Credit Suisse set to cut 10% of European investment bankers

Credit Suisse is gearing up to cut more than 10 per cent of European investment bankers this year, having already let hundreds of staff go in London and Zurich last month, according to people with knowledge of the moves.

The crisis-plagued Swiss lender announced in October that it planned to cut as many as 9,000 roles globally over the next three years from its 52,000 workforce. But those plans have stepped up in recent weeks as the bank prepares to announce its second consecutive annual loss next month.

Analysts are expecting a wave of heavy job cuts across investment banks globally, following on the heels of Goldman Sachs, which kick-started a plan to fire more than 3,000 staff this week.

Investment banking revenues were hit severely last year and lenders are under pressure to cut costs, having bulked up on hiring over the past two years.

Credit Suisse is under more acute stress than its peers, given it suffered huge client withdrawals in October following social media rumours about its financial health and has racked up a succession of quarterly losses over the past three years.

The initial wave of 2.700 global redundancies in December included 540 job cuts in Switzerland and as many as 200 in London.

Credit Suisse employs more than 5,000 people in London and 16,000 in Switzerland.

Consultations over the next round of redundancies started before Christmas, with more than 10 per cent of investment banking jobs in Europe under discussion, according to people with knowledge of the talks. A final decision is expected next month.

The lender employs around 17,000 investment bankers globally, with its main centres in New York and London.

In some of Credit Suisse’s smaller European outposts, as many as a third of jobs are threatened as the bank restructures its operations in the hope of eliminating overlapping roles and front-office positions.

Many investment bankers that survive job cuts in Credit Suisse’s New York office, its main hub outside Europe, have the prospect of joining the planned First Boston spin-off, which will be led by former Credit Suisse director Michael Klein.

But there is less certainty about investment banking roles in Europe, given First Boston will be centred on the US market.

“It is difficult to know where we will fit in, though it’s clear European activities will be slimmed down over time,” said one Europe-based banker. “We are in wait-and-see mode.”

Another lever managers have when it comes to managing costs is cutting the bonus pool, which was reduced by a third last year.

Few of Credit Suisse’s investment bankers expect much in the way of a bonus this year, given the annual loss the bank has signalled it will report next month.

But senior managers are eager to offer incentives to wealth managers who have strong personal connections with clients to prevent them defecting to rivals as well as staff working on critical projects.

“I expect bonuses in my team to be close to zero,” said one Credit Suisse dealmaker.

“But for the top guys in the private bank, they will get a lot of attention and they will try to retain as many of them as they can.”

In just three weeks in October last year, wealth management clients withdrew SFr63.5bn ($68bn) from Credit Suisse, the equivalent of 10 per cent of assets.

By comparison, UBS suffered 10 per cent of outflows during an entire year during the global financial crisis.

Credit Suisse chair Axel Lehmann told the Financial Times last month that withdrawals had flattened and clients were returning to the bank.

Credit Suisse declined to comment on the prospect of further job cuts or its bonus policy.