Credit Suisse is slashing 9,000 jobs and reviving a disused investment bank in what may be a final attempt to save the business, but warned today the turnaround campaign may “result in an adverse effect on our business as a whole”.
The restructuring announcement came alongside a dire set of third quarter results that laid bare the scale of the task to lift the bank out of the mire.
Losses ballooned over 150 per cent over the last quarter alone, rising to CHF4.03bn (£3.52bn) from CHF1.59bn (£1.39bn) in the three months to June.
The huge loss increase sent Credit Suisse’s Swiss-listed shares down nearly 13 per cent in early trading today.
The firm is planning to ask investors to inject £3.46bn into the businesses via a share sale backed by the Saudi National Bank.
The downbeat earnings are the latest event in Credit Suisse’s doom loop that has swung it from one of the global financial system’s leading lights to the sick man of the industry.
In 2020, the firm was ensnared in an espionage scandal that resulted in its former chief Tidjane Thiam leaving.
Credit Suisse also booked huge losses due to its exposure to collapsed investment funds Greensill Capital and Archegos Capital, run by Lex Greensill and Bill Hwang respectively.
Earlier this year, its ex-chairman and former Lloyds Bank boss, António Horta-Osório was jettisoned from his post after an internal probe found he breached Covid-19 quarantine rules to attend the Wimbledon tennis and Euro 2021 finals.
In its earnings update, Credit Suisse recognised the long list of scandals risk railroading its turnaround efforts.
“Any reputational harm resulting from prior events or from reactions to our strategic initiatives may make it more difficult to implement those strategic initiatives or achieve the related targets and objectives,” it said.
The restructuring drive will see the bank slash 2,700 jobs this year – five per cent of its workforce – and ultimately cut headcount by around 9,000 to 43,000 in 2025.
Credit Suisse intends to spin out its investment division by reviving the First Boston business, a capital markets firm the Swiss bank acquired in the early 1990s.
It is also offloading riskier financial products.
Boss Axel Lehmann called the plan a “blueprint for success” today.
JP Morgan analysts said that “question marks remain” over the restructuring of investment banking, adding that the share sale will weigh on the stock.