Published October 25, 2012
ZURICH – Credit Suisse will cut an extra 1 billion Swiss francs ($1.1 billion) of costs, including axing more jobs, as part of efforts to bolster its profits and capital position.
Volatile financial markets, a dearth of deals and tighter regulations in the wake of the 2007-9 financial crisis are forcing investment banks to slash costs, and the euro zone debt crisis has pushed many to cut back even more.
The Swiss bank said on Thursday third-quarter net profit fell 63 percent to 254 million francs, missing analysts' average forecast of 370 million. The quarter was hit by 1.05 billion francs in charges, mainly linked to its own debt.
However, Credit Suisse stock rose 2.6 percent after higher profits from the investment banking division, which benefited from a pickup in bond trading.
That unit offset Credit Suisse's private banking business, where margins shrank and fresh funds won from wealthy clients missed the bank's own targets by far.
The fixed-income recovery has already been noted by U.S. investment banks and could also boost European peers like Deutsche Bank
Credit Suisse said it was targeting 4 billion francs in cost savings by 2015, up from a goal of 3 billion francs it set in July and an earlier figure of 2 billion.
The bank, which is already cutting 3,500 staff or 7 percent of its workforce, said job losses would be inevitable to achieve the extra savings, but did not say how many more staff would go.
It has already combined the separate operating platforms of its two main units - private banking and investment banking - and will increasingly shift information technology jobs to Poland and India as part of its cost saving drive, finance chief David Mathers told journalists.
ALL THE RIGHT THINGS
Thursday's measures helped quell criticism of Chief Executive Brady Dougan following a stinging rebuke of the bank by the Swiss National Bank in June following urgings from the SNB to quickly bolster its capital.
"We believe management is doing all the right things in terms of shrinking the investment bank ... (and) cutting costs," said JP Morgan analyst Kian Abouhossein who rates Credit Suisse at "overweight" but prefers cross-town rival UBS .
At 1037 GMT, the bank's shares were up 2.7 percent at 21.90 francs, outpacing a 0.9 percent rise in the STOXX Europe 600 bank index.
Credit Suisse's renewed emphasis on costs comes as part of Dougan's push to return the bank to making cash dividends, having offered this year's payout in shares. The previous year it had given a choice of taking shares or cash.
The bank said it will go back to cash payouts in 2013, after its capital has hit a key 10 percent level under stiffer Swiss requirements, from 8.2 percent currently.
UBS, which reports quarterly results next Tuesday, is also expected to announce job cuts to protect profits as it withdraws from riskier investment banking areas which soak up large sums of capital.
Credit Suisse's investment bank lifted revenue 66 percent on the year, while costs edged 5 percent higher, in large part due to provisions for mortgage lawsuits. The unit benefited from a surge in sales and trading of fixed-income products such as credit and securitized products.
Mathers said business trends in the first weeks of the fourth quarter were similar to the third.
Credit Suisse's private bank didn't fare as well as the investment bank, however. The unit's revenue fell on the quarter and on the year, partly due to a traditional lull in client activity during the summer holiday months.
"The malaise continues" in the private bank, Kepler Capital Markets analyst Dirk Becker said. He rates the stock at "reduce".
(Editing by Hans-Juergen Peters and David Holmes)