Swiss bank Credit Suisse
Investment banks worldwide have been hit by slow trading due to the debt problems in the euro zone and United States, as well as regulations aimed at forcing banks to hold more capital to protect them from future shocks after the 2008 global financial crisis.
Switzerland's second-biggest bank said on Thursday it planned to cut about 4 percent of its staff of 50,700, about the same number it added in a post-crisis hiring spree focused on fixed income, the area hit most by current sluggish markets.
Credit Suisse's slump in fixed income was worse than rivals -- revenues fell 76 percent from the first quarter to 595 million Swiss francs ($742.6 million), compared with an average drop of 27 percent for U.S. banks and 36-37 percent at UBS
Weak markets have prompted a wave of job cuts in the banking industry, including at Standard Chartered
Credit Suisse said second-quarter net profit fell to 768 million francs, below analysts' average forecast for 1 billion. Net new assets in private banking were 11.5 billion, also missing a forecast 14.2 billion.
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.
Credit Suisse shares, already down more than a fifth this year, fell 2.9 percent by 1038 GMT, underperforming a 0.7 percent lower European banking sector index <.SX7P>.
Credit Suisse's Q2 results are similar to those of UBS with a truly awful investment banking performance and FICC results in particular but an actually rather resilient performance from wealth management, said Helvea analyst Peter Thorne.
COST CUTS TO TARGET INVESTMENT BANK
Credit Suisse Chief Financial Officer David Mathers said the cost cuts, aimed at shaving 1 billion Swiss francs from the expense run-rate during 2012, would hit all divisions but particularly the investment bank, and all geographies.
He said 500 of the job cuts would come in Switzerland, where the bank has a high cost base that is hurting results as the Swiss franc soars to record highs. Credit Suisse said the strong franc cut pretax income by 348 million.
Implementation costs in 2011 would entail charges of 400 to 450 million francs, of which 142 million were taken in the second quarter.
Credit Suisse said it would cut most of the jobs in low-return areas and continue to invest in growth businesses, including serving the ultra wealthy, emerging markets and rates and foreign exchange flow sales.
Credit Suisse said pretax profit in investment banking dropped 71 percent to 231 million francs, with trading in securitized products and U.S. and European rates particularly weak.
CFO Mathers said Credit Suisse had made accruals for 50 percent of the dividend it paid in 2010 so far this year, but that was not a forecast or a commitment for its 2011 dividend.
The dividend will have to be cut as the earnings per share at the H1 stage is 50 percent below last year and has little chance to catch up, said Kepler analyst Dirk Becker, adding he was putting his buy rating on the stock under review.
The bank said it was conducting an internal investigation after it said earlier this month it was being targeted by a U.S. probe following the indictment of several of its bankers for helping Americans dodge taxes.
This is a very serious issue and we're working hard to try to get a resolution, CEO Dougan told Reuters Insider.
CFO Mathers said the appointment of Hans-Ulrich Meister as new chief executive of private banking in addition to his role as CEO Credit Suisse Switzerland had nothing to do with the probe but was part of succession plans.
(Additional reporting by Martin de Sa'Pinto and Steve Slater)
(Editing by Andrew Callus and Erica Billingham)