In Hong Kong, one of the Swiss bank’s profit centers for years, its worker bees are not happy. Job cuts began in the summer, with some client-facing roles within the Greater China investment banking business slashed. Meanwhile, at its crown-jewel wealth management division, which services Asia’s high-net-worth individuals, Credit Suisse is struggling to halt the departure of its top bankers.
One can’t blame private bankers for abandoning ship. Amidst all the turmoil, this year’s bonus pool is likely to shrink further. Unlike some US peers where private bankers are paid a percentage of the revenue they generate, Credit Suisse’s bonus payments are discretionary. A bonus pool is determined at the global level, and cascades down to regional offices, team leaders, and client-facing relationship managers.
As a result, private bankers’ payout ratios can vary from person to person and year to year. Some may not get to eat what they killed at all. Throw in that some of the bonus is paid out in Credit Suisse shares — which have lost half of their value this year — and bankers may not even wait for compensation season before heading for the exit.
Perhaps the talent exodus is a wake-up call for those in Zurich. Asia has been an important profit center for the Swiss bank. Between 2016 and 2020, the region contributed one-third of the profit growth in its wealth management division, and 48% cumulative growth in invested assets, according to HSBC Holdings Plc. Credit Suisse’s star region has no shine without its diligent bankers in Hong Kong.
Now Credit Suisse may point to the China slowdown and say that Asia is not the only game in town – North America, for instance, is churning out a lot of new wealth. That would be a flawed argument. New business opportunities emerge even as China pursues big business crackdowns. For instance, family offices in the mainland are now keen to open branches in Hong Kong and Singapore and diversify their wealth into assets abroad.
In addition, one may argue that Credit Suisse’s two big divisions in Asia — investment banking and wealth management — complement each other. Private clients from China get rich by taking their companies public; they are also avid investors in their personal wealth. Here in Asia, investment banking is as big a profit contributor as the wealth management business, according to HSBC. Why break something that is already self-sustaining?
A big problem with Credit Suisse is a misalignment between its risk appetite and bureaucratic company culture, former Hong Kong bankers grumble. They question why the US prime brokerage unit serviced Archegos Capital Management, thereby incurring $5.5 billion in losses, and why the bank’s asset management arm marketed Greensill Capital’s supply chain financing as among the safest investments it offered, thereby denting the bank’s reputation. Why should Hong Kong be dragged in to share the burden?
It is perhaps time Credit Suisse show their Hong Kong bankers some love.
More From Bloomberg Opinion:
• No, Credit Suisse Isn’t on the Brink: Paul J. Davies
• Hong Kong Bankers Might As Well Be Quiet Quitting Now: Shuli Ren
• Credit Suisse and the Hotel California Effect: Marc Rubinstein
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder.
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