Credit Suisse to cut 2,000 jobs as profits drop
Thursday, July 28, 2011
GENEVA (AP) — Credit Suisse Group announced fresh job cuts Thursday after posting steeply lower second-quarter net profits of 768 million Swiss francs ($959 million), battered by a strong currency and a plunge in trading.
Credit Suisse said it would eliminate more than 2,000 jobs to cut costs as its net profit fell 52 percent 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.
Operating income fell to almost 1.37 billion francs from 1.7 billion francs, due to weak trading and the 23 percent year-on-year drop in value of the U.S. dollar against the Swiss currency.
“The strength of our business model is underscored by an underlying return on equity of 15 percent for the first half of 2011 despite a disappointing performance in the second quarter,” Chief Executive Brady Dougan said in a statement.
He said investment banking fell further than expected, while asset management and private banking remained strong, but that “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.”
The Zurich-based bank said it would cut about 4 percent of its 50,700 full-time employee positions globally, for a savings of 1 billion francs by 2012.
With the Swiss franc soaring against other currencies and trading volumes flat, analysts had anticipated that Switzerland’s second-biggest bank would post disappointing second-quarter results and announce sizable job cuts to reduce costs and please the market.
Its revenue from its main operations fell 25 percent to 6.33 billion francs, while revenue from trading and fixed-income sales also dropped. Its private banking operations also declined due to the strong Swiss franc eating into profits, revenue and assets held in other currencies.
Investors also were looking to see how the Zurich-based bank will deal with a recently announced U.S. tax evasion probe similar to the one that hit cross-town 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 also 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.
Shares of Credit Suisse have dropped by almost 22 percent this year.
On Tuesday, Switzerland’s biggest bank, UBS, lowered its medium-term earnings forecast and announced fresh job cuts after posting sharply diminished second-quarter net profits of almost 50 percent from the same period a year ago. UBS declined to say how many staff would lose their jobs in the cost-cutting exercise over the next two to three years.