Just because you’ve survived one round of cost cuts, that doesn’t mean you’re safe. There may be another round. And then another. Hence, Goldman Sachs first decided to trim $1.2bn of costs. Then it decided to trim $1.4bn. Now it’s upped the overall total to $1.9bn.
Similar stuff is going on at Credit Suisse, which announced some of its Q2 results prematurely today alongside news of its capital raising. Initially, Credit Suisse intended to cut its costs by CHF2bn by the end of 2013. However, having eliminated all those senior bankers in London, it’s achieved this earlier than anticipated. Flushed with cost cutting success, Credit Suisse now plans to cut an additional CHF1bn. Will jobs go as a result? Brady Dougan wouldn’t say, but the initial cuts resulted in 2,500 persons being eliminated. Logically, therefore, another 1,250 people could be ousted – except that (as our German editor points out) the next round of cost cutting is likely to hit lower paid operations and middle office staff rather than super-remunerated MDs, more of whom will need to go if targets are to be met. These new Credit Suisse cuts could be just as – if not more painful for its investment banking staff.
Separately, Bank of America has also released its second quarter results today. It’s done comparatively well: ex-DVA, sales and trading revenues are down a mere 7% on Q2 2011, which is pretty good considering risk (as measured, possibly inaccurately by VaR) has been reduced by 73%. M&A revenues are down a mere 12%. Only ECM and DCM don’t look so hot (down 59% and 41% respectively).
Bank of America is also cost cutting. It’s about to move into ‘Project New Bac’ Phase 2, which will affect the investment bank and trim 11% of the cost base from ‘targeted areas.’ Who will be cut? We don’t know. Interestingly, however, Bank of America says it’s received 1,500 suggestions from employees on how costs can be taken out. Whether these include substantially reduced compensation is still unclear.
Canadian brokerages no longer looking so appealing. (Bloomberg)
The terminal disease afflicting banking. (Alphaville)
As long as Goldman plays the ostrich game, its subpar returns will result in a subpar share price. (WSJ)
Back in 2007 Goldman made $11.5bn in net income. In the first six months of this year, by contrast, it earned an annualised net income of just $6bn. (Financial Times)
If you don’t get a bonus at UBS in London this year, it may be because your employer is ring-fencing the bonuses of a dozen top performers in Australia. (Reuters)
Arriving in a blacked out Mercedes with a team of astronauts in tow, Anton Kreil, dressed in his flight suit and mirrored sunglasses was surrounded by photographers and adoring women. (Telegraph)