Credit Suisse Group AG (CS) is planning more job cuts, as Tidjane Thiam, chief executive officer, vowed to make deeper cost cuts. The CEO says he was blindsided by a pileup of illiquid trading positions, which will likely lead to a first-quarter loss.
The company’s global markets unit will take a loss in the first quarter, with revenue falling as much as 45% compared to the previous year. Holdings of leveraged loans, scrutinized products and distressed debts led to $258 million of writedowns in the quarter. Thiam says he was unaware of some of the built-up positions.
Thiam took the helm in July, and has vowed to focus on wealth management while minimizing riskier securities businesses. The bank has already sold off half of its positions in leveraged loans and a quarter of its distressed holdings.
Credit Suisse has lost nearly 40% of its market value since October when the overhaul was announced. Shares reached their lowest level since 1989 last month, and are down 32% so far this year.
Under the new CEO’s restructuring plan, the company will reduce its risk-weight assets by an additional 20% to $60 billion. Credit Suisse will also cut an additional 2,000 jobs at the unit. The new cuts bring the total job reductions to 6,000 this year.
The bank expects its restructuring costs to peak at 1 billion francs before dipping down to 600 million next year. Credit Suisse is aiming for cost savings of 3 billion francs or more by 2018. Costs at global markets will be slashed to 5.4 billion francs, down from 6.6 billion francs at the end of 2015.
Many of Europe’s banks are cutting their trading businesses amid tighter regulations of riskier activities. A slowdown in emerging markets and the energy slump have eroded revenue. Deutsche Bank AG (DB), which plans to eliminate thousands of jobs and sell off assets, said earlier in the month that it does not expect to post a profit in 2016.
