Back in the day, investment bankers had to decide: hand over a good 10-15 years of your life, working insane 110 hour weeks in the office, but get paid very well in exchange, with the typical Ibanking associate and VP making anywhere between $300K-$750K in the late 20s, early 30s. Those days are long gone, and while the crazy hours remain, the pay has come down considerably in recent years. And for bankers at the second largest Swiss bank, Credit Suisse, it’s about to come down again.
As Bloomberg reports, Credit Suisse expects to cut bonuses at its most lucrative (historically) investment banking and capital markets division and reallocate capital to higher growth areas after a continued slowdown in deal-making. According to “people familiar”, the pay cuts are expected to happen even if fourth-quarter revenues rebound, which they probably won’t. In fact, it is now expected that after several quarters of lackluster M&A activity, a drop in IPOs and weaker leveraged finance, the bank’s best paying unit is expected to post its lowest result in years.
Credit Suisse paid out $3.2 billion in bonuses last year in total. Compensation and benefits for the first nine months were $75 million lower at the division compared to a year ago, according to the bank’s most recent quarterly report.
The bonus bloodbath was first hinted at several weeks ago, when CEO Tidjane Thiam called the division’s third-quarter performance “unsatisfactory.” As Bloomberg adds, “the bank lost out this year as a string of deals collapsed or didn’t get off the ground, including the planned initial public offering of Swiss Re’s U.K.-based Reassure unit and Chevron Corp.’s abandoned bid for Anadarko Petroleum Corp. Still, Credit Suisse retains a top 10 spot for M&A and is a global coordinator on Saudi Aramco’s IPO.”
Another hint: the head of the bank’s Ibanking/capital markets division, Jim Amine, stepped down earlier this month, taking the role as head of private credit opportunities based in New York.
Credit Suisse is hardly alone as bonuses across Wall Street are poised to drop again in 2019, according to a report Tuesday by compensation consultant Johnson Associates. A long-term perspective is even uglier, with a recent Bloomberg analysis indicating that compensation per employee is down as much as 61% at Goldman Sachs when adjusted for nominal wage growth in the period. Second after Goldman’s precipitous drop – now that the bank is transforming into a retail bank with major credit card problems – was Credit Suisse Group at 46%. The group had an average reduction of 14%.
Those working at hedge funds and in private equity and investment banking advisory are likely to do better, with their bonuses potentially climbing 5%, according to the report.