Zurich, Oct. 8 (Reuters): Credit Suisse First Boston, the loss-making investment bank of Switzerland’s Credit Suisse Group, will cut around 1,750 more jobs to seek an extra $ 500 million in savings this year, bank sources said on Tuesday.
The sources cited an internal email by CSFB chief executive John Mack sent to the group’s employees late on Monday in which he blamed already tough market conditions which had continued to deteriorate in recent weeks. CS officials in Zurich had no immediate comment.
According to the sources, Mack’s mail said CSFB was aiming to cut 5-7 per cent of its workforce across the world and in various functions. Mack was also seeking unspecified, additional savings in non-personnel costs.
Investors initially welcomed the new cuts, which should help keep a lid on expected losses at CSFB, one of two key divisions of Switzerland’s second-largest banking conglomerate.
CS shares, which have shed as much as a third of their value over the past week alone, opened 2 per cent higher at 21.20 francs in a slightly firmer Swiss market.
Mack, widely known on Wall Street as “Mack the Knife,” has already slashed more than 4,500 jobs since he took over as CEO in July 2001, cutting some $ 1.8 billion in costs in what has become the worst industry downturn in a generation.
Tens of thousands of investment bankers have already lost their jobs on Wall Street, feeling the brunt of declining equity markets which have cut into their firms’ trading revenues and reduced global mergers and acquisitions to a mere trickle.
Facing the heat
The CS group warned last week that CSFB would report an operating loss in the quarter just ended, after Mack managed to wring out a slim profit in the second quarter of the year.
CS finance chief Phil Ryan said on Monday the group did not expect CSFB to get back to profits before next year. The group as a whole is expected to report a net loss of at least one billion Swiss francs ($ 670.7 million) when it releases third-quarter figures on November 14, after a 579-million franc loss in the second quarter of the year. The job cuts come as CSFB faces the heat of US regulators amid allegations it improperly allocated tasty stock offerings in the late 1990s. CSFB earlier this year agreed to pay a $ 100-million settlement without admitting or denying guilt.
On Monday, further evidence emerged that CSFB might have used coverage of companies by its research department to win and retain lucrative investment banking business in documents including a presentation to potential clients obtained during the course of a regulatory probe.