Credit Suisse Reveals Big Loss
Credit Suisse Group lost three billion Swiss francs ($2.48 billion) in two months and said it plans to fire 5,300 employees, stark signals that investment banks will be retreating from complex bets and are piling into safer businesses as the fourth quarter is proving brutal.
Credit Suisse's decision to cut 11% of its work force will save about two billion francs in annual costs and further increases the ranks of the unemployed in the financial sector.
Two-thirds of the job cuts, or about 3,500 jobs, will be made at Credit Suisse's investment bank. The reductions will be completed by the first half of next year, the bank said.
After a horrid year, banks are jettisoning businesses that sold and traded complex credit securities. Banks like Credit Suisse also are cutting back on in-house, or proprietary, trading strategies that are sparking losses, and hoping they can make money on high-volume, less risky areas such as stocks, computerized trading, interest rates and currencies as well as advising on deals.
With banks focusing on different businesses postcredit crunch, investment-banking revenue next year will resemble the lower levels of 2002 and 2003, when Wall Street was recovering from the bursting of the telecommunications and technology bubbles, said Morgan Stanley bank analyst Huw van Steenis.
'What's fascinating is the mantra -- what you are hearing from most every investment bank now, bar one or two -- is that we are to return to a model of the late '90s,' Mr. van Steenis said.
Credit Suisse's announcement signals that losses are spreading to even banks that until now have mostly avoided massive write-downs tied to U.S. mortgage loans. Many banks in the U.S. and Europe are expected to report fresh losses totaling tens of billions of dollars in the fourth quarter.
The results will put a dent in the capital that banks have been raising from governments, sovereign funds and shareholders.
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