BUSINESS: Credit Suisse cuts 9,000 jobs to stem losses

Cred­it Suisse is lay­ing off thou­sands of jobs and restruc­tur­ing its busi­ness to stem heavy loss­es and investor fears.

The bank said it would take “a series of deci­sive steps” after recent scan­dals and a loss of CHF 4 bil­lion ($35 mil­lion) in the pre­vi­ous quarter.

The bank announced 9,000 job cuts over the next three years, but did not spec­i­fy where.

The com­pa­ny’s chair­man, Axel Lehmann, calls the trans­for­ma­tion “a plan for success.”

Investor reac­tion, how­ev­er, was poor, with Cred­it Suisse shares drop­ping more than 13% after the announcement.

As part of its turn­around plan, Cred­it Suisse is seek­ing to raise $4 bil­lion in new cap­i­tal, of which $1.5 bil­lion will come from the Sau­di Nation­al Bank.

It also plans to spin off the bank’s invest­ment arm, relaunch it as the CS First Boston brand, and wind down some of its high­er risk activities.

The num­ber of employ­ees will be reduced from the cur­rent 52,000 to 43,000 by the end of 2025, with a reduc­tion of 2,700 dur­ing the cur­rent fis­cal year. Cred­it Suisse is head­quar­tered in Switzer­land but has a major cen­ter in Lon­don and employs 5,500 peo­ple in the UK.

This will reduce over­all costs by CHF 2.5 bil­lion (15%) by 2025.

It has also set up a “bad bank” divi­sion to house risky assets it wants to liquidate.

It will be the third time in sev­er­al years that the group, which was once con­sid­ered one of Switzer­land’s most pres­ti­gious banks, has tried to revive the group after a string of scandals.

In Feb­ru­ary 2020, then-CEO Tid­jane Thi­am left the bank fol­low­ing a covert sur­veil­lance scan­dal. In March of the same year, the Arque­gos invest­ment fund col­lapsed, and Cred­it Suisse suf­fered huge loss­es. The bank­rupt­cy of British finan­cial firm Green­sill Cap­i­tal also took a toll.

Last year, the bank’s chair­man, Anto­nio Hor­ta-Oso­rio, resigned after less than nine months, accus­ing him of vio­lat­ing Covid rules. The bank was sub­se­quent­ly fined in a cor­rup­tion case relat­ed to Mozam­bique’s tuna fishery.

This year, the bank was fined for mon­ey-laun­der­ing alle­ga­tions linked to a Bul­gar­i­an drug-traf­fick­ing ring, a chief exec­u­tive was replaced, and last month its share price came under pres­sure from investors con­cerned about the com­pa­ny’s finan­cial health. became. The stock has halved since January.

Cred­it Suisse, Switzer­land’s sec­ond-largest bank, says the restruc­tur­ing will cre­ate a “sim­pler, more focused and more sta­ble bank”.

Ulrich Kell­ner, who took over as CEO in July, said this year’s results were impact­ed by “con­tin­ued chal­leng­ing macro­eco­nom­ic and mar­ket conditions”.

“This is a his­toric moment for Cred­it Suisse as we fun­da­men­tal­ly reshape invest­ment bank­ing and help cre­ate a new bank with a sim­pler, more sta­ble and cus­tomer-focused busi­ness mod­el.” said.

Ana­lysts at JP Mor­gan said the restruc­tur­ing was “ques­tion­able”, adding that sell­ing shares to raise new cap­i­tal would weigh on the stock.

Andreas Ven­dit­ti, an ana­lyst at Swiss invest­ment firm Von­to­bel, said the plan was “just the first step in a long process to restore con­fi­dence and restore con­fi­dence” of stakeholders.

“The key is deter­mi­na­tion and exe­cu­tion that no more mis­steps can be tol­er­at­ed, and it will take time to start see­ing results,” he said.