). If you do work for Credit Suisse, you're probably sceptical. The Credit Suisse bonus story is not that clear cut.
1. Credit Suisse bonuses were only increased for 2016 because they were down so much the previous year
Yes, Credit Suisse's overall bonus pool was up 6% for 2016, but if you work in Credit Suisse's investment bank you'll remember that the bonus pool for 2015 was cut by more than 30%. Worse, in 2015 31% of employees in the investment bank had their bonuses cut by more than 50%.
Over the course of last year, this caused big problems. Dissatisfied people in the investment bank started leaving. The (minimal) increase in the latest bonus pool was simply an attempt to put things right.
2. Average bonuses awarded for work done in 2016 were up slightly. But the amount the average member of Credit Suisse staff actually received last year was down a lot
The real bonus story at Credit Suisse is reflected in the charts below.
Bonuses awarded to Credit Suisse employees on a per head basis were up around 6.4% for last year. However, these bonuses were only issued in the first quarter of 2017 and are not all immediately available - a large proportion are deferred over three years.
The second chart reflects the reality of the amount Credit Suisse spent on bonuses that were expensed and received for 2016. On a per head basis these were down nearly 30%. This reflects the huge reduction in the value of deferred bonuses issued in 2015 and vesting in 2016. Because of this, the average Credit Suisse employee will have felt significantly poorer.
3. Credit Suisse therefore had to issue its most valued employees with special retention bonuses (this happened in both 2015 and 2016, but last year way more people received them)
As Credit Suisse employees felt the pinch in pay last year, the bank had to keep them happy.
It was forced to issue 148 of its key risk taking staff with retention bonuses worth CHF1.5m ($1.5m) each.
Even larger retention bonuses were issued to material risk takers (MRTs) in 2015, but in 2015 only 50 people received them.
4. Excluding those retention payments, most material risk takers at Credit Suisse did NOT get paid more last year. - Most saw their pay fall
Credit Suisse has 939 material risk takers in total. Excluding the 148 who received the retention bonuses, the average MRT experienced a 4% pay cut last year, as per the chart below.
5. Pay for material risk takers at Credit Suisse looks a lot higher than at Deutsche, but this is a definitional thing
With the average material risk taker at Credit Suisse earning CHF1.5m (€1.4m), Credit Suisse looks pretty generous compared to Deutsche Bank where the average MRT earned a mere €469k in global markets.
However, this is entirely down to the way the two banks define their MRTs. At Deutsche Bank anyone over VP is deemed a material risk taker, with the result that there are thousands of them. At Credit Suisse, material risk takers are defined much more narrowly as managing directors and people taking significant amounts of risk. By definition, this means that Credit Suisse's material risk takers are only its highest earners.
6. UBS pays its material risk takers more than Credit Suisse does
UBS's material risk takers earned an average of CHF1.7m last year, so Credit Suisse is less generous than its closest rival.
7. The stock bonuses Credit Suisse issued for 2016 are already down 4.5%
Credit Suisse issued its stock bonuses for 2016 on the basis of a share price of of CHF15.32 (the average of the 10 last trading days in February). The bank's share price currently stands at CHF14.62.
8. The good news is that Credit Suisse doesn't tie its stock bonuses into its (overly ambitious) returns targets
The good news is that Credit Suisse's deferred stock bonuses aren't contingent upon the bank meeting Tidjane Thiam's strangely ambitious return on equity targets of 10%-15% in global markets and 15% to 20% in the investment bank. This is in contrast to Deutsche, where employees' bonuses are reduced if John Cryan's targets aren't met, and UBS, where bonuses are reduced if the investment bank doesn't generate returns of at least 10%.
9. The other good news is that Credit Suisse pays an impressive proportion of its bonuses in cash - especially in the Americas
Because Credit Suisse defines a comparatively small proportion of its staff as material risk takers, it's less restricted by the regulations stipulating that bonuses for MRTs must be deferred.
Bonuses at Credit Suisse are paid entirely in cash until your total compensation (salary included) hits CHF250k. This is less generous than at UBS, where the cash threshold is CHF300k. Once you earn more than CHF250k, however, Credit Suisse's deferrals look comparatively tame - especially in the Americas where they start at 17.5% and rise to 60%. Elsewhere they start at 17.5% and rise to 85%.
By comparison, the deferral rate at UBS starts at 48% of bonuses. And at Deutsche the deferral rate maxes out at 100% for employees with bonuses over €500k - no matter where in the world they work.
10. And there are people at Credit Suisse earning CHF2m ($2m) in cash
Lastly, Credit Suisse caps its total cash compensation at CHF2m. This is a lot more than UBS's cap of CHF1m and is likely to have been a lot more than Deutsche, where the number of millionaires fell significantly last year.