Credit Suisse to cut 2,000 jobs as profits drop
GENEVA (AP) — Credit Suisse Group announced Thursday that it will cut more than 2,000 jobs after its second-quarter profits dropped by half, more than expected, due to a strong Swiss franc and a plunge in trading and investment banking earnings.
Credit Suisse follows cross-town rival UBS and U.S. giant Goldman Sachs in trimming its payroll costs in reaction to unexpectedly weak profits.
The company said it would eliminate the jobs globally, including about 500 in Switzerland, as its net profit fell to 768 million Swiss francs ($959 million)from 1.59 billion francs in last year's April-June period. The result was below analysts' predictions for a profit of 1 billion Swiss francs.
Chief Executive Brady Dougan said in a statement that the second quarter performance was "disappointing" but defended the company's overall business model.
He said asset management and private banking remained strong, although investment banking fell further than he expected, in part due to market uncertainty about U.S. and eurozone debt as well as new rules requiring banks to hold larger capital buffers.
"To ensure attractive returns in the face of an uncertain and challenging economic and market environment, we continue to be proactive about seeking cost efficiencies across the bank," Dougan said.
The Zurich-based bank will cut about 4 percent of its 50,700 full-time employee positions worldwide, for a savings of 1 billion francs by 2012.
Shares of Credit Suisse fell more than 1 percent, to below 29 francs, in mid-morning trading on the Swiss exchange. They have dropped by almost 22 percent this year.
Revenue from its main operations fell 25 percent to 6.33 billion francs. Trading and fixed-income sales were also down, largely because of a 23 percent rally in the value of the Swiss franc against the dollar.
Private banking disappointed, with new assets amounting to only 11.5 billion francs, below analyst forecasts for 14.2 billion francs.
Investors were looking for signs of how the Zurich-based bank will deal with a recently announced U.S. tax evasion probe similar to the one that hit rival UBS AG three years ago. The outcome of the case could again affect the entire Swiss banking industry, whose storied tradition of client secrecy was already weakened by a deal Switzerland struck to save UBS.
The bank said it has received a letter from the U.S. Justice Department saying it is the target of a grand jury probe, and has been responding to subpoenas and other requests for information from U.S. legal authorities and securities regulators.
"A limited number of current or former employees have been indicted or arrested for alleged conduct while employed at Credit Suisse or other financial institutions," the bank said in its financial statement.
It said the Justice Department was focused on whether U.S. clients were tax cheats, and the possibility that the bank and some of its employees helped those clients to avoid their responsibilities. The bank said U.S. securities regulators were looking at whether Credit Suisse "relationship managers" had registered as was required so that they could work as a broker-dealer or investment adviser.