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Banking

Credit Suisse axes 1,500 jobs

Swiss investment bank axes hundreds more jobs in investment banking to concentrate on the less risky private banking business

Credit Suisse has slashed another 1,500 jobs in its investment banking division, after culling 2,000 jobs in July, to increase its cost-cutting target by SFr200 million to SFr1.2 billion and boost its efforts in the less risky private banking business.

The bank said it will implement additional cost-efficiency measures to adjust its cost base – namely the job cuts. In this year’s Q2, it began implementing a number of cost-efficiency initiatives, by slashing jobs in the investment banking division, which are now expected to achieve SFr1.2 billion (up from SFr1.0 billion estimate) in cost savings.

The bank said this programme includes “reductions of approximately 4% of total headcount across the group and will involve implementation costs in 2011 of SFr550 million (up from an estimated range of SFr400 million to SFr450 million).

At face value, Credit Suisse reported improved results for this year’s third quarter, with pre-tax income of just over SFr1 billion, but most of the net income was attributable to shareholders (SFr683 million) and net new asset (SFr7.4 billion) in private banking.

It is no wonder the bank has announced it is to “evolve” its strategy, by utilising a “significant reduction of risk-weighted assets in investment banking, [to which the] measures underpin leading profitability in private banking and increased allocation of resources to faster-growing and large markets”.

Results revealed that investment banking posted a pre-tax loss of SFr190 million, which “reflected a challenging and volatile market environment”, said the group. However, like most of Credit Suisse’s counterparts, it chose to include debt (or debit) valuation adjustments (DVA) into its net revenue results.

It said that net revenues of SFr2.49 billion included “significant gains from DVA relating to certain structured note liabilities”.

Meanwhile, private banking bore a pre-tax income of SFr183 million, which includes SFr478 million from litigation provisions for the US and the German tax matters, when the US government investigated Swiss banks over allegations that they were helping high-net-worth clients evade tax laws.

Private banking net revenues stand at SFr2.6 billion; net new assets of SFr7.4 billion, of which SFr6.6 billion is in wealth management clients with strong inflows in ultra-high-net-worth individual (UHNWI) client and emerging market segments, said the group.

“During the third quarter, we experienced a challenging environment with a high degree of uncertainty, low levels of client activity across businesses and extreme market volatility,” says Brady Dougan, CEO at Credit Suisse. “In investment banking, we will accelerate our previously announced plans and reduce risk-weighted assets in fixed income under pro-forma Basle III by half by 2014. In private banking, we are committed to ensuring industry-leading profitability and implementing a series of growth, productivity and efficiency measures to build on our strong onshore and offshore footprint. All measures are aimed at increasing private banking’s contribution to the group’s pre-tax income by SFr800 million, excluding market-induced growth by 2014.”

The manoeuvre to concentrate on the private banking and wealth business comes at a time when analysts have remarked that it would make more sense for several investment banks, including Credit Suisse’s rival UBS, to more away from riskier business divisions and centre on the more profitable private wealth businesses.

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