Struggling CSFB cuts 2,000 jobs

Investment banking giant Credit Suisse First Boston is to slash 2,000 jobs, after a poor quarterly performance pushed its parent company into the red.

These steps require tough choices... but they are critical if CSFB is to continue to compete effectively and to build its business

John Mack, CSFB

Revenue at Credit Suisse First Boston (CSFB) fell 20% in the July-to-August quarter, a statement on Tuesday said.

The performance helped push CSFB's parent company, the Credit Suisse Group, into a 300m Swiss franc (£126m; $190m) loss for the quarter.

Like most other major investment banks, CSFB has been hit by the impact on financial services of the global economic slowdown,and in particular by the almost complete drying up of company merger and flotation work since the 11 September attacks.

Now, US-based CSFB is planning to shed about 7% of its staff, as part of a drive to cut its costs by $1bn by the end of next year.

CSFB becomes the first major financial-market firm to announce sweeping job cuts, but most of the industry's biggest companies are reported to be cutting staff on a more informal basis.

Wall Street giant

CSFB, one of the best-known names on Wall Street, acquired a reputation for aggression and daring in the 1990s.

Cost-cutter: CSFB chief executive John Mack

But spiralling salary costs have battered its results in recent years, prompting Credit Suisse to bring in John Mack as chief executive in July.

Mr Mack - known in the industry as "Mack the Knife" - is charged with trimming the fat at the investment bank.

"The steps we are taking today will more closely align the size of our business with changing market conditions and bring our cost structure in line with that of our major competitors," Mr Mack said.

"These steps require tough choices, which are all the more difficult in the face of the recent tragedy that has profoundly affected our industry.

"But they are critical if CSFB is to continue to compete effectively and to build its business."

Group troubles

CSFB's fading fortunes have compounded troubles at the Credit Suisse Group.

As well as CSFB, the group includes Swiss bank Credit Suisse and insurer Winterthur, as well as dozens of smaller financial firms around the world.

In the April-to-September quarter, the group took a 400m Swiss franc (Sfr) write-down on its holding in insurer Swiss Life, and had to set aside 200m Sfr against its potential exposure to troubled Swissair.

At the end of September, Credit Suisse, along with fellow Swiss bank UBS, agreed to acquire a majority stake in Swissair's regional subsidiary Crossair, as part of a plan to rescue most of the carrier's operations.

Since then, the two Swiss banks have come under fire for allowing Swissair to suffer a number of embarrassing incidents at the hands of creditors.