In an effort to increase profits and reinforce its balance
sheet,
Credit Suisse Group
(
CS
) is about to slash 100 jobs in Britain. The layoffs are a part
of this Zurich-based bank's strategy to achieve CHF 4.0 billion
($4.3 billion) in cost savings by 2015.
The reduction of headcount will occur in the equities, fixed
income and the advisory businesses of the investment banking unit
of the company in Britain. The layoffs will take place over the
next 90 days.
Even though this Swiss bank refused to give the exact number of
employees to be sacked, market rumors specify that roughly 1,000
job losses may take place due to targeted CHF 1.0 billion ($1.1
billion) expense savings announced by the bank in October this
year. These retrenchments are expected to stretch throughout
Europe.
A challenging operating environment in Europe compelled Credit
Suisse to come up with the decision of trimming down its
workforce. The sovereign debt crisis has been continued to be a
matter of concern and the company resorted to this kind of a
restructuring measure to address such issues. Notably, Credit
Suisse faced huge headwinds in the private banking segment in the
third quarter of 2012, with declining margins.
Streamlining Initiatives
Last week, as part of the expense reduction plan and efficiency
improvements initiative, Credit Suisse also announced a major
revamp in its organizational structure as well as in management
team. The changes will be effective by the end of this month.
The Private Banking and Asset Management divisions of the company
will be merged and the new unit will become its Private Banking
& Wealth Management division. Further, Credit Suisse's
Investment Banking securities business in Switzerland will be
transformed into Private Banking & Wealth Management
division.
Similar Actions in the Industry
Majority of the global banks are currently struggling to bring
down costs amidst the gloomy macro-economic factors and Eurozone
crisis. Recently, another Swiss banking giant
UBS AG
(
UBS
) slashed 10,000 jobs with roughly 2500 in Switzerland itself.
The layoffs were part of the bank's efforts to reorganize its
business by developing core businesses and downsizing troubled
units.
UBS has been reducing headcounts in its investment bank unit over
the past year and aims to refocus on building its market-leading
wealth management and asset management business.
Our Viewpoint
Since the near-term outlook of a rebound in the economy remains
uncertain, banks are increasingly resorting to aggressive
cost-cutting initiatives in order to maintain a sound capital
buffer for withstanding any financial crisis in the future.
Further, as bolstering revenue has become a challenge, banks are
elevating profitability through business overhaul and cost
reduction measures, including layoffs.
Credit Suisse currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We believe that prudent
business-model changes along with efficiency initiatives can lead
to an improvement in the company's capabilities and add to its
competitive edge. These factors may ultimately result in upward
estimate revisions, thereby leading to an improved Zacks Rank.
CREDIT SUISSE (CS): Free Stock Analysis
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UBS AG (UBS): Free Stock Analysis Report
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