Credit Suisse Group AG, the second biggest Swiss bank, is setting up a new division to combine its rates, foreign-exchange and commodities operations as it cuts more than 100 fixed-income jobs in London and New York.
The bank’s Global Head of Rates Jon Kinol in New York and Head of Global Foreign Exchange David Tait in London have been appointed to jointly run the newly-formed Global Macro Products group, Gael de Boissard, co-head of the investment bank, wrote in a message sent to staff yesterday. Adam Bradbery, a spokesman for the Zurich-based bank confirmed the memo’s content.
“Given the changes to the macro environment and the evolution of the financial and regulatory framework, we are combining our Rates, FX and Commodities franchises into a newly formed Global Macro Products group,” de Boissard wrote in the memo that was obtained yesterday by Bloomberg News. It “allows us to create scale in our delivery of macro products, and therefore achieve capital and cost efficiency,” he said.
Two people with knowledge of the matter said this month that Credit Suisse was cutting about 50 jobs in New York and 65 positions in London within its fixed-income department. Bradbery confirmed nearly all the affected staff have already been informed about these redundancies.
The fixed-income business had a “challenging” third quarter as client activity slowed across the industry, Credit Suisse Chief Executive Officer Brady Dougan said in an interview with Bloomberg Television last month. There has been “a slight improvement” in the markets recently, though it remains to be seen if it will last, he said later on a conference call.
Credit Suisse’s investment bank said last month that pretax profit declined 53 percent in the third quarter from a year earlier to 229 million francs ($250 million) as revenue from fixed-income sales and trading slid 42 percent to 833 million francs. Revenue from equities increased 8.3 percent to 1.07 billion francs.
The company said at the time it would shrink its rates business, which focuses on government bonds and interest-rate swaps and options, by 44 percent in terms of risk-weighted assets. The bank is transferring 10 billion francs of risk-weighted assets including parts of the rates business into a non-strategic unit, which will wind them down over coming years.
The remaining rates business will have a higher return on equity as a result, according to Credit Suisse. In cash products, it will focus on high-volume electronic trading, while the derivatives business will be geared toward simplified products that would mostly be centrally cleared.
Switzerland’s UBS AG and Credit Suisse may both have to shrink their fixed-income, currencies and commodities activities if the nation’s regulator imposes higher leverage ratios than currently planned, JPMorgan Chase & Co. analysts led by Kian Abouhossein in London wrote in a research note Nov. 4.
Credit Suisse in particular would be hit by rules forcing banks to hold more capital in relation to their assets, the analysts said. While both companies are estimated to reach Swiss leverage ratios of at least 4.2 percent by 2015, a Finance Ministry proposal that the measure be raised to 6 percent would lead to “material uncertainty” and possible cuts in the fixed-income, currencies and commodities divisions, they wrote.