Credit Suisse’s equities team has every right to feel a little peeved by this morning’s third quarter results announcement. It’s one of only two divisions within the investment bank to have performed better year on year, and yet it’s in the midst of another round of job cuts.
Its equities division has posted an 8% uptick in equities sales and trading revenues compared to the third quarter of 2012, and is up by the same percentage for the first nine months of this year with revenues of CHF3.7bn. And yet, as revealed at the end of September, the bank is trimming its European equities division. The bank pointed out that headcount reductions in the equities business had helped drive profitability and pointed to strong performance in its Asian division.
The good news is that jobs have remained relatively stable elsewhere. It now employs 20,000 people in its investment bank, an increase of 500 since the second quarter – although this is likely to be predominantly down to its graduate intake – and is just 100 fewer people than this time last year.
However, the bank is creating non-strategic units, which will see the wind-down of its rates business within the investment bank. This is as part of an effort to reduce risk weighted assets from $16bn currently to $9bn by the end of 2015. It will also focus on high volume, high liquidity products in its cash products, the bank said.
Any significant job cuts in the investment bank seem unlikely, however. Credit Suisse still wants to strip out CHF1.5bn in costs, but just CHF200m will come from the investment bank, with the infrastructure and private banking divisions taking the bulk of pain.
However, compensation has been curtailed significantly. It cut pay by 24% year on year in the third quarter, and it’s down by 17% for the nine months to September. This means an accrual of CHF204k per head so far this year, compared to CHF244k in 2012.
Meanwhile, Credit Suisse’s fixed income division has, in line with all other investment banks, had a terrible three months. Compared to the third quarter of 2012, revenues slipped by 42% to CHF833m, but have still managed to slip by just 9% for the nine months to September.
Credit Suisse’s debt underwriting business increased revenues by 5% compared the third quarter of 2012 to CHF424m, but equity underwriting slipped by 25% year on year. However, both businesses have performed well during 2013, having increased revenues by 28% to September.