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CSFB to shed 2,000 jobs
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October 9, 2001: 10:46 a.m. ET
The Swiss bank's investment unit expects to post a $120 million third-quarter loss.
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NEW YORK (CNNmoney) - Credit Suisse Group, Switzerland's second-largest bank, plans to slash 2,000 jobs at its investment bank as new leadership tries to cut costs and global market activity wanes.
Stock markets around the globe have been struggling to cope with a U.S.-led economic slowdown, and the Sept. 11 terrorist attacks on New York and Washington have exacerbated the problem.
CS Group's investment bank, Credit Suisse First Boston, which earns revenue from advising companies on mergers, acquisitions and selling shares, is expected to post a 20 percent drop in revenue from the second quarter and a third-quarter loss of about $120 million.
"To compete effectively with other top-tier financial services firms, we need to drive down cost and seek ways to operate more effectively," CSFB CEO John Mack said Monday.
The Swiss bank said the job cuts at CSFB will help drive down operating cost by $1 billion at the end of 2002. CS Group posted a third-quarter loss of 300 million Swiss francs ($188 million), including cost related to last year's acquisition of U.S. brokerage Donaldson Lufkin & Jenrette.
It also is one of the first moves by Mack, nicknamed "Mack the Knife", one of Wall Street's top executives whose cost-cutting measures are legendary, to reign in salaries, costs and bonuses. He indicated when he was appointed in July that expenses at the investment bank were too high.
"Even if Sept. 11 had not happened, they would have announced similar measures anyway," Bernstein analyst Evangelos Kavouriadis said. "That's why they brought John Mack in. They had a major issue with costs."
CSFB already had cut several hundred jobs this year after the DLJ acquisition and in response to slowing market conditions.
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And though CSFB attributed the latest cuts in part to those weak market conditions, it's unlikely the rest of the brokerage industry will have such a dramatic reaction.
"If Goldman Sachs (GS: up $2.40 to $77.70, Research, Estimates), Morgan Stanley (MWD: up $0.97 to $48.73, Research, Estimates) or Merrill Lynch (MER: up $1.32 to $41.38, Research, Estimates) cut 2,000 or 3,000 jobs, that pretty much tells you they don't expect any [market] activity for the next 12 to 18 months," A.G. Edwards & Sons analyst Diana Yates said. "I don't think that's going to happen."
More likely is that brokerages already in the midst of upheaval, such as J.P. Morgan Chase & Co. (JPM: up $0.63 to $33.07, Research, Estimates), which still is digesting its acquisition of Chase Manhattan Bank, are using the current market slowdown as an opportunity to cut costs.
"It's giving everybody an opportunity to do some spring cleaning," Yates said.
There were other contributing factors to the CS group loss, including its investment in insurer Swiss Life and exposure to troubled Swiss airline Swissair Group.
Credit Suisse will register a loss of 400 million Swiss francs on Swiss Life, whose shares have plunged more than 40 percent in the third quarter. The bank also expects to lose 200 million francs on Swissair, which is seeking court protection from creditors.
Credit Suisse said it expects transaction volume to remain low and market conditions to stay difficult in the fourth quarter.
Shares in Credit Suisse Group fell 4.3 percent to 52.10 francs in Zurich. The stock has fallen more than 40 percent from a high for the year of 87.25 francs in February. Credit Suisse Group (CSR: down $0.65 to $32.90, Research, Estimates) American depositary receipts fell in early trading Tuesday. 
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