CSFB makes further sweeping job cuts
Credit Suisse First Boston, the investment banking arm of the Credit Suisse Group, is to cut another 1,750 jobs worldwide.
The measure is part of a new cost reduction initiative this month aimed at saving $500 million (SFr744 million) at the loss-making unit.
In an internal mail to CSFB's 25,000 staff, chief executive John Mack said that the "extremely tough" market conditions had continued to deteriorate, leaving him no choice.
"Unfortunately, in this environment, to be competitive we simply have no alternative. And we owe it to our shareholders," he wrote.
Mack, known on Wall Street as "Mack the Knife", has already cut 4,500 jobs since taking over as CEO in July last year, saving some $1.8 billion in costs in an effort to bring back profitability.
In the latest round of losses, Mack said that CSFB anticipated eliminating five to seven per cent of the workforce.
"Reductions will vary by product and geography. In addition, we also will continue to seek savings in several other non-personnel related areas," he wrote.
Mack told his staff that the global underwriting volume had fallen by nearly 25 per cent from the second quarter. And over the past year, the value of worldwide merger deals had declined by 37 per cent, down 70 per cent from the peaks quarters of 2000.
"Making these cost cuts was an exceedingly difficult decision, but taking immediate action will help us return to profitability," he commented.
CS financial chief, Phil Ryan, told Reuters on Monday that the group did not expect CSFB to return to profitability before next year.
The group is expected by analysts to report a net loss of at least SFr1 billion for the third quarter, after making a SFr579 million loss in the second quarter.
Shares take a pounding
CS shares have taken a pounding this year, shedding more than two thirds of their value, suffering mainly from speculation that the group may have to raise further cash to bolster its reserves and pump more money into the ailing Winterthur insurance business.
In a related development, Reuters reported on Tuesday that further evidence had emerged that CSFB may have used coverage of companies by its research department to win and retain lucrative investment bank business.
Documents are said to include a presentation to potential clients obtained during the course of a regulatory probe.
CSFB earlier this year agreed to pay a $100 million settlement to US authorities after allegations of improper behaviour allocating stock offerings in the late 1990s. CSFB made the settlement without admitting or denying guilt.
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