Credit Suisse Might Lower Bonuses at Investment Banking Unit

Zacks Equity Research

Credit Suisse Group CS is mulling to cut bonuses at its investment banking and capital markets units as slowdown in deal making has been affecting their performance. The news was reported by Bloomberg.

Also, the company is likely to reallocate capital to areas where it finds scope of growth, such as wealth management. Per the article, improvement in fourth-quarter performance of segments will not be enough to make Credit Suisse revert its decision.

Credit Suisse’s investment banking & capital markets division provides advisory services related to mergers and acquisitions, divestitures, takeover defense mandates, business restructurings and spin-offs. The division also engages in debt and equity underwriting of public securities offerings and private placements. In the nine months ended Sep 30, 2019, revenues from this segment declined 27% on a year-over-year basis.

Management attributed the downfall in its advisory and underwriting businesses to volatility and macroeconomic uncertainty prevailing on a global level due to U.S.-China trade war tensions, Brexit and slowdown in global economy.

Per the article, the Swiss bank is making efforts to bag more M&A deals, and is also strengthening tech and healthcare teams as these seem to be attractive areas for investment and revenue generation.

Credit Suisse has long been restructuring in order to improve its prospects. Spending hundreds of millions of Swiss francs, the bank plans to transition the retail and commercial clients to a newly-formed "direct banking" unit.

Having sorted most of the legal issues, Credit Suisse might now be on the comeback trail with renewed focus on tapping profitable investment opportunities. Controlled expenses and stronger capital position are likely to support the company in undertaking growth measures.

The stock has gained around 20% year to date on the NYSE compared with the industry’s growth of 4.8%.

Currently, Credit Suisse carries a Zacks Rank #4 (Sell).

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