Credit Suisse plans to cut 9,000 jobs and raise $4 billion in additional capital as it faces stock price declines and fallout from significant scandals.
Credit Suisse will cut 2,700 jobs by the end he year and the remaining 6,300 jobs by the end of 2025 as it seeks to raise new capital from the Saudi National Bank and others.
Swiss Bank’s Recent Woes
The announcement including the loss of jobs is no surprise as the Swiss bank reels from significant losses in the third quarter. Its stock price has fallen significantly in the last few weeks and has fallen 50% so far this year.
The company is now valued at about $11 billion. News of its financial woes caused many clients to withdraw funds recently, causing Credit Suisse to violate liquidity regulations briefly.
Analysts at Goldman Sachs said the plan was incomplete, but its “low” targets would likely be surpassed.
The new plan from the Swiss bank also involves paring down its investment banking business, which will be the responsibility of a new entity, CS First Boston. Credit Suisse will also refocus its core banking operations on wealthier clients.
Part of Credit Suisse’s third-quarter losses of $4.09 billion came from restructuring its investment banking arm.
These new measures were tabled by the Swiss bank’s third management team in a relatively short period. Different management has tried to turn around the bank’s fortunes after it faced multiple scandals, including prosecution for aiding money laundering.
Its former chairman resigned after breaking COVID-19 protocols.
Crypto Twitter Weighs in on Credit Suisse News
After the news of the Credit Suisse restructuring broke, crypto Twitter, mainly anti-establishment, rejoiced.
One Twitter user, Lvld_Up, tweeted to his 1,360 followers that the 9,000 laid-off staff could form a decentralized autonomous organization (DAO) that runs in parallel with Credit Suisse. He asked the rhetorical question of whether the bank’s woes could be solved by decentralization.
Another Twitter user, punktaveira, who is a crypto investor, welcomed Credit Suisse to Web3:
Satoshi Stacker pointed out the irony that the Swiss bank was prosecuted for money laundering when it and other banks claim that Bitcoin is a vehicle for money laundering:
Credit Suisse is not the only traditional institution that faces an uncertain future. Many Wall Street companies have encountered significant economic headwinds in recent months, partly caused by stifling macroeconomic conditions.
Meta Platforms’ third-quarter profits came in 14% short of analysts’ expectations. Its share price fell after third-quarter revenues declined compared to a year ago amidst a weak advertising market. Investors are also growing increasingly impatient with the company’s metaverse efforts.
Chipmaker Intel is also under the pump, with shares falling 47% this year. This plunge comes amidst lower demand for PCs and a weakening economy. It fell short of second-quarter expectations. Analysts expect it to report revenue of $15.31 billion for the third quarter.
Bitcoin More Attractive in the Short-Term
With tech stock prices’ recent, mostly grim correlation with Bitcoin, one analyst believes that bitcoin’s recent rally to around $20,600 is positive for investors in the short term. The surge came from a stock market rally ahead of third-quarter earnings calls from some tech companies on Oct. 26, and some short-selling traders.
Bitcoin’s prices rise caused short-sellers to cover their positions and buy bitcoin. Bitcoin’s tight trading range between $19,000 to $20,000 for most of Sep. 2022 was a brief respite from volatility, causing some analysts to consider it an inflation hedge.
However, analysts warn that the Fed could slow down interest rate hikes in the medium to long term. As a result, bond yields would decrease, making riskier assets like Bitcoin less attractive.
But if crypto continues its correlation with stocks, more significant economic activity from traditional companies, spurred on by lower interest rates, could see crypto embark on another bull run.