December 6, 2023

Investment Banking

Let Your Investment Banking Do The Walking

Credit Suisse plans to cut 450 frontline jobs at its European investment bank

Credit Suisse’s European operations are set to bear the brunt of front-office job cuts as the Swiss bank prepares to cut around 900 jobs from its investment bank as part of a broader overhaul.

Around half of the planned 900 client-facing job reductions globally — or 450 people — will come from its investment banking and markets businesses in Europe, the Middle East and Africa, according to people familiar with the matter, as some underperforming divisions in the region are set to shrink.

Credit Suisse has been informing employees of job cuts since 7 November, according to people familiar with the matter, as it embarks on a plan to strip out 2,700 roles across the organisation before the end of 2022.

A Credit Suisse spokesperson declined to comment on the investment bank reduction, but pointed to a previous statement that the bank would shrink its headcount by around 9,000 people by the end of 2025 through a combination of cuts and natural attrition of employees as it reshapes its business.

READ Credit Suisse to cut 9,000 jobs, hive off investment bank in radical overhaul

Credit Suisse’s investment banking unit is set to be spun out into a new company called CS First Boston, which harks back to the First Boston brand name it acquired in 1990. However, while executives have spoken about a new “partnership model”, the business will be skewed towards the US, which is by far the biggest and most profitable fee pool in the world. Last year, 73% of Credit Suisse’s $4.1bn investment banking fees came from the Americas, according to data provider Dealogic.

In Europe, the bank is scaling back its capital markets business, chief executive Ulrich Körner told journalists during a 27 October call announcing its new strategy. It employs around 5,000 people in the UK alone, primarily within investment banking and market functions. Between 40% and 50% of front-line cuts will come from Emea, sources told FN.

“We will resize our capital markets business in Emea to be a real advisory-only business,” Körner said. “We have not achieved results over many years and we do not have the right standing in Emea.”

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Credit Suisse unveiled a second strategy overhaul in the space of two years on 27 October, as executives attempted to turn around the business after a series of crises and multi-billion dollar losses. The Swiss bank took a $5.5bn loss over the fallout from family office Archegos Capital, which collapsed in March last year — far more than its peers — and has replaced the vast majority of its executive team over the period.

CS First Boston will sit somewhere between a boutique investment bank and a bulge bracket player, executives said during the strategy update. It is moving to a so-called ‘capital light’ model, focused on advisory work rather than deals that require a big balance sheet.

However, senior dealmakers told staff during a town hall meeting in October that the CS First Boston spin-out still aims to maintain Credit Suisse’s leading position in leveraged finance, according to people familiar with the matter, despite a planned $35bn reduction in risk-weighted assets across the organisation. In 2019, Credit Suisse ranked second globally in the leveraged finance league table, according to data provider Dealogic, but currently ranks sixth, having made $264m in revenue so far in 2022.

CS First Boston, which will be led by veteran dealmaker Michael Klein, will offer senior bankers an equity stake in the new company, which is opening itself up to external investors to provide capital and may eventually separate from Credit Suisse entirely. The bank is also set to offer a more “eat what you kill” compensation model and bonuses comprised of more upfront cash in a bid to keep senior dealmakers on board.

Credit Suisse has experienced a high turnover of senior dealmakers over the past 18 months, with around 70 managing directors in its investment banking unit departing since Archegos’ collapse. While it has hired a similar number over that period, it has rolled out retention bonuses and other perks for staff in a bid to stem departures.

Körner said the CS First Boston spin-out has “generated a lot of excitement among our investment banking colleagues as well as talent outside the bank”.

While some senior Credit Suisse dealmakers have continued to land at rivals in recent weeks, bankers at rivals and specialist headhunters pointed to a new-found loyalty among some at the Swiss bank. Credit Suisse dealmakers have reneged on informal offers, sources told Financial News, instead choosing to stick with the Swiss bank as it launches CS First Boston.

To contact the author of this story with feedback or news, email Paul Clarke