Credit Suisse bankers' Jefferies exits reflect concerns about pay

Bankers are leaving Credit Suisse and their chosen alternative employer seems to be...Jefferies. First, Alejandro Przygoda, the Swiss bank's global head of financial institutions group (FIG) went to Jefferies along with two directors and an MD. Now, Armando Rubio-Alvarez, the head of Credit Suisse's FIG business in Europe, is joining Jefferies too.

The CS bankers' choice of Jefferies is notable because if you're a banker looking for a new seat, Jefferies has something very particular to recommend it: it has a reputation for paying on more of an 'eat what you kill' basis than other banks. - If you move to Jefferies and you bring in good revenues, you should (theoretically) be rewarded accordingly.

This is diametrically opposed to the perceptions around pay at Credit Suisse this year. As Credit Suisse undergoes both internal and external reviews following its $5.4bn in losses relating to Archegos and its embroilment in Greensill Capital's collapse (which could see clients losing $3bn), the fear is that it will be in no position to pay its people in 2021, irrespective of how well they perform. It doesn't help that in the first quarter of 2021, losses in Credit Suisse's investment bank exceeded profits for the entirety of last year, or that compensation spending per head was down 17% year-on-year in the first quarter, or that high earners at CS already had their pay squeezed in 2020. 

As well as paying to reflect performance, Jefferies is also distinguished by its policy of paying all-cash bonuses with harsh clawbacks. - If you leave Jefferies within 12 months of being paid an all-cash bonus, you have to pay 100% of the gross amount back. If you leave within 25 months, you have to pay back 50% of the gross amount. And if you leave within 36 months, you have to return 25%. 

These clawbacks can be a turn-off to ever joining Jefferies in the first place, but Credit Suisse's ex-FIG bankers seem prepared to overlook this. It probably doesn't help that Credit Suisse itself imposed Jefferies'-style clawbacks on the cash portion of its investment bankers' bonuses in February 2020. With Credit Suisse shares languishing and cash bonuses at the Swiss bank susceptible to claw backs anyway, it might seem that there's only upside in moving to Jefferies, even if it does rank several slots below Credit Suisse in the league tables.

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