Credit Suisse Group AG (ADR) (NYSE:CS) is planning to cut an additional 2,000 jobs as it continues to deepen cuts in its struggling investment banking unit. Under a new plan launched by CEO, Tidjane Thiam, the bank plans to reduce its risk-weighted assets to $60 billion from an initial target of $83 billion.
Cost Saving Push
Most of the cuts will target the the investment banking unit that Credit Suisse says is on course to post a loss in the first quarter. The announced layoffs will bring the lender’s total cuts for the year to 6,000 jobs. Gross savings as a result of the cuts should total $1.7 billion according to initial estimates.
Cost cuts have become the order of the day as banks try to shore up their earnings. Credit Suisse is targeting cost savings of as much as CHF2 billion by 2018. Cuts in the overall market could clock CHF5.4 billion this year down from CHF6.6 billion last year.
Thiam believes that the bank will be able to increase profit margins in the medium to long term by slimming the investment banking unit and laying off workers. Credit Suisse is also switching its focus to wealth management as part of an ongoing overhaul spearheaded by its chief executive.
The Swiss bank had a disappointing fourth quarter in line with the performance of the overall industry. As a result, the bank was forced to slash bonuses for business bankers by 35%.
Thiam is under immense pressure to reinvigorate the Zurich-based lender’s prospects in the sector. Since the bank announced its overhaul plan last October, shares have plummeted 41%. The crash in oil prices to 13-year lows compounded by a slowdown of growth in emerging markets has all but continued to deal the banking sector a big blow.
Credit Suisse is not the first bank to cry foul over the levels of uncertainty and volatility in the sector. Deutsche Bank AG (NYSE:DB), Europe’s largest investment bank has already warned that it may not post a profit this year.