Credit Suisse plans to cut 9,000 jobs and raise $4 billion in additional capital as it grapples with plunging stock prices and a fallout from significant scandals.
Credit Suisse will cut 2,700 jobs by the end of the year and the remaining 6,300 by the end of 2025 as it seeks to raise new capital from the Saudi National Bank and others.
The recent crisis of the Swiss bank
The announcement, including job losses, comes as no surprise as the Swiss bank grapples with significant losses in the third quarter. Its share price has fallen significantly over the past few weeks and is down 50% so far this year.
The company is now valued at around $11 billion. News of its financial crisis led to several customers withdrawing funds recently, causing Credit Suisse to briefly violate liquidity rules.
Analysts at Goldman Sachs said the plan was incomplete, but it is likely to exceed its “low” targets.
The Swiss bank’s new plan also includes slashing its investment banking business, which will be the responsibility of a new entity, CS First Boston. Credit Suisse will also re-focus its core banking operations on wealthy customers.
A portion of Credit Suisse’s $4.09 billion loss in the third quarter came from the restructuring of its investment banking arm.
These new measures were introduced by the Swiss bank’s third management team in a relatively short period of time. Various managements have tried to turn the bank’s fortunes around after facing several scandals, including prosecution for aiding in money laundering.
Its former president resigned after breaking the COVID-19 protocol.
Crypto Twitter weighs in on Credit Suisse News
After news broke of Credit Suisse’s restructuring, Crypto Twitter, primarily the anti-establishment, rejoiced.
One Twitter user, Lvld_Up, tweeted to his 1,360 followers that 9,000 employees could form a decentralized autonomous organization (DAO) that runs parallel to Credit Suisse. He asked the rhetorical question whether the bank’s problems could be solved by decentralisation.
Another Twitter user, Punktavira, a crypto investor, welcomed Credit Suisse to Web3:
Satoshi Stacker pointed to 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 isn’t the only traditional institution facing an uncertain future. Many Wall Street companies have faced significant economic disruptions in recent months, partly due to easing macroeconomic conditions.
Meta Platforms’ third-quarter profit fell 14% below analysts’ expectations. Its share price fell after declining third-quarter revenue compared to a year ago amid a weak advertising market. Investors are also becoming increasingly impatient with the company’s Metaverse efforts.
Chipmaker Intel is also under the pump, with shares falling 47% this year. The decline comes amid low demand for PCs and a weak economy. It fell short of expectations for the second quarter. Analysts expect it to report revenue of $15.31 billion for the third quarter.
Bitcoin more attractive in the short term
With the recent, mostly severe correlation of tech stock prices to bitcoin, one analyst considers bitcoin’s recent rally to around $20,600, which is positive for investors in the near term. The rally was fueled by the stock market’s rally ahead of third-quarter earnings calls on October 26 from some tech companies and some short-selling traders.
The rise in bitcoin price prompted short-sellers to cover their positions and buy bitcoin. Bitcoin’s tight trading range of $19,000 to $20,000 for most of September 2022 was little respite from volatility, leading some analysts to consider it an inflation hedge.
However, analysts have warned that the Fed may slow interest rate hikes in the medium to long term. As a result, bond yields will drop, making riskier assets like bitcoin less attractive.
But if crypto continues its relationship with stocks, the more significant economic activity of traditional companies, driven by lower interest rates, could start crypto on another bull run.
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