If you’re a fixed income trader at Credit Suisse in Asia, you’re probably not feeling too confident about your 2018 bonus.
The bank cut markets compensation by 27% year on year in Asia in the fourth quarter, reflecting “lower discretionary compensation expenses”, according to its Q4 results, which were released today. Who might be feeling the brunt of these cuts? Credit Suisse doesn’t say – but fixed income traders seem likely to be toward the top of the list.
Credit Suisse’s APAC Markets unit (which includes equities and fixed income trading, but not IBD) endured a torrid time in late 2018. Fixed income sales and trading revenues for the region fell 95% in Q4 compared with Q3, and slumped 91% year on year. The latter was “mainly driven by lower revenues from developed market rates, foreign exchange and credit products, reflecting the unfavourable trading environment”. Last year, it was reported that the bank made a $92m trading loss in the fourth quarter (today confirmed at $85m), which may have been focused in Asia. In December, Helman Sitohang, Credit Suisse's Asia chief said client activity had been the worst in 10 years.
Equity traders at the bank fared better in comparison but still had a poor Q4: equity sales and trading revenues decreased 28%. Both sets of traders will be ruing their bad end to the year – had it not been for the fourth quarter slump, their figures would have looked substantially better. Despite the events of Q4, full-year revenues in both products were ‘only’ down 7%.
Speaking today, David Mathers, Credit Suisse’s chief financial officer, said the Asia Markets team had faced a “significantly” more difficult environment in the second half of last year, but had still delivered an overall profit.
What of Credit Suisse’s Asian investment bankers? They work in a team called Advisory, Underwriting and Financing (AU&F), which is part of Wealth Management and Connected (WM&C), the larger of Credit Suisse’s two APAC units (Markets is the other). Similar trends were at play here. Although full-year 2018 revenues were ‘only’ down 5% in AU&F, they fell 37% in the fourth quarter, mainly because of “lower financing revenues and lower equity underwriting revenues”.
Credit Suisse is not the only European bank in Asia whose bonus pool might be affected by its Q4 performance. UBS has reportedly trimmed its 2018 Asian pool by about 8% because of a decline in equity offerings in the fourth quarter that reduced fees, reports Bloomberg. Natixis has attributed the halving of its fourth quarter profits on Asian derivatives trades that went sour during difficult trading conditions.
Meanwhile, in private banking, which is part of WM&C and is Credit Suisse’s largest APAC business, the hiring of relationship managers has ground to a halt. The bank’s regional RM workforce stood at 580 in Q4 – down by 20 compared with Q3 and by 10 year on year. Private banks often cut underperformers in the fourth quarter. Credit Suisse’s main rival in Asian private banking, UBS, added 101 private bankers year on year in Q4, taking its headcount to 1,138.
Credit Suisse is managing more money with fewer bankers, however. Despite the tough market in Q4, the private bank’s Asian assets under management stood at CHF 201.7bn at the end of 2018 – CHF 4.9bn higher compared with the end of 2017.
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