City jobs to go in CSFB shake-up

Hundreds of jobs could be cut in the City of London after Credit Suisse yesterday announced a major restructuring of its investment banking business designed to boost its profitability and protect it from takeover.

The Swiss group is to merge the Credit Suisse First Boston investment banking business with its wholesale banking business in a move that will eventually lead to the demise of the CSFB brand.

Credit Suisse - the 10th largest banking group in Europe - also signalled that it would float off its Winterthur insurance arm after failing to find a buyer for the operation it bought eight years ago.

CSFB, which has been through a number of restructurings in recent years after suffering regulatory fines and heavy losses, is to be integrated with the wider Credit Suisse group over the next two years.

The latest move comes after a dismal 2002, a subdued business backdrop and a lingering expectation of possible takeovers and mergers in the European financial sector. "The environment has changed fundamentally. The years of easy money have long gone," said Oswald Gruebel, Credit Suisse's chief executive.

His co-chief executive John Mack, who also ran CSFB, was ousted in June. Brady Dougan, who took over as chief executive of CSFB, said that 200 to 300 jobs would be lost from the 19,000-strong investment banking workforce.

Mr Dougan signalled a move into more risky areas of proprietary trading - using the bank's own money to take bets on markets - and to develop a commodities business. He intends to focus on profitable areas such as leveraged finance, mergers and acquisitions and mortgage securitisation. While the City had expected much deeper job cuts, Mr Dougan insisted: "It's not really about reductions in scale. It's about focus and productivity."

He said the cuts would be global but gave no indication of how many would come in the City, where CSFB employs 5,000 staff.

The wider Credit Suisse group also gave no indication of any cuts to its total workforce of 60,000. The bank will end up with three main businesses - corporate and investment banking, private banking and asset management.

Mr Dougan admitted CSFB was struggling to compete with other "bulge-bracket" investment firms which offer a wide range of services to major companies around the world. "We have underperformed financially, plain and simple. If we get it right, we have a truly unique opportunity," Mr Dougan said.

The prospect of job cuts at CSFB comes at time when other big employers in the City are also making redundancies, including Deutsche Bank and Commerzbank.

The Swiss bank also set out financial targets to be met by 2007. It wants the investment banking business to make SFr3bn (£1.3bn) of net income compared to SFr1.1bn now while the entire group should report a net profit of SFr8bn by then, up from SFr5bn.

Mr Gruebel gave little indication of when the flotation of Winterthur might take place and appeared to hold out hope that a rival might yet bid for the business, whose future has been under review since June. Winterthur was set a three-year target to make net income of SFr1.2bn.