ZURICH (Reuters) – Swiss bank Credit Suisse said on Thursday it was cutting 11 percent of its workforce, or 5,300 jobs, as it revealed it made a net loss of about 3 billion Swiss francs ($2.5 billion) in October and November.
The bank said the loss, primarily in investment banking, where most of the job cuts will fall, was due to adverse market conditions and to the cost of reducing risk.
On the brighter side, Credit Suisse said that in November alone it was modestly profitable, and it also said its private banking segment was still seeing asset inflows and had hired 370 relationship managers this year, helping a rebound in shares.
The job cut announcement comes on the same day as Japan’s Nomura Holdings said it was firing 1,000 bankers in London. More than 100,000 jobs have been lost in the financial industry since September.
“These actions will better position us to weather the continuing challenging market conditions, capture opportunities that arise amid the continuing disruption, and prosper when markets improve,” Chief Executive Brady Dougan said.
Dougan said the investment bank would be leaner as it would exit certain proprietary and principal trading activities as well as origination capacity in some complex businesses.
“Investment banking is going back to basics and to the boring business,” said Dirk Hoffmann-Becking, a senior analyst with Bernstein Research. “Quite a lot of the frills is going.”
The bank will take a restructuring charge of 900 million Swiss francs, mostly in the fourth quarter, pointing to a total quarterly loss of about 4 billion Swiss francs, analysts said.
Having fallen 9 percent on Wednesday, Credit Suisse shares reflected the positives, climbing nearly 7 percent to 29.60 Swiss francs by 1150 GMT, while the DJ Stoxx index of European banking stocks was up 1.44 percent.
“The good news is that the loss occurred in October, and in November the bank was already profitable,” said Georg Kanders, an analyst with WestLB.
“The company is not sitting still; they are carrying out a cost reduction. It is impressive how they have reduced risk, and they say they have quite good net new money.”
NO GOVERNMENT HELP NEEDED
Traders say investors have looked more critically at Credit Suisse since the Swiss state bailed out rival UBS, which has made more write-downs than any other European bank.
When the rescue package for UBS was announced in October, Credit Suisse said it did not need government help, and Dougan told a conference call he did not foresee any circumstances in which the bank would need such help.
Echoing a similar move at UBS, the bank also said that, given its performance to date, “it would not be appropriate” for its chairman, its chief executive officer and the head of its investment bank to receive bonuses for 2008.
Thursday’s announcement brings the total number of job cuts at Credit Suisse this year to about 7,100, paring its workforce to about 45,000. UBS is cutting about 9,000 jobs, also mostly in investment banking, to bring total headcount to under 80,000.
“There was a bit of excitement when the news came out,” said a Credit Suisse employee in London. “Everyone is worried.”
Credit Suisse said the investment bank would bear two thirds of the new job cuts, bringing its staff to 17,500 by the end of 2009 from 21,300 at the end of September. There will also be cuts in asset management and private banking.
In commodities, a business that UBS has nearly axed, Dougan said its joint venture with Glencore GLEN.UL was strategic.
Most of the job cuts would take place by the end of the first half of 2009 and, along with other measures, should save 2 billion francs, or about 9 percent of the cost base. The bank said it also would axe 1,400 contractors.
The new cuts include 650 investment banking jobs in Britain and 170 jobs in Asia already announced this week.
Credit Suisse also said it had aggressively reduced risk-weighted assets and was aiming to bring them down to $170 billion by the end of the year from $236 billion at the end of 2007, and to $135 billion by the end of next year.
The bank said it had slashed to $3 billion its risky leveraged finance exposure from $11.9 billion at the end of September. It also trimmed its exposure on commercial mortgage-backed securities, which stood at $12.8 billion.
“We have been able to reduce that somewhat, but certainly not as much as the leveraged finance,” Dougan said.
The bank also said its Tier 1 ratio, a measure of financial strength, would be around 13 percent at the end of 2008, one of the strongest in the industry. Dougan said Credit Suisse already met stricter new bank capital requirements that Switzerland’s bank regulator said it had agreed on Thursday.
By Lisa Jucca
(Additional reporting by Rupert Pretterklieber and Olesya Dmitracova; Editing by Will Waterman)