Credit Suisse IS making a lot of investment banking redundancies. Here's who appears most deserving of the knife

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What began as a rumour in CityAm has become fully-fledged fact: Credit Suisse will be eviscerating a high proportion of its London investment banking business in July. Reuters says so.

Reuters has spoken to three people who say Credit Suisse will be getting rid of 60 MDs and directors in its M&A and capital markets team. Proportionately, directors will suffer more than the managing directors above them: 30% of directors will be going, versus only 10-15% of MDs. Analysts and associates don't appear to be affected, but this doesn't bode at analyst bonus time - particularly as Credit Suisse has reportedly ended the practice of automatically increasing analyst pay on an annual basis.

You can see why Credit Suisse might want to trim some of its equity and debt capital markets bankers. As the chart below (from UBS) shows, its capital markets bankers have lost market share quite consistently over the past three years. (Click to look)

(Source: UBS)

On the other hand, Credit Suisse's M&A bankers are having a comparatively good year. Their departure seems a bit of a shame. (Click to commiserate)

(Source: UBS)

UBS also offers some interesting insights into why Credit Suisse might have decided that if it's cutting costs, M&A and capital markets (IBD) businesses are the place to do so. UBS estimates that a 40% reduction in ECM revenues with a cost ratio of 50%, would only reduce Credit Suisse's overall 2012 earnings by 4%. A similar reduction in M&A revenues would reduce earnings 8%. In DCM, 11%.

By comparison, a 40% drop in equity sales and trading revenues with a 50% cost ratio will lead to a 33% drop in earnings. A similar drop in FICC revenues will lead earnings to fall 41%.

Some of the Credit Suisse bankers who are let go can console themselves with the thought that they'll still earn millions from the original PAF toxic bonus scheme. However, this only applies to MDs. Directors will probably have to make do with redundancy packages.   

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