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In an effort to increase profits and reinforce its balance sheet, Credit Suisse Group (CS - Snapshot Report) 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.
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 - Analyst Report) 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.
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.