UBS AG and Credit Suisse Group AG, Switzerland’s biggest banks, may be poised for further job cuts as sluggish client activity and the appreciation of the Swiss franc weigh on earnings.
“You’d certainty expect cost management to remain active,” said Matthew Clark, a London-based analyst at Keefe, Bruyette & Woods Ltd. “All these investment banks have positioned themselves last year in anticipation of a global recovery. They invested or maintained headcount at high levels, and that recovery hasn’t come through yet.”
Credit Suisse increased staffing by 2,500 last year to 50,100, while UBS added more than 6,000 people worldwide between the end of 2009 and March 31. The banks’ earnings may be hurt as a sputtering economic recovery and Europe’s sovereign debt woes curb client trading, while the franc’s rise to a record against the euro and dollar cuts revenue. Clark at KBW estimates UBS’s second-quarter net income will fall to 1.14 billion francs ($1.4 billion) from 2.01 billion francs in the year-earlier period. Profit at Credit Suisse may drop to 1.22 billion francs from 1.59 billion francs, according to his estimates.
UBS trimmed headcount by about 6 percent in the first quarter at the investment bank, where it employed 17,628 people at the end of March, and said last month it would cut about 500 information-technology jobs across regions and divisions to lower annual costs by a “double-digit million-franc” figure. Swiss newspaper Tages-Anzeiger, citing unidentified “insiders,” said today that UBS may cut 5,000 jobs to help save 1 billion francs in annual costs.
Credit Suisse plans to eliminate about 500 jobs at its private-banking division, a person with knowledge of the matter said today. The bank told staff last month at its investment bank, which employed 20,800 at the end of March, that it would start consultations about job reductions. The company plans to shed more than 600 jobs at that unit, including more than 100 in the U.K., a person briefed on the matter said at the time. In all, the company may trim as many as 1,500 jobs, Dow Jones said today, citing a person familiar with the matter.
Spokespeople at the banks declined to comment on the numbers of job cuts. UBS and Credit Suisse are due to report second-quarter earnings on July 26 and July 28, respectively.
“The outlook for growth remains subdued,” UBS Chairman Kaspar Villiger told SonntagsZeitung in an interview published July 3. “It is clever to prepare for such a case instead of deluding yourself. Cost cuts are inevitable. I cannot rule out further job cuts.”
Global investment banking revenue may fall by about 16 percent in the second quarter, mainly because of a slowdown in fixed-income, currencies and commodities trading, JPMorgan Cazenove said in a note to clients on June 7.
“They have a bit of a tightrope to walk between trying to protect short-term profits and at the same time not putting themselves at a disadvantage if and when growth does return,” KBW’s Clark said.
Royal Bank of Scotland Group Plc is cutting about 200 posts at its securities division in the U.K. and Europe, a person familiar with the plan said last month. Barclays Plc eliminated about 100 jobs at its investment bank, according to a person familiar with the matter.
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