Credit Suisse Group will cut an extra 1 billion Swiss francs ($1.1-billion U.S.) 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 per cent 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 per cent 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 <DBKGn.DE> and Barclays <BARC.L> when they report quarterly results next week.
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 per cent of its work force, 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.
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 crosstown rival UBS AG.
At 1037 GMT, the bank’s shares were up 2.7 per cent at 21.90 francs, outpacing a 0.9 per cent rise in the STOXX Europe 600 bank index.
Credit Suisse’s renewed emphasis on costs comes as part of Mr. 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 per cent level under stiffer Swiss requirements, from 8.2 per cent 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 per cent on the year, while costs edged 5 per cent 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.
Mr. 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”.
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