Credit Suisse’s Klein Says First Boston Staff Will Own Firm

Credit Suisse Group AG’s Michael Klein, appointed to run the First Boston investment-banking spinout, told a town hall meeting that everyone there would be shareholders in the new venture.

(Bloomberg) — Credit Suisse Group AG’s Michael Klein, appointed to run the First Boston investment-banking spinout, told a town hall meeting that everyone there would be shareholders in the new venture.

Trying to rally the staff to support the planned overhaul, Klein pledged that the new “super boutique” will be profitable, and said that should mean this year’s bad bonus round won’t happen again.

At the town hall Wednesday, Klein said the new venture will be owned and operated by everyone in the room, according to people who attended the meeting. He said Credit Suisse First Boston already has lined up investors, though he didn’t name them, the people said, asking not to be identified discussing non-public information. 

The executive stressed that his incentives are aligned with the venture’s success in part because he is set to have equity in it as a result of the sale of his firm, Klein Group. 

The Swiss bank said earlier this month that the purchase price for Klein’s business was $175 million, with the full consideration valued at $210 million. 

Credit Suisse posted a fifth-straight quarterly loss earlier this month, with red ink in the fourth quarter alone totaling 1.39 billion Swiss francs ($1.5 billion). The bank also lost an unprecedented 111 billion Swiss francs worth of assets during the three final months of last year. Chief Executive Officer Ulrich Koerner’s pledge to stem the outflows hinges on a massive outreach program to woo nervous clients and their cash back to the bank, while carving out the volatile investment bank and slashing costs.

The investment-banking venture will be based in New York and will offer capital-markets and advisory services.

A company spokesperson declined to comment.

The Swiss lender is in the early stages of a restructuring that includes cutting 9,000 jobs. Earlier this month it reduced the bonus pool for 2022 by about half. It also said that the management board took no bonus for that period. Koerner said in a Bloomberg TV interview that bonuses had to be linked to profits, so in years when the bank posts a loss “we pay very little or nothing.” 

In a bid to retain key staff, the bank has taken a creative approach to rewards. Senior employees such as managing directors and directors received a cash award which can be clawed back if they leave the firm within three years, as well as a regular deferred share-based award. 

Credit Suisse has seen a growing line of senior departures amid the revamp. Veteran dealmaker Cathal Deasy, co-head of investment banking and capital markets for Europe, the Middle East and Africa, exited the bank last month and there have also been departures across the bank’s debt capital markets, credit sales and bond trading businesses.

Klein, a former Citigroup Inc. executive who’s advised on many of the biggest global transactions, is expected to help recruit star dealmakers and attract investors as the Swiss firm works on carving out the investment bank. After a string of losses, it’s seeking to focus on areas of traditional strength such as capital markets, advisory and the leveraged finance businesses. 

Klein, who was on Credit Suisse’s board of directors until late last year, has also been appointed chief executive officer of Banking and CEO of the Americas, in addition to being CEO designate of First Boston.

Credit Suisse is lining up investors to help fund the spin-out. Several private equity firms including Apollo Global Management Inc. are considering taking a stake in the unit, people familiar with the matter have said. The Swiss lender has already received a commitment for a $500 million injection into the business from a“highly respected investor,” Koerner said when announcing the new strategy in October, without identifying the investor.  

–With assistance from Marion Halftermeyer and Crystal Tse.

(Adds detailson potential investors, pay plans)

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