Banking, finance, and taxes

Credit Suisse Accelerates Restructuring Plan

Chris Lange

Published: March 23, 2016 11:55 am

Last Updated: January 13, 2020 11:36 am

Credit Suisse Group A.G. (NYSE: CS) recently announced that it would be eliminating more jobs as part of accelerating its restructuring plan. Essentially, this Swiss bank will be cutting 2,000 jobs in its Global Markets unit, increasing the total job cuts announced thus far to 6,000. Of the 6,000 total announced, so far only 2,000 jobs have been cut.

Since October 2015, management believes that Credit Suisse has made good progress in reducing its fixed cost base across the organization and its cost program is moving at pace. As a result, the company announced an increase to its 2018 cost reduction target to $5.4 billion from $6.6 billion.

The idea behind this is that the reconfigured Global Markets segment will consume less capital and produce more stable earnings with a more fee-based, client-driven model.

Tidjane Thiam, chief executive of Credit Suisse, commented on the restructuring:

Regarding our Global Markets activities, the combination of a high and inflexible cost base, exposure to illiquid inventory in fixed income, historically low levels of client activity and challenging market conditions has led to disappointing financial results. In this context, we have taken immediate action to reduce outsized positions in activities not consistent with our new strategy and systematically reduced our exposures. Write-downs were USD 633 million in fourth quarter of 2015 and were lower in the first quarter at USD 346 million as of March 11, 2016. Revenues have remained weak in the period, with negative operational leverage.

So far in 2016, Credit Suisse has vastly underperformed the broad markets, with the stock down 32%. Over the past 52 weeks, the stock is down over 40%.

Shares of Credit Suisse were trading up nearly 1% at $14.88 on Wednesday, with a consensus analyst price target of $14.43 and a 52-week trading range of $12.56 to $29.99.