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Credit Suisse cuts jobs on poor results

There are gathering clouds at Credit Suisse

(Ex-press)

Bank Credit Suisse is to cut about 2,000 jobs as it reported a “disappointing” second-quarter net profit, dented by weak trading activity and the strong Swiss franc.

The Swiss bank said on Thursday net profit fell to SFr768 million ($959 million), below average analyst forecasts of SFr1 billion and less than half the SFr1.6 billion made in the same period in 2010.

Operating income fell to SFr1.37 billion from SFr1.7 billion in the Q2 last year. New assets in private banking were SFr11.5 billion, below average analyst forecasts of SFr14.2 billion,

Chief Executive Brady Dougan said the bank would cut four per cent of total staff – it employs around 50,000 - to save about SFr1 billion next year because of the "disappointing performance" this quarter.

Many of the job cuts concern people hired in a post-crisis spree. Around 500 posts are to go in Switzerland. Implementation costs in 2011 would be SFr400-450 million.

"We have to recognise the likelihood that the current headwinds in the economic and market environment may be more persistent than we would have hoped," said Dougan and Chairman Urs Rohner. 

"We expect interest rates to remain low for an extended period of time and the strong Swiss franc to continue to have an impact on our results. We may also continue to see lower levels of client activity and a volatile trading environment." 

Tough climate

Rival UBS said on Tuesday it would cut costs by up to SFr2 billion over the next three years and push back targets after reporting disappointing second-quarter profits – SFr1 billion, half the amount in the same period in 2010 – following slow trading in fixed income, currencies and commodities.

Jobs are expected to be shed, but no figures have yet been given.

Investment banking has been hit by slow trading as a result of the debt crises in the euro zone and United States as well as post-crisis regulations aimed at forcing banks to hold more capital to protect them from future shocks.

UBS and Credit Suisse also face the added burden of high cost bases in Switzerland as the safe-haven franc soars. 

Credit Suisse said pre-tax profit in investment banking dropped 71 per cent to SFr231 million. 

"Fixed income sales and trading results were significantly lower than in second quarter 2010 and first quarter 2011 reflecting challenging market-making conditions and moderately weaker client flows," it said. 

The bank said it was conducting an internal investigation following the announcement earlier this month it was being targeted by a US tax investigation following the indictment of several of its bankers. 

It reiterated that it was cooperating with the authorities to resolve the matter, subject to its Swiss legal obligations, which protect bank secrecy. 

Credit Suisse also said that it had appointed Hans-Ulrich Meister as chief executive of private banking in addition to his role as CEO Credit Suisse Switzerland, while Walter Berchtold would move to become chairman of private banking. 

Tax probe timeline

July 21, 2011: United States federal prosecutors charge four US-based bankers linked to Credit Suisse, including three ex-managers, with conspiracy in what they say was a long-running tax evasion scheme.

July 14, 2011: Credit Suisse receives a letter from the US Justice Department informing the bank it is the target of a criminal investigation.

February 2011: Three former and one current Credit Suisse employee indicted for tax fraud. The US Justice Department claims that as of late 2008 Credit Suisse was maintaining thousands of secret accounts for US customers with as much as $3 billion (SFr2.5 billion) in total assets under management.

January 2011: Police in the US arrest a former Credit Suisse employee who is to face trial in Florida.

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swissinfo.ch and agencies


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