Credit Suisse to Cut 1,500 More Jobs on Securities Loss
Credit Suisse Group AG (CSGN), the second- biggest Swiss bank, said it will cut about 1,500 more jobs and reorganize its securities unit after the division reported its first quarterly loss since 2008.
Credit Suisse fell the most in almost three years in Zurich trading as third-quarter net income of 683 million Swiss francs ($776 million) missed the 979 million-franc mean estimate of 12 analysts surveyed by Bloomberg.
Chief Executive Officer Brady Dougan, who said current volatility in the markets is “similar” to the 2008 crisis, is adding to the 2,000 staff cuts announced in July. That will make it more difficult for the Zurich-based bank to compete with larger rivals amid the European sovereign debt crisis and as the global economic slowdown crimps investment-banking revenue.
“The bank is trying to resolve its earnings problems by aggressive downsizing,” said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets. “It’s very difficult to achieve as once you fall out of the competition with the biggest investment banks it gets harder to attract good people even in areas the company wants to keep. Rivals will be happy.”
Credit Suisse dropped as much as 10 percent, the biggest intraday decline since December 2008, and was down 9.7 percent at 23.11 francs as of 9:12 a.m. in Zurich. The stock is down 37 percent this year, compared with a 30 percent decline at larger rival UBS AG and a 27 percent fall in the 46-company Bloomberg Europe Banks and Financial Services Index.
Investment-Banking Loss
Credit Suisse’s investment bank reported a pretax loss of 190 million francs for the quarter, compared with a profit of 395 million francs in the year-earlier period. Earnings at the private bank slumped 78 percent to 183 million francs after the company made 478 million francs of litigation provisions for tax matters in Germany and the U.S. Asset management profit fell 32 percent to 92 million francs.
“We believe subdued economic growth and the low interest rate environment and increased regulation that we are seeing may persist for an extended period,” Dougan said in a statement. “We may well continue to see continued low levels of client activity and a volatile trading environment.”
Credit Suisse’s job cuts will reduce the bank’s total headcount by almost 7 percent from the current 50,700 by the end of 2013. That will save about 2 billion francs in annual costs, the bank said. Credit Suisse had added about 4,000 employees since the beginning of 2009, including staff at the investment bank, to try to gain a bigger market share after surviving the subprime crisis with lower losses than some peers.
Market Volatility
Compared to 2008, “the volatility in the markets is similar in terms of the fact that people are taking a much more conservative approach to how they actually conduct themselves in financial matters,” Dougan said in an interview. “People have been through this a couple of times, so it’s a little different from that point of view. We need to have a period of more stability before we can get the markets and players in the markets acting in a more consistent way.”
UBS and Deutsche Bank AG, the biggest bank in Germany, last week signaled more jobs may be at risk amid demands for more capital and as a deterioration in the global economy hurts investment-banking revenue.
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