Credit Suisse Group, Switzerland's second largest bank, has announced that it plans a further round of cost-cutting at its investment bank Credit Suisse First Boston (CSFB) as it posted a 23 per cent drop in second quarter net profit.
On Wednesday, CSFB vice chairman Richard Thornburgh noted that CSFB had cut about 3,000 positions since last year's acquisition of the brokerage firm Donaldson, Lufkin and Jenrette. Under the recently appointed chief executive John Mack, Credit Suisse seeks further savings.
An announcement on cuts will be made to CSFB staff next week, Thornburgh said, without giving details.
CSFB has already cut 524 jobs in the second quarter of 2001, shaving personnel costs by some 10 per cent.
Credit Suisse said second-quarter net profit was SFr1.288 billion ($775 million), compared with net profit of SFr1.675 billion in the second quarter of 2000 and SFr1.428 billion in the first quarter of 2001.
Analysts had expected net profit of just SFr1.12 billion. The 2001 figures include about SFr300 million each quarter in costs after Credit Suisse acquired United States-based brokerage Donaldson, Lufkin and Jenrette (DLJ) late last year.
Profits at nearly all financial firms have been hurt this year by tough market conditions -- that includes Credit Suisse, estimated to be the world's twelfth-largest banking group.
Chairman and chief executive Lukas Mühlemann expected business to remain challenging this year:
Market problems continue
"Going forward we expect the world's economic climate and the situation in the global financial markets to be difficult in the third and fourth quarters, affecting our core activities in the areas of asset gathering and investment banking."
The company said it expected results in the third quarter to be lower than in the second.
The impact of weaker markets was felt across most of Credit Suisse Group's businesses, including CSFB, where operating income was down seven per cent in US dollar terms. In private banking, transaction related business volume also fell.
When the Credit Suisse Group hired Mack - widely known in his former job as president of Morgan Stanley Dean Witter as "Mack the Knife" because of his cost cutting skills - it said the move was part of a planned succession and not a response to issues CSFB is facing.
Part of Mack's job is to deal with investigations of CSFB and some other firms by United States regulators for allegedly abusing its position as underwriters of hot technology stock offerings.
Credit Suisse Group was able to offset weakness in certain areas of its business by strength in insurance operations, including Winterthur which it acquired in 1997.
Winterthur reported higher premiums and higher profit in the first half both in its life and non-life businesses.
swissinfo with agencies