It feels like a big mystery about Credit Suisse remained largely unnoticed.
OK, they took a 4.4bn hit from Archegos… but how did they manage to lose *only* 900m in Q1 and wrongfoot analysts who had all estimated much lower capital ratios?
OK, they took a 4.4bn hit from Archegos… but how did they manage to lose *only* 900m in Q1 and wrongfoot analysts who had all estimated much lower capital ratios?
To understand the magnitude of the mystery: the Q1 consensus *before* the Greensill mess was around 1.4bn.
1.4bn-4.4bn=-3bn. Where the hell did the extra 2.1bn come from?! Not to mention a potential Greensill provision.
1.4bn-4.4bn=-3bn. Where the hell did the extra 2.1bn come from?! Not to mention a potential Greensill provision.
Let’s be super generous and assume no Greensill provision (hmmm) and a fabulous Q1 with PBT at 2bn.
We’re still missing 1.5bn. Not exactly small change. Where could this come from?
We’re still missing 1.5bn. Not exactly small change. Where could this come from?
In Q4 2020 they took a markup on their stake All Funds, the fund platform also known as the cash machine, +127m.
This should be listed soon, price rumoured at 7bn, so their stake could be worth 1.1bn, & maybe they convinced auditors to book some profit. Let’s say twice Q4 +250m
This should be listed soon, price rumoured at 7bn, so their stake could be worth 1.1bn, & maybe they convinced auditors to book some profit. Let’s say twice Q4 +250m
Still missing 1250m.
The only remaining lever I could think of, is bonuses.
Last year, IB bonuses were around 2bn.
Normally it’s accrued pro-rata of PBT, so let’s say 30% in Q1.
If you set that to 0 you get a) very angry bankers at the end of the year and b) still 650m missing!
Last year, IB bonuses were around 2bn.
Normally it’s accrued pro-rata of PBT, so let’s say 30% in Q1.
If you set that to 0 you get a) very angry bankers at the end of the year and b) still 650m missing!
Needless to say, it’s easier to “accrue” zero bonus in Q1 than to actually reduce bonuses when you have to announce them next year – so it’ll be interesting to see what happens, when they have to live up to that “promise”.
Another possibility to explain the missing 650m is clawback on bonuses - not from execs, that’ll be less than 50m – but from IB staff.
THAT would be interesting, because that kind of amount is unheard of.
THAT would be interesting, because that kind of amount is unheard of.
Although it’s the spirit of all the reforms on bankers’ bonuses, actually doing is quite brutal.
Honestly, I can’t wait for the Q1 results and see what actually happened!
Honestly, I can’t wait for the Q1 results and see what actually happened!
I fell like @sjhmorris @BondHack @StevenArons @kowsmann or @CNBCJou would love to investigate this ! (& probably tons of others!)
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