Swiss banking giant Credit Suisse said yesterday that it will cut roughly 5,300, or 11 per cent, of its jobs after posting a loss of around 3 billion Swiss francs ($2.5 billion) for the first two months of the fourth quarter. The Zurich-based bank also decided to scrap bonuses for its top executives.
Most of the job cuts will come in the group's investment-banking arm, where it is also sharply cutting its risk exposure and reducing or eliminating trading activities in certain sectors. The bank said the job losses and other cost cuts should save around 2 billion francs.
Shares in Switzerland's second-largest bank fell as much as 6 per cent in early trading before rebounding to trade almost 8 per cent higher as investors welcomed the move to slash costs and risk, while refocusing on the high-margin wealth management business.
Around two-thirds of the job cuts will be in investment banking, though all divisions will experience some cuts. There's also likely to be a higher concentration of cuts in the US than elsewhere, because of the investment banking operations in the country, said CEO Brady Dougan on a conference call with analysts.
''The strategic steps we are outlining today will further reinforce the strong position of Credit Suisse from a risk, cost, capital and earnings perspective," Dougan said in a statement. "These actions will better position us to weather the continuing challenging market conditions, capture opportunities that arise amid the continuing disruption, and prosper when markets improve.''
Dougan, Chairman Walter Kielholz and Paul Calello, head of the investment bank, will forgo bonuses for 2008 after about 5.2 billion francs in net losses so far this year. Today's announcement brings the total number of job cuts at Credit Suisse to 7,390, compared with 9,000 at UBS.
Credit Suisse had reported a loss of nearly 1.3 billion francs for the third quarter of this year, but refused in October to join in a Swiss government bailout of the country's financial sector. The government said it would pour 6 billion francs into banking giant UBS in October. UBS announced at the time that it would transfer up to $60 billion of illiquid assets off its books and onto those of the Swiss National Bank. Illiquid assets are ones that cannot be sold easily, or without substantial loss.
But Credit Suisse declined to take government money, instead raising approximately 10 billion francs ($8.26 billion) from a group of international investors led by the Qatar Investment Authority. The bank said it decided not to participate in the government's bailout plan because it had a low level of affected assets in its portfolio and good access to capital markets. (See: Credit Suisse rescues itself, UBS gets funds infusion)
The CEO reiterated his stance that foresees no circumstances under which state aid would be required, he told reporters on a conference call today. He added that the bank should still be able to achieve a 20 per cent return on equity over the business cycle after the reorganization.
Investment banks globally are grappling with widening losses and slashing jobs after the bankruptcy of Lehman Brothers Holdings Inc. in September locked up credit markets and sent stocks tumbling. Top executives at competitors including UBS, Deutsche Bank AG and Goldman Sachs Group Inc. are also forgoing bonuses this year. (See: Goldman Sachs senior executives to forgo bonuses for 2008 / UBS executives to repay over $58 million of bonuses; bank admits some fraud ) Nomura Holdings Inc. is firing as many as 1,000 employees in London, the company said today, after worsening financial markets and costs related to buying parts of Lehman pushed the shares to a 26-year low.