Credit Suisse steps up cost and job cuts in in­vest­ment bank­ing

The Pak Banker - - FRONT PAGE -

Credit Suisse Group on Wed­nes­day an­nounced 800 mil­lion Swiss francs ($821 mil­lion) in ad­di­tional cost cuts and plans to shrink its in­vest­ment bank fur­ther as part of a re­struc­tur­ing plan aimed at re­vi­tal­iz­ing its earn­ings.Like its global peers, Credit Suisse is grap­pling with record low in­ter­est rates, low com­mod­ity prices and slower growth in emerg­ing mar­kets such as China.

Banks are fac­ing a slump of 15 per­cent in mar­ket trad­ing rev­enue in the first quar­ter, spoil­ing what is nor­mally the most lu­cra­tive pe­riod when in­vestors put their money to work at the start of the year. The cuts by Credit Suisse will in­clude elim­i­nat­ing 2,000 jobs at its Global Mar­kets busi­ness, Switzer­land's se­cond-largest bank said. "This was the re­struc­tur­ing plan in­vestors were hop­ing for last year," said Ge­orge Kara­manos, an an­a­lyst at Keefe, Bruyette & Woods. "A neg­a­tive op­er­at­ing en­vi­ron­ment has forced man­age­ment to ad­dress tough is­sues it avoided last time around."

Shares in the com­pany rose 2 per­cent to 14.61 Swiss francs at 0858 GMT, hav­ing fallen by more than a third this year. Deutsche Bank's (DBKGn.DE) fi­nance chief said on Tues­day the first two months of 2016 were the worst start to a year for banks that he has seen in his bank­ing ca­reer. Chief Ex­ec­u­tive Tid­jane Thiam, who took over at Credit Suisse ?from Bri­tish in­surer Pru­den­tial last July, is five months into im­ple­ment­ing his new strat­egy. He raised around 6 bil­lion francs in cap­i­tal last year and is cut­ting back its volatile in­vest­ment bank­ing busi­ness while fo­cus­ing on more sta­ble wealth man­age­ment. An­a­lysts and in­vestors agree with the path Thiam has set the bank on but ?many view his tar­gets as too am­bi­tious, with con­cerns a pos­si­ble slow­down in high-growth emerg­ing mar­kets could make them harder to hit.

The Zurich-based bank said in Fe­bru­ary it ac­cel­er­ated cost sav­ings to lock in 1.2 bil­lion of the tar­geted 3.5 bil­lion francs by 2018, with around 4,000 jobs be­ing cut. The lat­est moves bring job cuts to 6,000.

In the state­ment on Wed­nes­day Thiam said he aimed to achieve 1.7 bil­lion francs in cost sav­ings in 2016. Thiam said a com­bi­na­tion of high costs, ex­po­sure to illiq­uid in­ven­tory in fixed in­come, "his­tor­i­cally low lev­els of client ac­tiv­ity" and chal­leng­ing mar­ket con­di­tions had led to dis­ap­point­ing re­sults at the Global Mar­kets divi­sion where staff bonuses fell 36 per­cent.

"In this con­text, we have taken im­me­di­ate ac­tion to re­duce out­sized po­si­tions in ac­tiv­i­ties not con­sis­tent with our new strat­egy and sys­tem­at­i­cally re­duced our ex­po­sures," Thiam said. Thiam said that write-downs at Global Mar­kets, which to­taled $633 mil­lion in the fourth quar­ter of 2015, were lower in the first quar­ter at $346 mil­lion as of March 11, 2016.

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