Credit Suisse to eliminate 5,300 jobs

Keystone

Credit Suisse on Thursday said it would cut 5,300 jobs – 11 per cent of its global workforce – including around 650 positions in Switzerland.

The country’s second-largest bank said the cuts came in a bid to reduce costs and take its balance sheet back into positive territory after predicting it would end 2008 with another quarterly loss.

Credit Suisse’s loss of SFr3 billion ($2.48 billion) for the first two months of the final quarter reflected the impact of adverse market conditions and risk reduction, the bank said.

The losses were primarily in investment banking, where most of the job reductions will fall. Most cuts will have taken place by the end of June next year, the bank said.

“These actions will better position us to weather the continuing challenging market conditions, capture opportunities that arise amid the continuing disruption, and prosper when markets improve,” chief executive Brady Dougan said in a statement.

The 650 cuts in Switzerland represent about three per cent of its 20,000 national staff.

Bank spokeswoman Esther Gerster told the Swiss news agency that not all the staff would be made redundant since the group had hundreds of open positions.

Credit Suisse said the reductions would help save SFr2 billion in costs and would take a charge of SFr900 for the measures it was taking, mostly in the fourth quarter.

The bank’s shares climbed 10.1 per cent following the announcement, closing at SFr30.50 on the Swiss Stock Exchange.

Expected

Finance Minister Hans-Rudolf Merz on Thursday evening told Swiss television that Credit Suisse’s structural changes had been expected and expressed confidence in the bank’s capitalisation.

Credit Suisse has so far managed the worst financial crisis since the Great Depression without state aid but lost SFr1.3 billion loss in the third quarter.

It has already cut 1,800 this year and earlier this week said it would cut 650 investment banking jobs in Britain. Shares have fallen this year by about 60 per cent.

Thursday’s announcement came as no surprise to the Swiss Association of Bank Employees, but the organisation called the cutbacks “painful” and said further jobs losses were expected elsewhere within the country’s banking sector in the coming months.

The Swiss Association of Commercial Employees urged the bank to find alternative employment within the group for as many of the staff as possible.

Giovanni Barone-Adesi, a professor of finance theory at the Swiss Finance Institute in Lugano, said the global financial sector as a whole was in “worrying” shape but that Credit Suisse had less to fear than its foreign competitors.

“If you compare the situation in Switzerland with the situation in New York and London, Switzerland is in a much better position,” he told swissinfo, adding that the financial institution could stem its losses if it focused on profitable business units like private banking.

The private banking business was still seeing asset inflows and had added 370 relationship managers to its roster this year, Credit Suisse said.

A statement noted that in November alone, the bank had been “modestly profitable”. It will have nevertheless lost about SFr5.2 billion by the time the year is over and Credit Suisse said its chairman, chief executive and head of the investment bank would not receive any bonuses.

No more Mr Clean

“The company is not sitting still; they are carrying out a cost reduction. It is impressive how they have reduced risk, and they say they have quite good net new money,” said Georg Kanders, an analyst at commercial bank WestLB

Analysts at Bank Wegelin were more cautious in a research note: “Restructuring costs are not yet included. Thus, the total fourth-quarter loss could well be closer to SFr4 billion.”

Traders say investors are looking more critically at Credit Suisse since cross-town rival UBS, badly hit by the United States subprime mortgage crisis, was bailed out by the Swiss government.

“For a long time it looked like Credit Suisse was Mr Clean as far as the credit and finance crisis was concerned but the latest market turbulences have shown that both of the major [Swiss] banks are affected,” one trader told Reuters.

In a related development, the Swiss Federal Banking Commission has reached a deal with both UBS and Credit Suisse on stricter bank capital requirements and said it expected international rules to move in the same direction.

The new rules will include the introduction of a leverage ratio for the two banks and higher capital adequacy targets.

“Switzerland has been quick to learn the lessons of the ongoing financial crisis,” the commission’s director, Daniel Zuberbühler, commented in a statement. “International standards will go in the same direction.”

The banks will have until 2013 to meet the new capital adequacy requirements but the deadline can be extended.

swissinfo with agencies

Key facts

Founded in 1856, Credit Suisse has its headquarters in Zurich.
It is active in private banking, investment banking and asset management.
It reported a net profit of SFr7.7 billion for 2007.

Comments from CEO Brady Dougan

“Our strategy remains clear and consistent: we will continue to judiciously invest in the growth of private banking globally and our Swiss businesses, reduce volatility and risk, and increase our focus on client and flow trading businesses in investment banking.”

“The strategic steps we are outlining… will further reinforce the strong position of Credit Suisse from a risk, cost, capital and earnings perspective.”