Zurich: Board members of Credit Suisse are taking a 25 percent pay cut and bonuses for top staff are being slashed after a hefty fine from U.S. authorities, the bank said as it also set out a range of measures to tackle the surge in the Swiss franc.
Shares in the Zurich-based lender surged more than 9 percent but remained well below their level before the Swiss National Bank (SNB) abandoned its peg against the euro on Jan. 15.
The SNB move has caused a headache for Swiss banks and exporters with the bulk of their spending in francs.
Like crosstown rival UBS, Credit Suisse said it will seek to move more jobs to lower-cost locations in order to avoid paying staff in Swiss francs. It said it did not yet have specifics in terms of the number of jobs affected.
The bank said it will implement incremental cost savings of 200 million francs (USD 215 million) by the end of 2017.
It also said it would cut its overall bonus pool by 9 percent in 2014, after agreeing to pay more than USD 2.5 billion in penalties for helping Americans evade taxes.
Underscoring the significance of the response, it said its board of directors will take a voluntary 25 percent pay cut and its executive board agreed to cut their bonuses by 20 percent.
"Despite the fact that I think people did a good job, they worked hard, it was a difficult issue to work through, the executive board and the board thought that, voluntarily, we should reduce our compensation to just reflect the impact of the settlement`s cost on the firm`s financials for 2014," Chief Executive Brady Dougan said at a news conference.
Credit Suisse last May became the largest bank in decades to plead guilty to a U.S. criminal charge, resolving its long-running dispute with the United States over the probe and marking a rare criminal indictment for a major financial institution.
Public anger over executive pay in Switzerland manifested itself in a 2013 referendum when voters gave shareholders a binding say on executive pay.
ADVERSE IMPACT
Credit Suisse has been a lightning rod for criticism over compensation since its decision to pay CEO Dougan nearly 90 million francs in 2010, when a five-year share bonus programme topped up his regular salary.
The bank also set out measures responding to the currency volatility. "Based on 2014 earnings, we estimate the net adverse impact on our profit to be approximately 3 percent and expect to more than offset this impact through the announced measures by end-2017," Dougan said in a statement.
Credit Suisse also said it would bring down the size of its balance sheet, banker jargon for lending less or making disposals, by between 50 billion francs and 70 billion, more than previously stated, in order to achieve its end-2015 leverage ratio target of approximately 4.5 percent.
It will trim a unit devoted to winding down non-strategic assets and will add to cost cuts last year in the bank`s Macro Products Group within its fixed-income unit. A stronger franc will also lower the size of dollar-denominated assets on its balance sheet.
Analysts saw the bank as being proactive, with the Swiss government expected to respond soon to recommendations last year from an expert panel calling for higher bank leverage ratios.
"This is positive, it also shows management trying to get ahead of the debate on their balance sheet," Morgan Stanley analysts wrote in a note to investors.
The bank`s net profit of 921 million francs beat views, benefiting from the sale of prime real estate in Zurich to Swatch and a 324 million franc accounting gain on the value of Credit Suisse`s own debt.
It left its dividend unchanged and offered shareholders the option of receiving a payout in the form of new shares.
Credit Suisse attracted net outflows in the quarter of 3 billion francs in private banking and wealth management. Wealth management brought in 4.4 billion in net new assets.
