Credit Suisse is considering cutting 5,000 jobs, or roughly one out of every ten, as part of a cost-cutting drive at Switzerland’s second-largest bank, according to a source with direct knowledge of the matter.
The magnitude of the potential job cuts highlights the challenge that Credit Suisse and new CEO Ulrich Koerner face in restoring the bank’s reputation after a string of scandals.
The bank would only say that it would provide an update on its strategic review with its third-quarter earnings and that any reporting on outcomes would be speculative.
Credit Suisse has designated 2022 as a “transition” year, with a change of guard, restructuring to reduce risk-taking in investment banking, and expanding wealth management.
The Zurich-based bank has denied rumors that it might be bought or broken up.
The source said that discussions about job cuts are still ongoing and that the number of cuts could change. The Swiss newspaper Blick previously reported that over 3,000 jobs would be lost.
Credit Suisse has already stated that it will reduce costs to less than 15.5 billion Swiss francs ($15.8 billion) in the medium term, down from 16.8 billion francs this year.
So far, no job cuts have been announced.
Koerner, who was appointed CEO just over a month ago, has been tasked with reducing investment banking and cutting more than $1 billion in costs in order to help the bank recover from a string of setbacks and scandals.
His strategic review, the bank’s second in less than a year, will assess options while reaffirming the bank’s commitment to serving wealthy customers.
The Swiss lender is under increasing pressure to turn the business around and strengthen its financial position.
“Cutting costs is the simplest immediate step. However, this is not a strategy “Andreas Venditti, a Vontobel analyst, stated, “You can get caught in a vicious circle where jobs are lost, service suffers, and customers leave.”
Another conundrum, according to Venditti, is that “should restructuring costs, including job cuts, run into the billions, the bank may also need to raise more capital.”
Deutsche Bank analysts estimate that it may need to increase capital by 4 billion Swiss francs to shore up its buffers and fund the revamp.
After a tumultuous two years marked by huge losses, a rare court conviction for the bank in Switzerland, and a 40% drop in its shares, Koerner, 59, succeeded Thomas Gottstein as CEO in August.
Between April and June, the bank lost 1.59 billion Swiss francs due to legal expenses. Before taxes, its investment bank alone lost 1.12 billion Swiss francs.
A $5.5 billion loss on the default of US family office Archegos Capital Management, as well as the closure of $10 billion in supply chain finance funds linked to failed British financier Greensill, have also befallen the bank.
Credit Suisse was also convicted in June of failing to prevent money laundering by a Bulgarian cocaine trafficking ring in Switzerland’s first criminal trial of a major bank. It is contesting the conviction.
A senior executive told Reuters that Credit Suisse is still betting big on China and plans to launch a wealth business there next year, indicating that the bank expects its fortunes to improve.
Following the acquisition of full ownership of its local securities venture, the bank intends to begin offering wealth management services in China next year.
