By Brenna Hughes Neghaiwi
ZURICH -Credit Suisse had a gross credit exposure of 1.569 billion Swiss francs ($1.69 billion) to Russia at end-2021, the Swiss bank said on Thursday, becoming the latest European bank to reveal the size of its potential losses in relation to sanctions imposed on the country.
Credit Suisse’s year-end exposure included lending to wealthy clients as well as trade finance and investment banking exposure – positions it said have since been reduced.
“The world around us is changing in at times alarming ways, with the ongoing effects of COVID-19 and, more recently, the tragic consequences of Russia’s invasion of Ukraine,” Chief Executive Thomas Gottstein and Chairman Axel Lehmann said in the bank’s annual report.
Gottstein and Lehmann said they believed the bank’s exposure to Russia was “well-managed” and said it had the right systems in place to address associated risks.
Other banks, including UniCredit and BNP Paribas have warned of billions of euros in potential costs following Western sanctions imposed on Russia over its actions in Ukraine. [L3N2VD29I]
Factoring in risk mitigation via credit default swaps and other hedges, as well as guarantees, insurance and collateral, Credit Suisse said its Russian credit exposure stood at 848 million Swiss francs on a net basis at end-2021.
The bank said it had minimal exposure in terms of loans granted to sanctioned individuals in its wealth management division.
Credit Suisse’s 2021 was marked by the collapse of $10 billion in supply chain finance funds linked to insolvent British finance firm Greensill and a $5.5 billion trading loss from the implosion of the Archegos investment fund.
The Swiss bank also announced a new 78 million franc litigation provision on Thursday, which increased its annual loss to 1.65 billion francs from a previously reported 1.57 billion francs.
The new provision was to cover a settlement reached with German utility Stadtwerke Munchen GmbH in March.
Credit Suisse executives had their bonuses cut by nearly two thirds last year, the annual report showed, while CEO Gottstein’s compensation fell 43% to 3.8 million francs in his first full year in the job, dipping below pay awarded to CFO David Mathers.
“The compensation committee considered that it was important to emphasise leadership accountability. As a result, executive board members had one full year of variable compensation cancelled,” committee chair Kai S. Nargolwala said in a letter.
“This equated to lost compensation for the executive board of more than 40 million Swiss francs.”
Executive pay had already been cut in 2020 as the bank contended with a string of bad headlines, ranging from a spying scandal to a $450 million writedown on a hedge fund investment.
Gottstein became CEO in February 2020 after the departure of his predecessor over the spying scandal.
His pay was already cut to 6.5 million francs in 2020, from the 8.53 million the bank had proposed ahead of the Archegos and Greensill scandals.
In 2021, Credit Suisse replaced more than half its executives as the scandals prompted investigations and a strategic overhaul.
Of the 12 members on its executive board, only five were already executive managers at the start of last year, with five having joined the bank since 2020 and two internal promotions.
The bank has also changed chair twice since the start of 2021. Former Chairman Antonio Horta-Osorio – brought in to lead a turnaround – left after only nine months following an internal investigation into his personal conduct.
Horta-Osorio received 3.5 million francs for the period up to his departure in January, Credit Suisse said.
In an unusual step, it said the board had agreed to pay his 1.125 million franc chair fee “fully in cash, rather than group shares”.
Credit Suisse had already flagged a 32% drop in its organisation-wide bonus pool in February, when it reported a loss for both the fourth quarter and the full year.
Its overall variable compensation pool fell to 2 billion Swiss francs in 2021 as the bank reduced regular deferred awards but sweetened pay for senior bankers by a surge in upfront cash and a one-off bonus.
($1 = 0.9266 Swiss francs)