Credit Suisse considers job cuts after loss warning amid State Street takeover bid report

Investment bank warned it expects third straight loss this quarter, driven by slump at investment and trading division

Swiss blog Inside Paradeplatz reported that US-based State Street could make a bid for Credit Suisse, citing an “insider”. AFP

Credit Suisse Group is considering a fresh round of job cuts, part of a renewed push to slash costs after warning of a second-quarter loss, according to people familiar with the matter.

The Swiss bank is considering headcount reductions across divisions including investment banking and wealth management in a number regions, the sources said.

After falling as much as 7.6 per cent on the profit warning, the stock reversed course, gaining as much as 4.8 per cent after Swiss blog Inside Paradeplatz reported that US-based State Street could make a bid for Credit Suisse, citing an “insider”.

The dismissals are likely to come as the bank prepares to update investors on risk, compliance, technology and wealth management on June 28, the sources said.

The final tally of cuts has yet to be decided, they said.

A Credit Suisse spokeswoman declined to comment, highlighting the lender’s statement on Wednesday, which said it would accelerate cost-cutting efforts.

The bank issued a warning that it expects a third straight loss this quarter, driven by a slump at its investment banking and trading division.

Credit Suisse highlighted widening credit spreads and client deleveraging amid volatile markets, though other banks have said the volatility has benefited their trading desks.

“Today’s profit warning blames ‘the current geopolitical situation’ and ‘significant monetary tightening’ yet we would argue CS’ predicament may be largely self-inflicted,” Citigroup analysts led by Andrew Coombs wrote in a note to clients on Wednesday.

During chief executive Thomas Gottstein’s two years in charge, the group has had a $5.5 billion hit from Archegos, the collapse of partner Greensill Capital and a string of profit warnings that eroded investor confidence, weakened key businesses and prompted an exodus of talent.

The lender has said that 2022 will be a year of transition as it seeks to reduce risk at the investment bank while shifting resources to wealth management.

The Swiss lender had about 51,000 employees at the end of March. It recently overhauled top management saying that its chief financial officer, legal counsel and head of Asia would all be either stepping down or leaving the company.

It also named former Bank of Ireland group chief executive Francesca McDonagh as head of the Europe, Middle East and Africa region.

Even before Wednesday’s warning, the bank had been struggling to keep pace with rivals’ trading results after reducing risk because of Archegos. Equities revenue dropped 47 per cent in the first quarter while the fixed income business, typically a source of strength, did even worse.

Results laid bare the other steep challenges still facing the bank as it seeks to regain investor confidence, including still-to-come legal hits and weaker-than-expected wealth management results.

Thomas Gottstein, chief executive of Credit Suisse Group. Bloomberg

Mr Gottstein is also contending with a number of factors outside his control that could affect any recovery. Wealthy investors, particularly in the Asia-Pacific region, are sitting out the volatility in markets, hurting fees for the private bank.

Covid lockdowns in the region are reviving fears of supply chain disruption, while M&A activity has taken a hit after Russia’s invasion of Ukraine.

The latest troubles are in stark contrast to the message from investment banking and capital markets head David Miller, who has been telling clients this year that the bank “is back” and ready to underwrite deals.

While Credit Suisse said on Wednesday that advisory fees generated by Mr Miller’s dealmakers have been “resilient”, it said low levels of debt and equity issuance contributed to the investment bank likely posting a loss this quarter.