Many will be unfazed by the announcement of a new strategic review and cost cuts given the Swiss bank’s track record. finews.asia analyses the numbers.
Another year, and another strategic review for Credit Suisse. And with that, Switzerland’s second-largest bank raises a familiar industry nemesis, that of impending cost and job cuts.
As part of several steps announced Wednesday when releasing quarterly results, it indicated that it wanted to reduce its absolute cost base to below 15.5 billion Swiss francs ($16.2 billion) in the medium term, which it said was currently running at 16.8 billion francs based on annualized figures for the first half and against its current target of bringing them down to 16.5-17 billion.
Modest Aim
There is a lot of hairsplitting going on here, but if we take the figures at face value, that represents about a 6-9 percent decline in costs. By itself, that does not sound all that challenging given current market conditions, particularly if the medium term is the usual 3-5 years. But there is a small hitch.
Employee Numbers Keep Rising
As finews.asia indicated early this year, the current pattern they are going through is a familiar one. The bank has recorded a restructuring expense almost every year for the past five years, except in 2019. Despite that, employee numbers keep rising.
The same trend has held up through 2022 as well despite the bank’s continued losses, weak markets, the Ukraine conflict, and high inflation.
Employee numbers were at 51,410 at the end of the second quarter, 4 percent higher than the same period a year earlier and 1 percent higher than the level at the end of March. Over the same period, compensation and benefits were up 2 percent but down 3 percent from the first three months of the year.
Savings Digitalized
Although employee numbers are not the only way to measure the severity or depth of restructuring, they can be an important indicator of effectiveness. Here is where something seems to be amiss.
When queried, Credit Suisse indicated that it expects to reap savings of 650 million francs in technology and operations and another 300 million in procurement.
That by itself gets pretty near their target while including the additional spending in risk, compliance, and infrastructure.
Asking Why
That raises the question. Why feature the 15.5 billion objective so prominently as a key facet of the comprehensive strategic review given the number doesn’t seem all that material.
For the bank, it all is starting to look like the plan is shaping up to be another restructuring that is not a restructuring. Although investors should rightly be skeptical, employees can relax in the knowledge they likely have some of the safest corporate jobs out there, at least for now.
If nothing else, a «Bloomberg» (paywall) article seems to provide circumstantial evidence of that. Apparently, unidentified sources say the bank is offering senior investment bankers lucrative retention payments. This, for a business that reported a second-quarter pre-tax loss of $1.2 billion.
