Competitors lure CS bankers with signing bonuses

class=”sc-3778e872-0 cKDKQr”>

Next up, please: William Mansfield, head of Credit Suisse’s European M&A division, is moving to Deutsche Bank, the “Financial News” portal reports. The top banker had been at CS’ service for 27 years. This brain drain is a big problem for UBS looking to take over CS. Because such departures make CS less valuable every day. But UBS boss Sergio Ermotti’s hands are tied.

Because the takeover is not yet complete. Officially, Credit Suisse is an independent bank until the so-called closing of the deal. And Ermotti & Co. has nothing to say yet, with contacts between the two banks limited to big questions about the deal.

This transitional stage is a boon for competition. “The merger gives us the opportunity to hire new people,” says Allan Bertie, head of European investment banking at US bank Raymond James.

Bonus discounts for 1000 CS bankers

Bonus cuts in CS mandated by the federal government fell into his hands. “The deferred compensation ban will likely drive more bankers away from CS in frustration,” says Bertie, “and deferred compensation has always been seen as the ‘glue’ to keep people and make them expensive.”

On April 5, Karin Keller-Sutter’s Federal Finance Department (FDF) canceled or reduced deferred bonus shares for members of the top three management levels in Credit Suisse. Nearly a thousand CS workers worldwide were affected. According to the federal government, the volume of these deductions is CHF 50 to 60 million, plus the proportional variable fee payable for the current year.

The cut is a “political signal,” as the finance department wrote. The federal government apparently wanted to counter public anger that state aid for forced marriages was about billions of dollars.

“Increasing immigration pressure”

But those in charge in Bern suspect that everything could backfire. “This can further increase the pressure for high performers to leave, contributing to undesirable operational instability,” says FDF.

A senior executive at a US investment bank confirmed that one way to tackle CS seniors is to offer CSer’s bonus shares, which are cut by the federal government when they transition. However, you do not have to fully guarantee these bonus shares, it always depends on what options the person concerned has. Simply put: the more a talent is sought after, the higher the percentage of government deduction bonus package it will receive if there is a change.

Investment banker Bertie says the same thing: “I don’t think many banks will compensate bankers for lost compensation payments, but the signing of bonuses and more gradual compensation structures will persuade bankers to make the switch.”

Khan takes the best people to court

According to financial circles, CS is currently working on a list of top bankers they definitely want to hire. However, CS himself is not allowed to pay any retainer bonuses, or he will get into trouble with the federal government.

What about UBS? According to a report by the Bloomberg agency, the head of wealth management, Iqbal Khan, is already traveling the world trying to persuade the best CSs to stay. He joined CS in Hong Kong at the invitation of his CS colleague Francesco De Ferrari – officially still a competitor, CS was only allowed to interfere with this trick.

During these appearances, Khan is said to have advertised that CSs will be given “incentives” and some sort of retention bonus if they stay on board. UBS officials claim that rival banks will eventually resort to similar methods to impress the best people in CS. It would therefore be absurd to allow the new CS holder UBS to offer worse conditions than rival banks, thereby placing them at a disadvantage.

Does UBS pay a retention premium?

According to the federal government, UBS is actually allowed to offer retention bonuses or loyalty bonuses. “If the bank is no longer able to offer a competition-compliant fee system, this risks posing a significant risk to operational stability and ultimately to UBS’s entire business, which must be avoided,” the FDF says.

Because the federal government’s only requirement in terms of bonuses in UBS concerns CS takeovers who are engaged in the processing of the CS investment bank’s troubled portfolio.

The federal government is willing to bear the 9 billion loss from this portfolio after UBS takes over the first 5 billion francs. According to federal guidelines, CSers concerned should receive a bonus from UBS only if the portfolio is successfully liquidated without having to use the federal government’s 9 billion.

UBS does not want to comment on retention bonuses.

Source :Blick