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Morning Coffee: The new era of cost-cutting at Barclays’ investment bank, Credit Suisse needs to axe 15% of headcount

What’s going to happen to Barclays investment bank when it presents its new plan in June? Tushar Morzaria, the bank’s chief financial officer who took the job six months ago, admitted to analysts in February that its future is not entirely clear.

It’s already unveiled plans to cut thousands more jobs, and yesterday ousted its pay chief after ongoing concerns over rising compensation – something CEO Antony Jenkins said was necessary to avoid a ‘death spiral’ of departing bankers – and analysts expect an exit from areas like commodities and emerging markets. However, according to a report in the Wall Street Journal, a frank admission two months ago by Morzaria suggested the plan is not finalised and he wants to avoid an incremental approach: “You do this once and only once, and it needs to be thoughtful, appropriate and correct,” he said.

Already the bank has stripped out 820 of its highest earners, and cut back on the use of outside consultants. Morzaria said that he is “happy to say no” to any costly requests from executives. “So people will get frustrated, but that’s one way of simplifying it and decluttering,” he said.

"The challenge and question boils down to, do we need this big, huge battleship of an investment bank or should we break it up," Sandy Chen, an analyst at Cenkos Securities told the Journal.

The same question appears to be being asked over at Credit Suisse. Its fixed income division continues to weigh it down, and the Swiss bank should consider taking a leaf out of UBS’s book and exiting some business lines, suggests Bloomberg.

It currently employs 100 more people than at the end of 2008, while other banks have been depleting headcount, and should cut another 15% of people from its 19,700 investment banking employees, Kian Abouhossein, JPMorgan’s big name banking analyst, suggests.

The headcount situation at Credit Suisse may not be as simple as the figures suggest, however. As we pointed to previously, it’s continued to draft in large numbers of analysts while cutting at the senior end to bring down the compensation bill.


“We estimate that a further 8%, or $1 trillion, of the investment banking sector’s balance sheet is poorly directed and could be cut.” (Financial News)

Junior employees at accountants, lawyers and property consultants are asking for loans to generate enough equity to become ‘partners’ in order to avoid a huge tax bill (Financial Times)

Citigroup has lost four mortgage bond traders, some of whom have gone to new jobs at hedge funds (Bloomberg)

Working parents don’t need flexibility, they need predictability of working hours for childcare (Financial Times)

Private equity firm could reward employees on a deal-by-deal basis (Financial News)

Cantor Fitzgerald CEO sues Southampton Town municipal boards for $56m because they won’t let him build a basketball court next to his house (New York Post)

“Being caught is so out of their wildest dreams,” says illustrator who captures financial criminals on canvass (Dealbook)

The average person misplaces items nine times a day (Wall Street Journal)

AUTHORPaul Clarke

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