Credit Suisse slashes 1,500 more jobs
Adverse market conditions have forced Swiss bank Credit Suisse to ramp up its restructuring plan by adding another 1,500 job cuts to the 2,000 previously announced.
Chief executive Brady Dougan blamed volatile market conditions, the ongoing European debt crisis, regulatory pressures and the strong Swiss franc for a disappointing third quarter SFr683 million ($768 million) profit.
While insisting that the bank would be well positioned to take advantage of any upswing, Dougan said the prevailing conditions presented a “challenging environment with a high degree of uncertainty, low levels of client activity across businesses and extreme market volatility”.
“We may well continue to see continued low levels of client activity and a volatile trading environment,” Dougan added.
Having built up staff levels in anticipation of improved conditions, especially in investment banking, Credit Suisse has now been forced to bow to continued adverse conditions. Swiss rival UBS has also announced 3,500 job cuts while other global banks have been paring back.
However, UBS defied market expectations last month by reporting a SFr1 billion third quarter profit despite rogue trading losses eating a SFr1.85 billion hole in its accounts
Shares plummet
In common with other banks, Credit Suisse’s biggest disappointment was investment banking, which recorded a SFr190 million loss.
Most of the job losses are expected in the poorly performing division as the bank tries to save SFr2 billion in costs by the end of 2013.
Credit Suisse shares plummeted on the unwelcome news with analysts expressing doubts about the bank’s restructuring strategy.
“While we think that this points in the right direction, overall however, we would like to see more pronounced action in Credit Suisse’s investment banking alignment process,” Bank Sarasin said in a note.
While the bank’s wealth management operations managed to secure SFr6.6 billion in net new assets in the last three months, private banking profits plunged to SFr183 million from SFr836 million in the same period last year.
Litigation costs
Brady Dougan said the division would concentrate more heavily on the very wealthiest clients and mainly in emerging markets in a bid to improve profits by SFr800 million.
At the same time, the most risky investment banking assets would be halved by the end of 2014 to meet new regulatory requirements and to free up resources for other areas.
Third quarter results were further hit by one-off provisions put aside to deal with ongoing tax evasion disputes in the United States and Germany.
The US authorities recently named Credit Suisse as one of a number of Swiss banks it suspects of helping its citizens evade taxes. The SFr295 million that the bank has put aside in anticipation of a settlement is way below the $780 million that UBS had to pay out in 2009.
A further SFr183 million has been earmarked to settle tax evasion issues in Germany after Switzerland signed a treaty stipulating that Swiss banks would pay back lost tax revenues on long-standing German accounts.
Dougan put a brave face on Tuesday’s disappointing results, arguing that Credit Suisse’s repositioning drive is ahead of the competition.
“We are well equipped for this environment and remain convinced that our strategy will provide us with substantial opportunity for growth and stronger performance as economic and market conditions improve,” he said.
The Credit Suisse group reported a pre-tax profit of SFr683 million, compared to SFr609 million in the same period last year.
Second quarter net profits this year amounted to SFr835 million.
Investment banking reported a SFr190 million loss (SFr231 profit in Q2 2011, SFr395 million profit in Q3 2010).
Private banking profits weighed in at SFr183 million (SFr843 million Q2 2011, SFr836 million Q3 2010).
Wealth management managed to attract SFr6.6 billion of net new money (SFr12.4 billion in Q3 2010)
The restructuring charges are expected to total SFr550 million with SFr443 million booked in Q3 2011.
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