No sooner did Financial News point out that Credit Suisse had a bit of a cost problem in its investment bank and no sooner did Credit Suisse protest that the problem was purely down to the way it allocated costs, than the worst has happened: a rumour has surfaced that Credit Suisse is about to make a serious amount of senior redundancies.
'The word on the street is that we are about to witness a large cull of up to 30% of the managing directors and directors involved in investment banking in Europe,' claims City Am this morning.
Credit Suisse has declined to confirm this, but 'sources close to the bank' said that if such a thing does happen it would be part of the 1,500 redundancies announced by the bank last year. When Credit Suisse announced its second quarter results in April, it had made no redundancies and still seemed to be hiring.
Being made redundant is bad. But being made redundant from Credit Suisse may be worse. The bank's PAF 2 bonus scheme for senior staff, which paid some MDs from a pool of Credit Suisse's derivative assets last year, comes with punitive conditions saying that PAF 3 bonuses can be clawed back in their entirety if an someone leaves within three years of the issue date. With luck, this doesn't apply in situations of redundancy.
Investing now to take advantage of bankers at Goldman Sachs in future
Fortunately, there is a way that Credit Suisse's investment banking MDs can invest their redundancy payments now to take advantage of the long hours worked by bankers at Goldman Sachs in future.
Yesterday, it emerged that Goldman has appointed an architect to turn the dilapidated old BT telephone exchange on Farringdon Street into its new London offices by 2017. The building, which currently looks quite uninspiring, is pictured below (courtesy of Google Street View).
By 2017, however, Goldman's new London headquarters will house around 5,500 of its London staff. At that point, the BT telephone exchange will have been transformed and - we surmise - Farringdon/Clerkenwell could yet become an even more popular place to live. Now may therefore be the moment to buy some nearby rental flats in the area to house all the junior Goldman Sachs bankers for whom working near the office will be a big priority.
Local estate agents tell us Clerkenwell's already very popular with bankers and that house prices have been rising there this year. "In the last 12 months, the price of flats for sale in Clerkenwell has gone up 10%," says Tim King at Felicity J Lord. Crossrail is likely to make Farringdon even more popular in future, says King (although this may conceivably also lead some senior Goldman bankers to commute in from elsewhere).
Tom Street, a lettings agent at Stirling Ackroyd, says 90% of the lettings he deals with in Clerkenwell involve "City professionals", but that the local lettings market has quietened as people become uncertain about their jobs.
This may all change in five years' time. Far-sighted Credit Suisse bankers with redundancy packages and others with cash to spare are advised to take note now.