Credit Suisse (CSGN.S) is looking to lay off about 5,000 employees, almost one position in 10, as part of a cost reduction drive at Switzerland’s second-largest bank, a source close to the matter told reporters.
The scope of potential job cuts highlights the challenge facing Credit Suisse and new chief executive Ulrich Koerner, who is trying to put the bank back on an even keel after a series of scandals. The bank refused to comment beyond restating that it would provide an update on its strategic review with its third-quarter earnings, saying that any reporting on outcomes was provisional.
Credit Suisse has called 2022 a “transition” year with a change of guard, restructuring to reduce risk-taking in investment banking, and pushing up wealth management. The Zurich-based has brushed off speculation that it could be bought or dissolved.
The talks about job cuts are underway and the number of layoffs could still change, the source said. Swiss newspaper Blick earlier published that more than 3,000 jobs would be lost.
Credit Suisse has already said it will slash costs below 15.5 billion Swiss francs ($15.8 billion) in the medium term, compared to an annualized 16.8 billion francs this year. Until now, it has not indicated job cuts.
Koerner, upgraded to CEO just over a month ago, has been assigned the task of cutting back investment banking and reducing more than $1 billion in costs to help the bank bounce back from a series of scandals and setbacks.
His strategic review, the second in less than a year, will assess options for the bank while reiterating its devotion to servicing wealthy clients.
The Swiss bank is facing growing pressure to restructure the business and enhance its financial resilience.
Andreas Venditti, an analyst with Vontobel, said:
“Cutting cost is the easiest immediate step it can take. But it’s not a strategy. You can end up in a vicious circle, where jobs are cut, service declines, and customers leave.”
Venditti underlined another conundrum:
“Should restructuring costs, including from job cuts, run into the billions, the bank may also need to raise more capital.”
Analysts at Deutsche Bank forecast that it may require to boost capital by 4 billion Swiss francs to build up its buffers and fund the reshaping.
Koerner, 59, a restructuring expert, took over from Thomas Gottstein as CEO in August after a tempestuous two years underscored by massive losses, a rare court sentence for the bank in Switzerland, and a 40% drop in its shares.
Buy Crypto NowBetween April and June, the bank incurred a 1.59 billion Swiss franc loss, as legal costs escalated. Its investment bank alone shed 1.12 billion Swiss francs before tax.
Double hits – the collapse of $10 billion of supply chain finance funds tied to the collapsed British financier Greensill and a $5.5 billion loss on the default of U.S. family office Archegos Capital Management – have also weighed on the bank.
In June, Credit Suisse was also found guilty of failing to stop money laundering by a Bulgarian cocaine trafficking gang in Switzerland’s first criminal trial of one of its top banks. It is appealing against the verdict.
In a sign that Credit Suisse hopes for a rally in its fortunes, a senior executive told Reuters that it is still betting highly on China and intends to start a wealth business there in 2023. The bank plans to start providing wealth management services in China in 2023 on the back of acquiring complete ownership of its local securities venture.
($1 = 0.9825 Swiss francs)
