According to several individuals familiar with the situation, Credit Suisse Group AG is exploring possibilities of workforce reduction again as part of its efforts to cut costs after reporting a loss in the second quarter.
Sources who requested anonymity as the matter is private said the Swiss lender is considering cutting staff across several sectors, including investment banking and wealth management.
After the lender's shares fell by about 7.6% in the wake of the profit warning, the stock recovered and advanced as high as 5.8% following a report on the Swiss blog Inside Paradeplatz in which an unnamed insider cited that State Street Corp. may make an offer to buy Credit Suisse.
Insiders noted that the layoffs are likely to be revealed during the bank's scheduled meeting to inform investors of the status of the lender's various management departments on June 28th. The numbers of layoffs are still undecided, individuals added. Although the bank refused to comment, a Credit Suisse spokesperson pointed to the bank's Wednesday statements announcing cost-cutting plans.
As a result of a downturn in investment banking and trading, the lender anticipates a third consecutive loss in the second quarter. A report released by Credit Suisse cited widening credit spreads and client deleveraging amid unstable market conditions, although other banks have stated that the volatility has improved their trading departments' results.
According to Citigroup Inc. strategists, "the profit warning is attributed largely to 'the present geopolitical context' and 'Federal Reserve's last actions.' But we think the bank may have created its own predicament."
According to Inside Paradeplatz, an offer for Credit Suisse could be made in the near future at a price of about 9 francs per share. The lack of solid strategic motivation by State Street led experts to express skepticism about the deal. A State Street spokesperson said the company was working on a response to these reports. Credit Suisse did not respond to the request for comment.
During Thomas Gottstein's two years at the top, Archegos has taken a $5.5 billion hit, Greensill Capital collapsed, and the business has issued profit warnings, damaging investor confidence, weakening key functions, and forcing key employees to leave. The bank has announced that 2022 will be a year of transition as it moves resources toward wealth management while reducing risks in investment banking.
Approximately 51,000 workers were employed by the Swiss bank at the end of March. Among other changes, top management has undergone an overhaul. The firm recently announced that several employees in key positions would either leave or step down. In addition, the lender appointed Bank of Ireland's ex-CEO Francesca McDonagh to lead the group's European, Middle Eastern, and African operations.
Prior to Wednesday's warning, the Swiss lender was having trouble keeping up with competitors after cutting risk due to Archegos. During the first quarter, equity revenues fell 47%, while fixed-income revenues, a traditionally strong area, fell even further. The bank's results revealed the bank's other problems in regaining investor attention, such as upcoming legal actions and weaker-than-anticipated wealth management performance.
In addition to the self-inflicted damage caused by the bank, Gottstein is coping with a furious macro-environment beyond his control that is further threatening to derail the recovery. A lack of activity from rich investors, notably in the Asia Pacific, due to the instability of the market has caused fees for private banks to suffer. Additionally, there are concerns about supply chain problems amid coronavirus lockdowns in China, while M&A activity has slowed following the Russia-Ukraine war.
The recent developments contrast starkly with statements made by one of the bank's top managers David Miller who has been assuring clients that the company is prepared to deal this year.
Although Credit Suisse stated Miller's dealmakers have produced "resilient" advisory fees, it noted that the low volumes of debt and equity issuance contributed to the lender reporting loss in this quarter.
Investors will be looking for information on the Omicron strain and inflation this week. Last week, market volatility was fueled by concerns about each of these causes.Stocks