Credit Suisse unveiled the much-awaited overhaul of its underperforming investment bank yesterday, leading to hundreds of job losses, and announced that it would prepare its insurance arm Winterthur for a flotation after failing to find a buyer.
The Swiss-based banking giant will merge the investment bank Credit Suisse First Boston with the rest of the group and cut 200 to 300 jobs worldwide. A spokesman said the job cuts, out of a total investment banking workforce of 19,000, would affect "various regions and various businesses". In London, the bank employs about 6,000 staff.
The First Boston brand, acquired in 1988, remains for the time being but might be dropped in the future, the spokesman said. The restructuring, which is expected to take up to two years, spells an end to the existence of the 72-year-old investment bank as an independent entity.
Brady Dougan, the chief executive of CSFB, admitted that the "performance gap remains significant" between the investment bank and its competitors. He said the planned changes would boost net income at CSFB to at least Sfr3bn (£1.4bn) in 2007, from Sfr1.1bn last year. But analysts and investors need to be convinced that the targets can be met, voicing scepticism about the bank's goal of group net income of more than Sfr8bn in 2007.
Mr Dougan pledged to focus on high-margin areas such as leveraged finance, mergers and acquisitions, flotations, derivatives and mortgage securitisation - all areas where the bank has competitive strengths. Analysts say it also needs to cut annual costs by about Sfr1.7bn.
All businesses within the Credit Suisse group will be merged into a single unit comprising three business lines: private client services, corporate and investment banking and asset management. Job losses could arise from plans to combine the equities and fixed-income groups into a unified proprietary trading group. The bank also intends to spin off its private-equity unit, DLJ Merchant Banking, as well its hedge funds, the Credit Opportunities Fund and the Diversified Credit Strategies Fund.
The flotation of Winterthur "is not going to happen tomorrow. It's going to happen at some point over the next few years", the spokesman said.