Credit Suisse announces exposure to Russia and executive pay cuts

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ZURICH — Credit Suisse executives saw their bonuses slashed by nearly two-thirds last year, according to its annual report on Thursday, as the bank also reported Russian credit exposure of 848 million Swiss francs ($915 million). dollars).

Bonuses for top executives fell 64% to 8.6 million francs as the bank canceled long-term incentives after a series of scandals. The Swiss lender also announced a new litigation provision on Thursday, which took its annual loss to 1.65 billion francs from 1.57 billion francs previously announced.

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The new litigation provisions of 78 million francs were to cover an agreement reached with the German utility Stadtwerke Munchen GmbH in March.

Chief executive Thomas Gottstein’s pay fell 43% to CHF 3.8 million in his first full year in the role.

“2021 has been a very disappointing and challenging year for Credit Suisse,” Gottstein and Chairman Axel Lehmann said in a letter to shareholders, customers and employees in the report.

“We have made a number of improvements throughout the year, and … are rebuilding a bank we can all be proud of, with a clear goal of delivering sustainable growth and value to our shareholders.”

The two leaders also warned that the world is sometimes changing in “alarming ways”, pointing to the “tragic consequences of Russia’s invasion of Ukraine”.

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Credit Suisse for the first time detailed its net credit exposure to Russia at year-end, which included high-net-worth lending as well as exposure to trade finance and investment banking – positions that , according to him, have since been reduced.

It said it has minimal exposure in terms of loans and credits granted to sanctioned individuals in its wealth management division.

Credit Suisse’s 2021 was marked by the collapse of $10 billion in supply chain finance funds linked to insolvent UK financial firm Greensill and a $5.5 billion trading loss due to the implosion of the Archegos investment fund.

FOCUS ON ACCOUNTABILITY

“The compensation committee felt it was important to focus on holding leaders accountable. As a result, board members have seen a full year of variable compensation forfeited,” committee chair Kai S. Nargolwala said in a letter.

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“This equates to a compensation loss for the management of more than 40 million Swiss francs.”

Executive pay had already been slashed in 2020 as the bank faced a series of bad headlines, from a spy scandal to a $450 million writedown on a hedge fund investment.

Gottstein, previously head of Credit Suisse’s Swiss operations, became CEO in February 2020 after his predecessor’s abrupt departure following the spy scandal.

His salary has already been reduced to 6.5 million francs in 2020, against 8.53 million that the bank had offered before the Archegos and Greensill scandals.

In 2021, Switzerland’s second-largest bank replaced more than half of its executives as the various scandals sparked investigations and a strategic overhaul.

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Of the 12 members of its management board, only five were already senior executives at the start of last year, five having joined the bank since 2020 and two internal promotions.

The bank has also changed chairman twice since the start of 2021. Former chairman Antonio Horta-Osorio – brought in to lead a turnaround – left after just nine months following an internal investigation into his personal conduct.

Horta-Osorio received 3.5 million francs for the period until his departure in January, Credit Suisse said.

In an unusual move, he said the board had agreed to pay his CHF1.125 million chairmanship fee “entirely in cash, rather than group shares”.

Credit Suisse had already reported a 32% drop in its organization-wide bonus pool in February, when it announced a loss for the fourth quarter and the full year.

Its overall variable pay pool fell to 2 billion Swiss francs in 2021, as the bank cut regular deferred bonuses but sweetened pay for senior bankers with increased upfront cash and a one-off bonus. ($1 = 0.9267 Swiss francs)

(Reporting by Brenna Hughes Neghaiwi Editing by Michael Shields and David Goodman)