Credit Suisse Group yesterday announced 800 million Swiss francs (€733 million) in additional cost cuts and plans to shrink its investment bank further as part of a restructuring plan aimed at revitalising 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 per cent 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 two per cent to 14.61 Swiss francs at 0858 GMT, having fallen by more than a third this year.
Deutsche Bank’s 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 six 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 yesterday 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 per cent.
“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 added that write-downs at Global Markets, which totalled $633 million in the fourth quarter of 2015, were lower in the first quarter at $346 million as of March 11, 2016.
The write-downs would trigger a first-quarter loss at the business, but a smaller one than in the fourth quarter.
“Revenues (at Global Markets) have remained weak in the period, with negative operational leverage,” Thiam said.
On a brighter note, the bank cited net new money inflows so far this year of 3.6 billion francs at its Asia Pacific business, 7.1 billion at international wealth management, and 4.5 billion at its Swiss universal bank, whose partial public listing in 2017 was on track if market conditions permit.