Credit Suisse to layoff 9,000 people, projects $1.6bn Q4 loss
A string of scandals this year has dogged Swiss bank Credit Suisse. Add to that the challenging economic environment, and we have a recipe for disaster. The bank has now said that it projects a CHF 1.5 billion ($1.6 billion) loss in the fourth quarter due to declining client activity. It also plans to ax 9,000 employees by 2025 to cut costs.
Why does this story matter?
Credit Suisse, the second-largest Swiss bank, hasn't had the best of 2022 so far. Constantly declining share prices, a money laundering-related conviction, failed bets on Archegos Capital Management and Greensill Capital...the list goes on. Last month, the bank's credit default swap reached its highest in the last two decades. Considering all that, restructuring has been in the cards for a while for the bank.
Bank expects losses in wealth management and investment banking
In its Q4 projection, Credit Suisse said that it expects losses in wealth management sections and investment banking. It attributed this to the market conditions, continuous credit outflows, and the sale of non-core businesses. The bank projects a total pre-tax loss of around CHF $1.5 billion. It expects to lose CHF 75 million due to the sale of the shareholding in the Allfunds group.
Number of deposits and assets under management will decrease
The number of deposits in the bank and the assets under its management are set to decrease in Q4. This will result in a decline in net interest income, recurring commissions, and fees, which will lead to a loss for the wealth management division.
Bank plans to undergo a complete overhaul
Credit Suisse is set to undergo a sweeping overhaul. A number of scandals have the market questioning the bank's financial health. The Zurich-based bank plans to restructure its business to address that. The bank held an extraordinary general meeting to seek shareholders' approval for the bank's restructuring plans and its proposal to raise CHF 4 billion.
It aims to cut 2,700 jobs in Q4
As part of the restructuring, the bank plans to cut jobs. It aims to slash 2,700 jobs in the fourth quarter and around 9,000 by 2025. The bank said that layoffs will depend on several factors, including the performance for the rest of the year, the continued exit of non-core positions, goodwill impairments, and the outcome of other asset sales.
