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New accounts for Credit Suisse's London business suggest the credit business is subsidizing the bank's equities expansion.

Credit Suisse's London credit traders deserved to be handsomely paid for 2017

If you work in Credit Suisse's global markets division, you probably want to work in credit trading or securitisation - both were some of the Swiss bank's strongest business areas in 2017, according to research firm Coalition. Moreover, results released this week for Credit Suisse International, the entity which mostly comprises the global markets and investment banking functions in London, suggests Credit Suisse's London credit trading business enjoyed a very significant increase in profitability last year.

As the charts below show, profits at Credit Suisse's London credit trading business rose by 144% last year compared to 2016. The profit margin in the business was a healthy 50% of revenues as result. By comparison, the bank's London equities and equity derivatives divisions continued to make a loss. In cash equities, where Credit Suisse has been investing heavily under new equities boss Mike Stewart,  the loss in London narrowed to a mere $6m last year. In equity derivatives and investor products, the loss for 2017 was still $76m. Credit Suisse's M&A bankers and capital markets professionals were profitable, but only just.

Alongside credit trading, Credit Suisse's other big money-spinners in London were the combined 'fixed income and wealth management products' division and 'global markets management'. In the former, profits fell 55%. In the latter, Credit Suisse made a profit of $116m after a loss of $10m one year previously.

It's unusual for banks to break out revenues and profits for individual business areas, even in the UK. Credit Suisse appears have done so in order to conform strictly to UK regulatory reporting requirements.

The results for Credit Suisse International reveal a significant increase in pay per head at the UK unit last year. Average compensation rose 34% to $506k (£357k). The increase can be attributed partly to a 45% reduction in the number of (lower paid) support staff employed by the entity, and partly to a 20% increase in Credit Suisse's share price last year, which helped inflate the value of last year's bonuses. The support staff didn't leave the bank: they just shifted to Credit Suisse Services AG, a new entity set up to comply with global Too-Big-To-Fail legislation.

While the average employee at Credit Suisse International earned $506k last year, the average member of the 12-person senior management team earned $1.2m (up from an average of $1m in 2016). The highest paid member of the London senior management team earned $1.8m (up from $1.4m).

The ongoing big loss in Credit Suisse's London equity derivatives business may rise eyebrows. Some of Credit Suisse's long-serving equity derivatives MDs left the bank after Stewart arrived (some have now reconvened in a hedge fund) and the bank has been busy hiring to replace them.

Things may be improving. Credit Suisse CEO Tidjane Thiam has said Credit Suisse is having a strong start to the year in equity derivatives. And in an interview with Bloomberg last week, Stewart said the business will continue hiring in equity derivatives and is now in "execution mode" and aspires to a top five position in equities overall. Credit Suisse's credit traders need to hope Stewart succeeds: today's results suggest they're subsidizing the equities business until he does.

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AUTHORSarah Butcher Global Editor

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