The Swiss banking giant is accelerating its cost cutting amid a restructure and challenging economic conditions.
Tidjane Thiam, CEO, Credit Suisse
Credit Suisse will be cutting approximately 4,000 positions including employees, contractors and consultants as part of a major cost-cutting effort as the Swiss banking giant faces a steep loss for the fourth quarter of 2015 and a loss for the year.
The loss for the fourth quarter of 2015 was a steep drop of 5.8 billion Swiss francs ($5.8 billion). Credit Suisse also reported a group fiscal year 2015 pre-tax loss of 2.4 billion Swiss francs (CHF) ($2.42 billion).
The Swiss banking giant also had:
- A goodwill impairment of CHF 3.8 billion;
- Restructuring costs of CHF 355 million;
- Significant litigation items (FY2015 CHF 821 million; 4Q15 CHF 564 million);
- Strategic Resolution Unit (SRU) losses (FY2015 CHF 2.51 billion; 4Q15 CHF 1.12 billion);
- And Fair Value of Own Debt (FVOD) impacts: a FY2015 gain of CHF 298 million but a 4Q15 loss of CHF 697 million.
The job cuts, which are to be completed by the end of 2016, were announced as part of Credit Suisse’s presentation of results for fiscal year 2015 by Tidjane Thiam, CEO of Credit Suisse.
“Given the particularly challenging environment we face, we decided in the fourth quarter to accelerate the implementation of our cost savings program across the bank,” Thiam said. “We have identified and actioned initiatives that will permanently reduce our fixed cost base, resulting in cost savings of CHF 500 million [$502.5 million] per annum on a full year run-rate basis. We are implementing a reduction of approximately 4,000 positions (employees, contractors and consultants).”
The cuts in headcount “combined with the measures already implemented in the fourth quarter (including the transfer of our US Private Banking)” will lead to the cost savings by the end of January of 1.2 billion in Swiss francs per year [$1.21 billion] or 34 percent of “the CHF 3.5 billion [$3.52 billion] of savings targeted by end 2018,” Thiam said.
Credit Suisse has been readjusting its core businesses and embracing the private wealth management, which is proving to be highly volatile.
“Since October 21, we have been implementing with discipline our new strategy, with a new organizational structure and the completion of our capital raise, for which we are grateful to our shareholders,” Thiam said.
The bank’s three new geographic divisions – Asia, Switzerland and international — have been delivering profitable growth. “This performance was achieved in spite of challenging conditions, particularly in 4Q15,” Thiam says. “The fourth quarter of 2015 was characterized by volatile market conditions, pressures on market liquidity, a sharp decline in oil prices, widening credit spreads, continued uncertainty linked to asynchronous monetary policies, and large fund redemptions by market participants affecting asset prices.”
The Investment Banking and Capital Markets (IBCM) group “was negatively impacted by a slowdown in client activity as well as some underwriting and corporate bank mark-downs and reported a small adjusted pre-tax loss for the fourth quarter,” Thiam says.
“We have continued to reposition our IBCM business, which has suffered from under investment in the past, through incremental targeted investments, shifting our model towards advisory and equity underwriting and towards investment grade corporates in order to diversify our revenue base and materially reduce the volatility of our earnings in this attractive, capital light activity,” according to Thiam.
Thiam reaffirmed the bank’s strategy announced in October.
“We continue to believe that wealth management, supported by our investment banking capabilities, remains a uniquely attractive long-term opportunity for our bank, as we are well positioned to create value for our customers, individual and institutional, across our chosen markets,” Thiam says. “Therefore we will continue to implement our strategy with discipline during the 35 months that now separate us from the objectives we committed to achieving by December 2018.”
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