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Credit Suisse to Cut Investment Banker Bonuses, Move Capital

Patrick Winters
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Credit Suisse to Cut Investment Banker Bonuses, Move Capital

(Bloomberg) -- Credit Suisse Group AG expects to cut bonuses at its investment banking & capital markets division and reallocate capital to higher growth areas after a slowdown in deal-making, according to people with knowledge of the matter.

The reductions are likely to happen even if fourth-quarter revenues rebound, the people said, asking not to be identified as the matter is private. Several quarters of lackluster M&A activity, shelved IPOs and weaker leveraged finance -- one of the Swiss bank’s traditional strengths -- may cause the unit to post its lowest result in years.

Chief Executive Officer Tidjane Thiam recently called the division’s third-quarter performance “unsatisfactory.” The bank lost out this year as a string of deals collapsed or didn’t get off the ground, including the planned initial public offering of Swiss Re AG’s U.K.-based Reassure unit and Chevron Corp.’s abandoned bid for Anadarko Petroleum Corp. Still, Credit Suisse retains a top 10 spot for M&A and is a global coordinator on Saudi Aramco’s IPO.

Bonuses across Wall Street are poised to drop in 2019, according to a report Tuesday by compensation consultant Johnson Associates Inc. Those working at hedge funds and in private equity and investment banking advisory are likely to do better, with their bonuses potentially climbing 5%, according to the report.

Compensation Drops

Credit Suisse paid out 3.2 billion francs ($3.2 billion) in bonuses last year in total. Compensation and benefits for the first nine months were $75 million lower at the division compared to a year ago, according to the bank’s most recent quarterly report.

The stock traded 1.3% higher at 12.88 francs as of 4:34 p.m. in Zurich, after earlier gaining as much as 1.7%.

Credit Suisse said it is implementing a number of M&A plans to boost revenues over the next years, while Thiam also said last month that the bank is building out teams in tech and healthcare as these are the fastest-growing sectors with bigger fee pools. Still, the bank expects to shift capital from the IBCM unit to areas including wealth management, according to the people.

The head of the IBCM unit, Jim Amine, stepped down earlier this month, taking the role as head of private credit opportunities based in New York. The bank appointed David Miller, a 22-year Credit Suisse veteran, to succeed Amine and join the executive board.

Top 10 Ranking

Amine had led investment banking and capital markets for more than a decade, a period during which Credit Suisse kept its top 10 position in U.S. M&A league tables, while rivals UBS Group AG and Deutsche Bank AG dropped.

He oversaw healthy profits in each of the last three years as stock markets and dealmaking boomed and risk weighted assets - an indicator of the funds deployed for transactions - grew by more than a third, peaking at the end of June. But in the three months through October these assets declined slightly, according to the bank’s quarterly report. The international wealth management unit used about $1 billion more.

Miller was most recently global head of credit and part of the leadership team at global markets, the bank’s main trading unit. Eric Varvel, who is based in New York and heads Credit Suisse’s asset management business, was appointed chairman of the investment banking and capital markets unit.

Slumping revenue at the division has become a growing issue for Thiam in recent quarters, while global markets trading -- a long-term straggler -- has made surprise profit gains.

(Adds detail on risk weighted assets in 10th paragraph.)

--With assistance from Sonali Basak.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Marion Dakers

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