Credit Suisse is overhauling its operations and slashing thousands of jobs to address significant losses and investor worries.
The bank announced it was adopting “a series of decisive initiatives.” In response to previous scandals and an SF4bn ($4bn, £3.5bn) loss in the most recent quarter.
Over the next three years, 9,000 posts would be eliminated. Although it did not specify where the reductions would occur.
Chairman Axel Lehmann hailed the makeover plan a success.
However, investors had an adverse reaction, as the shares of Credit Suisse fell more than 13% after the news.
Credit Suisse is to raise $4 billion in new capital as part of the reorganization. The Saudi National Bank will contribute $1.5 billion.
It has planned to rebrand as CS First Boston, spin off the bank’s investment division, and close some of its riskier ventures.
By 2025, the workforce will decrease from 52,000 to 43,000, losing 2,700 positions this year alone. Although Credit Suisse is in Switzerland, it has a workforce f 5,500 people.
By 2025, it claimed to assist in reducing its overall cost base by SFr2.5 billion, or 15%.
Additionally, it creates a “bad bank” unit to liquidate high-risk residential assets.
Significant problems at Credit Suisse
This is the third effort in recent years to rescue the troubled organization after several scandals rocked the bank.
After a scandal involving covert surveillance operations, Tidjane Thiam, its former chief executive, resigned in February 2020. In addition, the collapse of the Archegos investment vehicle in March of that year left Credit Suisse with huge losses.
Another setback was the demise of the British financial institution Greensill Capital.
Antonio Horta-Osorio, the bank’s chairman, resigned in 2017 after less than nine months in office due to a regulatory violation with Covid. A corruption case involving the tuna fishing sector in Mozambique later resulted in a sanction for the bank.
Authorities penalized the bank this year for a money-laundering scandal involving a Bulgarian drug ring. Its CEO was removed, and saw pressure on its stock prices from investors worried about the firm’s financial stability this month. Its share price has decreased by 50% since January as a result.
The second-largest bank in Switzerland, Credit Suisse, predicted that the restructuring would result in “a simpler, more focused, and more reliable business.”
Performance this year has been impacted by “continuing adverse market and macroeconomic conditions,” according to Ulrich Koerner.
The restructuring, according to JPMorgan analysts, “remains in question,” and the share sale to acquire additional funds will have an impact on the stock price.
The strategy is “only the first stage in a long journey to rebuild confidence and reclaim the trust,” said Andreas Venditti, an analyst with Swiss investment managers Vontobel.
Investors worry as shares drop
As concerns about the Swiss bank’s financial stability increased in October, shares of Credit Suisse fell sharply.
After the bank’s CEO failed to assuage investors, its shares plummeted by more than 10% but later recovered.
Ulrich Koerner, the CEO, insisted in a memo to colleagues last week that Credit Suisse’s financial situation was sound.
It comes before a reorganization strategy when the bank releases its earnings at the end of October.
Executives at the Swiss bank spent a significant portion of the weekend trying to reassure skeptics about its financial stability.
Concerns over Credit Suisse’s financial situation have caused its shares to decline over the past year.
In July, the bank announced a strategy review and appointed Mr. Koerner, an asset management expert, to succeed Thomas Gottstein as CEO.