Credit Suisse Group CEO Tidjane Thiam. Picture: BLOOMBERG/CHRIS RATCLIFFE
Credit Suisse Group CEO Tidjane Thiam. Picture: BLOOMBERG/CHRIS RATCLIFFE

ZURICH — A slump in investment banking revenue pushed Credit Suisse to accelerate its cost-cutting plan as CE Tidjane Thiam admitted he had been unaware of trading positions that triggered more big writedowns in the first quarter.

Switzerland’s second-biggest bank said on Wednesday it would shave a further Sf800m ($821m) off costs and cut 2,000 more jobs from its Global Markets division.

The unit is set to record a 40% to 45% drop in first-quarter revenues and is selling off holdings of illiquid assets that the bank’s senior management had not had on its radar.

Asked in an analyst call who will be held responsible for about $1bn in losses on its illiquid credit portfolio over the past two quarters, Mr Thiam said things had clearly gone wrong.

"We have gone back to that decision-making process and there has been consequences internally for a number of people," he said, adding he did not want to name names but that the bank was now confident the problems had been identified.

Mr Thiam said: "We can’t have the CEO and a chief financial officer in a bank surprised by something like that."

The first quarter is normally the most lucrative period for the industry, when investors put their money to work at the start of the year, but this year revenues have been hit by record low interest rates, low commodity prices and slower growth in emerging markets.

Rival Deutsche Bank’s finance chief said on Tuesday the first two months of 2016 were the worst start to a year for banks that he has seen in his banking career.

Credit Suisse said job cuts would come mostly in London and New York. The latest cuts bring the total to 6,000 job losses announced by Mr Thiam, who took over last year.

Mr Thiam disclosed that he had asked for his 2015 bonus to be cut 40%, even more than the 36% cuts in bonuses for staff in the Global Markets division.

The chief executive from Ivory Coast is five months into implementing his new strategy. He raised about Sf6bn in capital last year and is cutting back Credit Suisse’s volatile investment banking business while focusing on more stable wealth management.

Bowing to the Inevitable

The shares, which had fallen by more than a third this year, rose 0.8% by midafternoon.

"This was the restructuring plan investors were hoping for last year," said George Karamanos, an analyst at Keefe, Bruyette & Woods. "A negative operating environment has forced management to address tough issues it avoided last time around."

A top-30 investor in the bank added: "I believe he is bowing to the inevitable. In my view the big ‘universal’ banks are, in their current forms, broken models and unmanageable."

In the statement on Wednesday Credit Suisse increased to "at least" Sf4.3bn its targeted savings by 2018, up from Sf3.5bn announced in October. It aimed for Sf1.7bn in cost savings in 2016 and was likely to make a first-quarter loss after exceptional items, Mr Thiam said.

He declined to say whether Sf1bn in restructuring costs expected this year would allow a 2016 net profit.

Mr Thiam said a combination of high costs, exposure to illiquid inventory in fixed income, "historically low levels of client activity" and challenging market conditions had led to disappointing results at the Global Markets division. There were concerns tied to China’s economic performance resulting in an outflow of funds, according to the bank.

Mr Thiam said that write-downs at Global Markets, which totalled $633m in the fourth quarter of 2015, were lower in the first quarter at $346m as of March 11.

On a brighter note, the bank cited net new money inflows so far this year of Sf3.6bn at its Asia Pacific business, Sf7.1bn at international wealth management, and Sf4.5bn at its Swiss universal bank, whose partial public listing in 2017 was on track if market conditions permit.

Reuters