Credit Suisse First Boston will fire another 2,000 bankers and launch a wholesale cost-reduction programme in an effort to save $1bn (€1.1bn) a year.
The news of the latest redundancies, which represent around 7% of CSFB's global headcount, came as CSFB warned that it would report an operating loss of $120m in the third quarter on the back of lower activity. It takes the total redundancies at CSFB to over 5,500 since it bought Donaldson, Lufkin & Jenrette last year.
This makes the firm the only investment bank to report a loss in the third quarter. Despite difficult market conditions banks such as Goldman Sachs, Bear Stearns, Lehman Brothers and Morgan Stanley all managed to reduce the impact with a strong performance from their fixed income business.
Sources at CSFB said that fixed income had produced a strong performance in the third quarter, but the firm's cost base was "simply too high". Revenues fell 20% from the second quarter to around $3.2bn. With costs in the second quarter running at $3.1bn, this left the firm with no room for manoeuvre on valuation adjustments, provisions or depreciation.
he sources denied that a one-off trading loss or black hole had pushed CSFB into the red.
The cost reduction programme will affect all areas of the firm, with the investment banking unit being the worst hit with about 650 redundancies. CSFB is also looking to rationalise support services, procurement and IT functions, across the firm.
The move is part of a wider effort since the appointment of John Mack as chief executive of CSFB to bring its cost base into line with other Wall Street firms. Last week eFinancialNews.com reported that CSFB needed to cut around $1bn a year to bring its compensation ratio (salaries and bonuses as a proportion of operating income) down to the levels at Wall Street firms.
In the second quarter CSFB's compensation ratio was 57.6%, compared with an average of 51.1% at its main rivals.
Mack said: "To compete effectively with other top-tier financial services firms, we need to drive down costs and seek ways to operate more efficiently. 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 our major competitors."
The firm has appointed Phil Vasan, the former head of CSFBNext, its e-commerce unit, to manage the cost reductions programme. It is understood that CSFBNext will be effectively closed and folded back into the firms's IT function.