Credit Suisse has taken an axe to its U.S. prime brokerage business. Two weeks after we predicted a round of redundancies following the departure of global head of prime brokerage, Indrajit Bardhan, around 20 people in the front office have disappeared, many of them very senior.
The exits include the following names:
Jeremy Siegel: Managing director and global head of the consulting team.
Bob Leonard: Managing director and global head of capital services.
Clay Mason: Junior on capital introduction team.
Mike Wingertzahn: Managing director and head of Delta 1 sales.
Gardy Berthoumiex: Managing director and global head of the central collateral desk.
Isabelle Krusen: Director, prime services coverage.
Julia Allen: Director, prime services coverage. Chicago
Stephen Webb: Vice president, U.S. equity finance trading.
Mark Matulonis: Vice president, prime brokerage transition management.
Fred Nadd-Aubert: Managing director and head of securities lending.
Tony Palladino: Director, securities lending.
Shelby Tom: Trading assistant, securities lending.
Phil Maxim: Vice president and delta one trader.
Jeffrey Janker: Director, advanced execution services and trading coverage.
Credit Suisse confirmed the departures. Many of the names on the list above were senior staff with long tenure at the bank: Siegel had been at CS for 13 years, Leonard for 15 and Berthoumiex for 20. Most were based in New York. Credit Suisse's prime broking business employs "hundreds" of people in total.
The layoffs come as Credit Suisse continues to take costs out of its global markets business. The Swiss bank hired heavily for its equities business in 2017, but revenues fell 8% last year, partly as a result of the reclassification of systematic equities as part of wealth management division, but also because of what the bank itself described as, “market challenges.”
A spokeswoman for Credit Suisse said: “We continue to invest in the equities business and across the global markets division as evidenced by our recent hires. Credit Suisse remains committed to its Prime Services business as the cornerstone to its Equities department.”
Credit Suisse’s approach to its prime brokerage business has been confused in recent years. In late 2014, the bank indicated that it was planning to shrink the business because of its heavy use of balance sheet, and in late 2015 some London prime brokerage trading roles were shifted to Dublin and the bank reportedly notified clients that it was closing its FX prime broking business. By March 2016, however, Credit Suisse changed its mind and said it had decided to maintain and invest in prime brokerage, seemingly as a means of winning hedge fund clients.
The latest prime brokerage cuts suggest that Credit Suisse is trimming pb again. Last week’s compensation report indicated that members of the bank’s executive board had their 2017 bonuses curtailed for failing to generate returns. The 4.7% 2017 return on regulatory capital in global markets was below the bank’s unspecified lower “threshold.” Cutting back on capital hungry prime brokerage activities looks like one way of remedying this. However the bank says that headcount cuts will not be matched a reduction in capital allocated to the business.
Credit Suisse has the third largest prime broking business globally. Last year, however, Credit Suisse's prime broking business slipped to fourth place in the U.S. market according to HFM Magazine, which said the bank was being used as a "back-up" by many of its clients.
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