Credit Suisse Group (NYSE: CS) plans to cut up to 6,500 more jobs in 2017, as Chief Executive Tidjane Thiam moves forward with a major restructuring. The strategy to manage a minority stake in the Swiss banking division was to raise cash to boost the group’s capital, but this developed more than anticipated in the fourth quarter.
The additional job cuts come after Switzerland’s second-biggest bank reported a 2.44 billion net loss for 2016. But Thiam hit a positive tone for the upcoming year. “We are now well-placed to capture growth and benefit from improving market conditions as a result of the tough actions we took in 2016,” he stated at a news conference. Since he took over 18 months ago, Thiam has been on a cost-cutting direction while turning the business towards wealth management instead of investment banking.The bank cut about 7,250 jobs in 2016 and said there would be between 5,500 and 6,500 more this year. It employed around 47,000 people at the end of 2016. Credit Suisse did not identify where the excess cuts would come but said they would include contractors, consultants and staff.
The 2016 loss — the bank’s second straight year in the red – derived significantly on the back of a roughly $2 billion charge to settle U.S. claims the bank misled investors in the sale of residential mortgage-backed securities.
Investors were supported by the bank’s better-than-expected 11.6 percent common equity Tier 1 capital ratio, which is a key measure of balance sheet strength. “It’s the capital that surprised positively,” said Vontobel analyst Andreas Venditti, who has a “hold” rating on the shares. Credit Suisse has dealt with questions over its capital levels for years, going back to Thiam’s predecessor, Brady Dougan.
In determination to develop its capital, the bank had proclaimed plans to raise 2-4 billion francs by selling up to 30 percent of its Swiss business in an initial public offering. However, there has since been assumption among some analysts and investors that the bank could reconsider selling a stake in the business.
Thiam said the bank was still arranging for the IPO but left the door open to other options to improve its balance sheet “if there are ways to reach a more attractive risk/reward outcome for our shareholders”. “The likelihood (of the IPO) has gone down,” Venditti said.
In wealth management, Credit Suisse saw net outflows in the fourth quarter as clients withdrew cash to participate in tax amnesty programmes and it dropped some external asset managers. Cross-town rival UBS, the world’s biggest wealth manager, also saw net withdrawals in the fourth quarter due to tax amnesty programs in emerging markets and Asia Pacific. Credit Suisse said all its wealth management divisions had seen positive inflows so far this year.