Credit Suisse Cuts Jobs, Payouts

ZURICH, Switzerland -- Credit Suisse prepared to cut another 1,250 jobs and slashed its dividend on Tuesday as Switzerland's second-largest bank struggles to recover from a record 2002 loss amid tough markets and the risk of war in Iraq.

CS said the global market downturn and a host of one-off charges caused a 950 million Swiss franc ($696 million) net loss in the fourth quarter of 2002, pushing it to a record full-year net loss of 3.3 billion francs. That was a touch better than the 3.4 billion loss the bank had warned of on Jan. 21.

CS insisted it would return to profits this year, but finance chief Phil Ryan said it was impossible to predict at what point of the year it will turn the corner.

"Obviously the Iraq factor is a big one. A lot of our business is tied to investor confidence -- we're not oblivious to the risk and keep a close eye on this," he said.

"At this point the lack of clarity is unusually high. There is room for an upturn, maybe in the second half, but it really all depends on what happens in the Iraq crisis," Ryan added.

CS shares were down 5.4 percent at 25.55 francs in mid-morning trading as investors zoomed in on its murky outlook and weak performance in private banking.

The bank, which ranks about 25th globally by market value, has suffered one of Europe's worst share-price batterings over the past 12 months, falling 55 percent due to worries about the global bank's strategy and its ability to reverse the worst losses in its history.

The 2002 loss was mainly due to CS's Winterthur insurance unit where falling equity prices wiped out investment gains, and problems at its Credit Suisse First Boston investment bank, which is facing an avalanche of litigation in the United States.

CS said the onslaught of bad headlines it faced in 2002, when fears over the bank's capital structure and its strategic directions ran rampant, had scared off customers and hurt its flagship wealth management business.

The 1,250 job cuts announced on Tuesday come on top of some 6,500 positions already slashed at ailing Credit Suisse First Boston, which has suffered from runaway costs after expanding strongly in the late 1990s.

And in December, CS said it would cut 300 jobs by consolidating CSFB's Zurich-based securities and treasury operations into the group's financial services division, which had just over 80,000 employees at the end of 2002.

To help it restore profits, CS said it would cut 900 jobs in its financial services division, which includes retail banking and insurance, and shave off another 350 positions by combining its Winterthur life and non-life insurance business under one roof.

"We hopefully have done what we needed to do to restore profits in 2003," Ryan said.

CS said its key private banking business saw net new assets of only 500 million francs, down sharply from a net inflow of 3.4 billion francs seen in the third quarter and far below the inflows seen at domestic rival UBS, which last week reported inflows of 9.4 billion francs.

"Clearly net new money inflows in private banking were very weak in the fourth quarter compared to the third and compared to UBS," said Z?rcher Kantonalbank analyst Christoph Ritschard.

Co-chief executive Oswald Gr?bel told analysts the measures should help CS make a "reasonable" profit in the current year.

CS's results were in stark contrast to larger Swiss competitor UBS, the world's sixth-largest bank, which last week reported a 3.5 billion franc net profit for 2002. However, UBS also warned of a tough 2003.

"They seem to have underperformed compared to UBS across the board," said Vasco Moreno, head financial analyst at investment bank Fox-Pitt, Kelton in London. "Credit Suisse is certainly losing market share to its competitors."

CS said its Tier 1 capital ratio, a measure of stability, rose to a comfortable 9.7 percent at the end of the quarter compared to 9.0 percent at end-September, helped by a 1.25 billion franc issue of mandatory convertible securities.

To help preserve much-needed capital, CS said it would cut its dividend by 95 percent, proposing a 0.1 franc payout for 2002 after a 2.0 francs payout on 2001 results.

Underlining the tough market environment, CS booked some 635 million francs in credit loss provisions in the fourth quarter. Ryan told analysts the charges should decline this year.

"We do see lower provisions ... going into next year. However, it is way too early to declare victory," he said.

CS set aside an extra $450 million in the fourth quarter for CSFB's legal troubles, which range from allegations of biased research coverage to dodgy allocation of initial stock offers.

Despite CSFB's woes, CS insisted it does not want to spin off the investment bank.