Credit Suisse’s investment bankers and traders have a name for Tidjane Thiam: “The celebrity.” The French-educated ex-government minister who cut his teeth at the Prudential is seen as a bombastic big name with a matching pay package. But Thiam’s package is now under fire and it might be time the bank re-based compensation for its managing directors too.
“When I joined Credit Suisse, I was astonished,” says one recently ex-equities managing director (MD) in London who left after over a decade. “I came from one of the top U.S. banks and the MDs at Credit Suisse were being paid twice as much. People at the bank I was coming from were far bigger producers – Credit Suisse seemed happy to pay for mediocrity.”
It’s an accusation that seems pertinent in light of shareholders’ current uproar over the Swiss bank’s executive pay. The bank faces a shareholder revolt at Friday’s annual shareholder meeting after attempting to award its executive board members CHF78m ($78m) in bonuses despite a CHF2.7bn loss following a settlement relating to earlier the sale of toxic mortgage securities in the U.S.. Executive bonuses were subsequently cut by 40%, but the outrage has lingered.
Shareholders might want to disperse their indignation wider than just Credit Suisse’s executives, however. Last year, costs ate up 99.2% of revenues in Credit Suisse’s global markets business, but the bank still paid each of its 939 material risk takers an average of CHF1.5m ($1.5m) – down only slightly from the CHF1.56m it paid them a year before (when costs were 128% of revenues). This was less than the CHF1.7m paid to risk takers at UBS, but at the same time, 148 key risk taking staff were each given additional bonuses of CHF1.5k to stop them leaving. – Not bad when the global markets business only scraped a profit of CHF48m for 2016.
“In the past few years, Credit Suisse had a system where the people who produced and were close to management were well looked after,” says one equities headhunter, speaking on condition of anonymity. “You needed to be part of that inner circle and then you got top dollar on the street.”
In equities at least, 2017 could be the year that this all changes. Late last year the Swiss bank let go of Andrea Negri, its co-head of equity sales and head of equity derivatives sales in Europe. Negri’s exit has left many of his highly paid team in London without their champion. This June, Mike Stewart is due to join from UBS as head of equities, based in New York. Even before he joins, Stewart has been followed by a swathe of other UBS lieutenants, including Benoit Rauly and Giuliano Cislaghi. Matt Mallgrave, a former Goldman partner who only joined as head of U.S. equity flow trading in June 2016 has left for J.P. Morgan. Things are changing and Credit Suisse’s established equities MDs are under threat.
“Credit Suisse has been a closed shop of managers,” says the departed MD. “It’s more like an HSBC than a Morgan Stanley. It’s very First Boston – very second tier. No one good ever joined First Boston out of university, but because they had a Swiss bank behind them which didn’t really understand how an investment bank worked, they all rose to the top and got paid a lot more than they ought to have.”
This might be sour grapes. However, Credit Suisse’s senior salespeople and traders are unquestionably under pressure to prove they deserve the $1.5m sweeteners they’ve been given to stick around. Last year, Credit Suisse’s fixed income and equities traders under-performed their rivals. Brian Chin, a personable “securitization guy” was appointed to run global markets in September last year, but he’s got a difficult job given the bank’s lack of exposure to the macro business, which is expected to pick up in the second half. More promisingly, the bank could have benefited from its strengths in securitization and credit when it reports Q1 results tomorrow.
“Credit Suisse has been run by a team of yes-men and consultants for a while,” says the disaffected ex-MD. “You have some brilliant people there – like Tim Carswell and Nas Al-khudairi, but you also have a lot of senior people who are just collecting their money.” He adds that the real strength in Credit Suisse’s equities business lies in the middle ranks: “The bank really needs some good management. Hopefully Mike Stewart can bring that.”