Switzerland-based global financial services firm Credit Suisse is reportedly planning job cuts as an unstable market causes revenues to decline. According to Reuters, the bank is considering eliminating about one position in 10, in a massive Credit Suisse layoff plan. The Zurich-headquartered bank has offices in all the major financial capitals of the world.
The job cuts will affect approximately 5,000 employees as the firm works out a strategy to reduce costs. The scale of job cuts is just the tip of the iceberg as new CEO of Asset Management Ulrich Koerner attempts to steer the bank to safer waters, after a string of scandals.
A Credit Suisse Overhaul
According to Deutsche Bank AG, Credit Suisse faces a capital gap of nearly $4.1 billion as it attempts to reshape its image and support growth. The bank is in the throes of an overhaul as Koerner attempts to shed the image created by scandals and colossal loses. He succeeded Thomas Gottstein as CEO after the bank was put through the ringer – with huge losses, a court conviction, and share price loss of almost 40%, in the past two years.
The bank has continued to suffer losses to the tune of billions as it took a hit of almost $5.5 billion loss on the default of US family office Archegos Capital Management and the shuttering of $10 billion of supply chain finance funds linked to collapsed British financier Greensill. The firm is currently in the process of appealing a conviction of money laundering involving a Bulgarian drug-dealing gang.
On August 22, the company announced the appointments of Dixit Joshi as Chief Financial Officer and Francesca McDonagh as Group Chief Operating Officer. It is no surprise that a major restructuring is underway as the bank aims to overhaul its past image. Furthermore, Ulrich Koerner is under pressure to quickly engineer a turnaround and appease its wealthy clientele.
“Capital generation as well as running down businesses take time and are likely more back-end loaded whereas strengthening capital and funding the restructuring require capital up-front,” Deutsche Bank analysts Benjamin Goy and Sharath Kumar Ramanathan wrote in August. “The sale of securitized products has some execution risks, in our view.”
While selling the company at book value will bring in some capital, experts believe that the Swiss lender might try to cut its losses by just trimming its investment bank and wealth management divisions. The Deutsche Bank analysts stated that these divisions have been the larger driver of profits in the past.
Meanwhile, the bank has refused to address the rumors and stated that it will provide an update along with its third quarter results.
A person familiar with the Credit Suisse layoffs told Reuters that nothing is set in stone and the number of job cuts can change. Also, Swiss newspaper Blick had earlier reported that the company has plans to shelve nearly 3,000 jobs in Zurick. On the other hand, German newspaper Handelsblatt speculated that nearly 4,000 people might be affected by the Credit Suisse layoffs.
The Swiss lender already has plans to keep costs below $15.8 billion in comparison to the nearly $16.5 billion annualized expenditure. Experts state that while job cuts are the easiest way to scale back expenditures, it is not a reliable strategy and can quickly snowball into a problem as less workers can translate to service issues and customer losses.
The bank’s spokesperson refused to comment on the Credit Suisse layoffs stating, “We have said we will update on progress on our comprehensive strategy review when we announce our third-quarter earnings; any reporting on potential outcomes before then is entirely speculative.”
