Credit Suisse (CS) to Cut Jobs as Part of Cost-Saving Move
As part of its efforts to reduce expenses, Credit Suisse Group AG CS plans to cut around 5,000 jobs. The news was first reported by Reuters, citing a source with direct knowledge of the matter. Per the source, the discussions are ongoing and the number of job cuts could change.
Currently, Credit Suisse’s new chief executive officer, Ulrich Koerner, who became CEO in August after the removal of Thomas Gottstein, is under immense pressure to turn things around for the bank.
The company has been facing a string of scandals of late and has, hence, decided to make swift progress on its risk management and compliance overhaul.
Following the collapse of Archegos Capital Management in March 2021, which triggered one of the biggest trading losses in the history of Wall Street, CS faced a $5.5-billion hit.
Archegos, the New York family office run by fund manager Bill Hwang, took huge bets on a few stocks, using money borrowed from banks. However, after some of its biggest positions reversed, it was not able to meet the margin calls, resulting in a collapse.
Because of this, Credit Suisse and a few other banks, the prime brokers that offered almost $50 billion worth of leverage to Archegos, collectively lost more than $10 billion.
In addition to being part of the above-mentioned scandal, this June, Credit Suisse and a former employee were found guilty by Switzerland’s federal criminal court of failing to prevent money-laundering by an alleged Bulgarian cocaine trafficking gang between 2004 and 2008.
Apart from these, the shuttering of $10 billion of supply-chain finance funds linked to collapsed British financier Greensill has negatively impacted Credit Suisse’s financials.
Because of mounting litigation provisions and the poor performance of its investment banking business, the bank reported a net loss of 1.59 billion Swiss francs ($1.66 billion) in the second quarter of 2022.
Koerner has, thus, taken the responsibility of repositioning its investment bank in the tough macroeconomic and market environment as it seeks to achieve a more stable, capital light and better-aligned investment banking business. Further, the CEO has planned on cutting more than $1 billion in costs to help the bank recover from these setbacks and scandals.
By using technology, CS plans to achieve 200 million Swiss francs ($209.1 million) in cost savings in 2022 and 2023 each, with a further 400-million francs reduction in the medium term.
Notably, last month, the bank announced a new strategic review, for which updates will be provided with the third-quarter earnings results. The review will evaluate options for Credit Suisse, while reaffirming its commitment to serving wealthy customers.
Over the past year, shares of CS have lost 52.7% compared with a decline of 10.7% of the industry.
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Currently, Credit Suisse carries a Zacks Rank #5 (Strong Sell).
A couple of better-ranked stocks from the same space are HSBC Holdings plc HSBC and Barclays PLC BCS. Currently, HSBC sports a Zacks Rank #1 (Strong Buy), whereas BCS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past year, shares of HSBC have gained 14.1%, while BCS has lost 26.6%.
Over the past 30 days, the Zacks Consensus Estimate for HSBC’s current-year earnings has been revised 1.7% upward, while the same for BCS has moved 10.7% north.
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