(Bloomberg) - Credit Suisse Group AG is weighing a fresh round of job cuts, part of a renewed push to slash costs after warning of a second-quarter loss, according to people familiar with the matter.
The Swiss bank is considering headcount reductions across divisions including investment banking and wealth management in multiple regions, the people said, asking not to be identified as the matter is private.
After falling as much as 7.6% on the profit warning, the stock reversed course, gaining as much as 5.8% after Swiss blog Inside Paradeplatz reported State Street Corp. could make a bid for Credit Suisse, citing a single “insider.”
The dismissals are likely to come as the bank prepares to update investors on risk, compliance, technology and wealth management on June 28, said the people. The final tally of cuts is still to be decided, they said. A Credit Suisse spokeswoman declined to comment, pointing to the lender’s statement on Wednesday, which said it would accelerate cost cutting efforts.
The bank warned it expects a third straight loss this quarter, driven by a slump at its investment banking and trading division. Credit Suisse pointed to widening credit spreads and client deleveraging amid volatile markets, though other banks have said the volatility has benefited their trading desks.
“Today’s profit warning blames ‘the current geopolitical situation’ and ‘significant monetary tightening’ yet we would argue CS’ predicament may be largely self-inflicted,” Citigroup Inc. analysts led by Andrew Coombs wrote in a note to clients Wednesday.
Inside Paradeplatz said that an offer for Credit Suisse at about 9 francs a share could come within days. A State Street representative said the firm is preparing a response to the report, while analysts were skeptical about a deal, citing the lack of strategic rationale for the US firm. Credit Suisse declined to comment.
Chief Executive Officer Thomas Gottstein’s two years in charge have seen the $5.5 billion hit from Archegos, the collapse of partner Greensill Capital and a string of profit warnings that eroded investor confidence, weakened key businesses and prompted an exodus of talent. The lender has said that 2022 will be a year of transition as it seeks to reduce risk at the investment bank while shifting resources to wealth management.
The Swiss lender had about 51,000 employees at the end of March. It recently overhauled top management saying that its chief financial officer, legal counsel and head of Asia would all be either stepping down or leaving the company. It also named former Bank of Ireland Group Plc Francesca McDonagh as head of the Europe, Middle East and Africa region.
Even before Wednesday’s warning, the bank had been struggling to keep pace with rivals’ trading results after reducing risk because of Archegos. Equities revenue dropped 47% in the first quarter while the fixed income business, typically a source of strength, did even worse. Results laid bare the other steep challenges still facing the bank as it seeks to regain investor confidence, including still-to-come legal hits and weaker-than-expected wealth management results.
Beyond the bank’s self-inflicted damage, Gottstein is contending with a multitude of macro factors outside his control that further risks derailing the recovery. Wealthy investors, particularly in the Asia Pacific region, are sitting out the volatility in markets, hurting fees for the private bank. Covid lockdowns in the region are reviving fears of supply chain disruptions, while M&A activity has taken a hit after Russia’s invasion of Ukraine.
The latest troubles are in stark contrast to the message from investment banking and capital markets head David Miller, who has been telling clients this year that the bank “is back” and ready to underwrite deals.
While Credit Suisse said Wednesday that advisory fees generated by Miller’s dealmakers have been “resilient,” it said low levels of debt and equity issuance contributed to the investment bank likely posting a loss this quarter.
(Adds company response to M&A speculation in seventh paragraph)
By Cathy Chan, Ambereen Choudhury
and Marion Halftermeyer
