Hard cheese for Credit Suisse as it sheds 2,000 jobs

The Swiss bank has had a tough year, particularly its investment banking arm. And the outlook for the next few months isn't much better...

by Emma Haslett
Last Updated: 25 Oct 2011
Things continue to look decidedly shaky at Credit Suisse, which has posted a disappointing set of results for its second quarter. According to the figures, net profits fell by 52% compared to the same period last year, to Sfr768m (£578m), down from Sfr1.6bn a year ago. The poor performance was largely driven by its investment banking arm, which had a tough start to the year. Now it wants to make Sfr1bn in savings – which includes cutting about 2,000 jobs.

Now obviously, investment banking is a risky business (look at the mess they led into in 2007): unfortunately, though, over the past few months, all those risks seem to have combined to create a sort of toxic environment, on top of the strong franc, the European and US debt crises have caused investors to be more risk-averse, while some have avoided the markets altogether as the trading environment becomes more volatile. Things haven’t been straightforward on the retail side, either, with low interest rates keeping profits down, while regulations brought in in the wake of the recession mean banks need to hold extra capital, giving them less free cash to play with.  

The majority of the jobs will be lost in the investment arm, according to CEO Brady Dougan. It’s been a tumultuous few years there: having announced in 2009 that it was planning to cut its headcount to 17,500, the bank then backtracked when its rivals also began making massive cuts, seeing an opportunity to grow. By the end of 2009, it had increased revenues to just over SFr20bn - almost a record level. But as profits began to fall in mid-2010, it continued to increase its headcount, rising to 21,300 by the end of June this year. Apparently, this round of redundancies will pretty much take it back to 2009 levels.

To be fair, it hasn’t all been bad: during the previous quarter, the bank handled high-profile IPOs including Glencore, the largest company ever to list in London. But Dougan was staying (uncharacteristically) cautious: ‘we have to recognise the likelihood that the current headwinds in the economic and market environments may be more persistent than we would have hoped’. Banker speak for: ‘we’re not sure what’s going to happen next’.

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