Swiss bank Credit Suisse said it would cut about 2,000 jobs as it reported second-quarter net profit that missed expectations, dented by weak trading activity and the strong Swiss franc.
Credit Suisse said net profit fell to 768 million Swiss francs ($958.9 million), below average analyst forecasts for 1 billion. Net new assets in private banking were 11.5 billion, below average analyst forecasts for 14.2 billion.
It said on Thursday it planned to cut about 4 percent of its total staff of 50,700, about the same number it had added in a post-crisis hiring spree particularly in fixed income, the area hit most by current sluggish markets.
It said the job cuts would be part of a cost savings program aimed at reducing 1 billion Swiss francs in the expense run-rate during 2012. Implementation costs in 2011 would be 400 to 450 million francs, of which 142 million were taken in the second quarter due to job cuts in investment banking.
We have to recognize the likelihood that the current headwinds in the economic and market environment may be more persistent than we would have hoped, said Chief Executive Brady Dougan and Chairman Urs Rohner.
We expect interest rates to remain low for an extended period of time and the strong Swiss franc to continue to have an impact on our results. We may also continue to see lower levels of client activity and a volatile trading environment.
Rival UBS said on Tuesday it would cut costs by up to 2 billion francs and push back targets after reporting disappointing second-quarter profits due to slow trading in fixed income, currencies and commodities (FICC).
Credit Suisse said it expected a limited revenue impact from its job cuts as the majority should be in low-return areas, while it would continue to invest in growth businesses, including serving the ultra wealthy, emerging markets and rates and foreign exchange flow sales.
INVESTMENT BANKING STRUGGLES
Investment banking has been hit by slow trading due to the debt crises in the euro zone and United States as well as post-crisis regulations aimed at forcing banks to hold more capital to protect them from future shocks.
UBS and Credit Suisse face the added burden of high cost bases in Switzerland as the safe-haven franc soars.
Credit Suisse said pretax profit in investment banking dropped 71 percent to 231 million.
Fixed income sales and trading results were significantly lower than in second quarter 2010 and first quarter 2011 reflecting challenging market-making conditions and moderately weaker client flows, it said.
The bank said it was been conducting an internal investigation after it said earlier this month it was being targeted by a U.S. tax investigation following the indictment of several of its bankers.
It reiterated that it was cooperating with the authorities to resolve the matter, subject to its Swiss legal obligations, which protect bank secrecy.
Credit Suisse also said it had appointed Hans-Ulrich Meister as chief executive of private banking in addition to his role as CEO Credit Suisse Switzerland, while Walter Berchtold would move to become chairman of private banking.
(Editing by David Holmes)