CREDIT Suisse has cut back on bonuses dramatically, announcing at its full-year results yesterday that 2010 bonus payouts were down 25 per cent per employee compared to last year.
The bank also downgraded its all-important return on equity forecast – a key prediction of mid-term profitability – from 18 per cent to 15 per cent, citing strict Swiss capital requirements as a drag on earnings.
The bank’s overall compensation costs fell nine per cent per person, however, ahead of a six per cent fall in revenues to SwFr31.4bn (£20.1bn).
Chief executive Brady Dougan said that lower bonuses had been partly offset by bigger base salaries, while there was a five per cent increase in global headcount to 50,100.
Unlike many global investment banks, Credit Suisse does not link bonuses purely to revenues but uses a range of other metrics to generate bonus payments.
Overall, the bank’s results disappointed, with pre-tax profit down 21 per cent on 2009 to SwFr6.8bn.
Chief executive Brady Dougan said of banks: “The industry is facing a new environment with more capital requirements and new business conditions.”
The bank’s profitability was hit by stringent Swiss capital requirements that go beyond the Basel III regulations. It announced a core tier one capital ratio of 17.2 per cent, up from 16.3 per cent last year.
Credit Suisse also cut its full-year dividend by more than expected. It will fall to SwFr1.30 a share for 2010 from SwFr2.00 the prior year.
Like many of its rivals, its investment banking division was also hit hard by slow trading due to market uncertainty in the second half of last year.
Despite gaining market share, pre-tax profits at the investment banking arm plunged 48 per cent to SwFr3.5bn. The bank said it was hit hard by the strong Swiss franc, with many of its revenues in dollars and costs in francs.
Despite the drag from Swiss regulations, however, Dougan said that the rules had at least given them the ability to plan, saying: “We have emerged from the regulatory uncertainty that the rest of the industry is still experiencing.”