Credit Suisse has unveiled plans to drastically slash more jobs in its investment-banking business as part of a drastic cost-cutting strategy aimed at boosting its earnings. The Swiss lender said on Wednesday (23 March 2016) that it plans to cut 2,000 jobs at its Global Markets business in order to deal with challenging market conditions and will implement cost cuts worth CHF 800m (£578.5m, €733.6m, $821m), bringing its 2018 cost reduction target to at least CHF 4.3bn.
Switzerland's second-largest lender indicated the cost cuts will drive its operating cost base below CHF 18bn by 2018, adding it aimed to achieve CHF 1.7bn in cost savings in the current year. In February, the Zurich-based bank said it had already pushed through approximately 4,000 job cuts to accelerate the cost-cutting strategy outlined by chief executive Tidjane Thiam, who took over at Credit Suisse from British insurer Prudential in July 2015.
Five months into implementing his plan, Thiam said the latest job cuts were inevitable due to a combination of factors. He blamed what he called "historically low levels of client activity" and high costs for a disappointing performance in the bank's Global Markets business.
"In this context, we have taken immediate action to reduce outsized positions in activities not consistent with our new strategy and systematically reduced our exposures," he said.
Credit Suisse's Global Markets division recorded $346m worth of write downs in the first quarter of 2016, down from $633m in the final three months of 2015. The first quarter write downs will translate into a first quarter loss which will, however, be smaller than the one recorded in the fourth quarter of last year.
Credit Suisse's shares have fallen by over a third so far this year but, under Thiam's stewardship, the lender raised approximately CHF 6bn in capital last year and analysts have welcomed the latest cost saving measures.
"It is positive that Credit Suisse is taking more action on costs and reducing risk-weighted assets in Global Markets," said analysts at RBC Capital Markets. "As with previous restructuring plans though the issue is the implications for revenues long term and the extent to which the bank gets credit of a 15% target return on equity in Global Markets."