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Credit Suisse toxic bonus pool not that hot

The 17% return on the Credit Suisse toxic bonus pool so far this year, as reported by the Wall Street Journal, surely soothed hard feelings among bankers who were outraged in December when the bank told 2,000 of them that  bonuses would be linked to the performance of risky leveraged loans and commercial mortgage-backed  securities dumped into a pool called the partner asset facility.

But compared with gains in the U.S. commercial mortgage-backed securities market, it’s not looking too hot. AAA CMBS have moved from around 60 cents at the beginning of the year to about 80 to 85 cents on the dollar while the riskier BBB- tranche of the CMBX is showing gains of around 50% over the last two months, according Richard Parkus at Barclays Capital Deutsche Bank, who gives the government and its TALF and PPIP programs full credit for the gains.

But US CMBS isn’t likely to be a big part of the bonus pool holdings since Credit Suisse dealt mainly in European CMBS. Though credit has been on a tear globally, looks like assets in the rest of the pool still aren’t so hot.

Colleague Alexander Smith has much more here.

Toxic bonuses, Credit Suisse’s one hit wonder

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Credit SuisseAt the height of the financial crisis, Credit Suisse came up with a clever idea to offload dodgy assets without having to sell them at knock-down prices. It stuffed $5 billion of them into a bonus pool for its bankers.

The Swiss bank’s scheme — which includes leveraged loans and commercial mortgage backed securities — exposed 2,000 senior Credit Suisse bankers to the value of those toxic assets. They were given 70-80 percent of their equity compensation in the form of so-called “partner asset facility” (PAF) units linked to the performance of the assets. The rest of the bonus was in the form of share units.

Credit Suisse pulls ahead of UBS

UBS has always looked down its nose at its cross-town rival, but Credit Suisse under Brady Dougan has turned the tables on the blue-bloods. As UBS remains mired in a potentially catastrophic legal tussle with America’s tax collectors, CS is winning market share across the board.

With its second quarter results, Dougan has shown that the storming first quarter was no flash-in-the pan. Stripping out various one-offs (including a counter-intuitive 1.1 billion Swiss franc loss thanks to an improvement in the value of its own debt), Credit Suisse’s net income increased 62 percent on the first quarter, to 2.5 billion Swiss francs. That is equivalent to a boom-like 27 percent-plus return on equity.

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