Credit Suisse board members float equity idea for dealmakers

CREDIT Suisse Group board members floated the idea of giving senior dealmakers an ownership stake in their unit, a move aimed at retaining talent while keeping a lid on costs.

The option was mentioned to the firm’s most senior investment bankers during a global townhall on Thursday (Sep 8) by Michael Klein and Blythe Masters, people with knowledge of the discussions said. That led some to conclude the firm is considering a spinout of the advisory and underwriting unit, the people said.

The directors didn’t provide details of how the idea would potentially work, and it’s unclear how seriously it’s being considered as Credit Suisse works towards a broader project of restructuring the loss-making investment bank. A spokesman declined to comment, reiterating the bank’s previous statements that it will update investors on its strategy alongside third quarter earnings on Oct 27.

Credit Suisse is in the throes of deciding on the future of its investment bank after promising investors that it would cut back the troubled unit and pivot to a more advisory-focused model that consumes less capital. Board members have differed over the extent of cuts that should be enacted while still properly servicing wealth management clients, according to people with knowledge of the matter.

Giving bankers a direct stake in their unit could help keep talent after Credit Suisse lost more than 60 senior dealmakers over the past 2 years, despite handing out at least US$1.3 billion in retention packages and one-time awards to stem defections in the past 20 months. It would sacrifice a cut of future dealmaking profits and potentially leave top bankers with less incentive to help the other divisions.

Any such move would introduce additional complexity to Credit Suisse’s next shake-up, but the Swiss firm does have a history of creatively rewarding top staff. The bank has in the past paid bankers with a pool of illiquid assets from its balance sheet and in bonds that would get wiped out if its capital ratio fell too low.

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Credit Suisse’s board of directors met last week in Singapore to discuss the strategic review. The ad-hoc committee looking at the future of the investment bank is spearheaded by Klein and includes board members Masters, Mirko Bianchi and Richard Meddings. 

Credit Suisse is already looking for outside capital for the securitised products business, but executives want to avoid an outright sale of that business. Time is tight for the leadership of the Zurich-based bank, with chairman Axel Lehmann having pledged to roll out the second strategy reboot in a year next month. A previous attempt to revamp the bank under ex-chairman Antonio Horta-Osorio fell flat after more minor cuts to the investment bank failed to stem losses and repair confidence. 

Credit Suisse has been seeking a turnaround after the twin blow-ups of Archegos Capital Management and Greensill Capital in 2021 undermined confidence, weakened key businesses, and spurred an exodus of staff. The Zurich-based bank has changed its entire executive team and half of its board of directors in the past 18 months in an effort to move past the crises. BLOOMBERG