Bankers await more job cuts as CSFB's profits tumble
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Your support makes all the difference.City bankers were bracing themselves for more redundancies yesterday after Credit Suisse First Boston warned revenues were still falling and UBS Warburg said it could not find work for almost half of its graduate trainees.
CSFB saw net operating profits fall 78 per cent to $338m (£233m) last year, excluding $646m of charges for 2,500 redundancies and the $100m settlement of an investigation into CSFB's handling of technology flotations in the late 1990s.
The investment bank is saddled with one of the highest cost bases on Wall Street, the legacy of lucrative guaranteed bonus contracts used to retain and recruit staff at the peak of the bull market. Average pay at CSFB fell by 49 per cent as John Mack, the unit's new chief executive, renegotiated contracts and sacked staff. About half of last year's wage bill was guaranteed, the company said.
Mr Mack said it would take up to three years for CSFB to get the ratio of salaries to revenues down from last year's 58 per cent to the industry average of 50 per cent. Fourth-quarter operating losses were $196m, up from $123m in the third quarter and against a profit of $901m in the fourth quarter of 2000.
"We don't have a revenue problem, we have a cost problem," Mr Mack said. Revenues at CSFB were not expected to rise this year, he added.
Separately, UBS Warburg disclosed that the number of year-2000 graduate trainees receiving a firm job offer this summer, at the end of their two-year programme, would be lower than last year. About 40 of the 90 trainees are to leave the investment bank. Usually only about one-third do not stay on.
Goldman Sachs, which reports first-quarter results next week, is also thought to be preparing cuts. The Wall Street bank declined to comment on reports that 2,000 people, or 10 per cent, of its global workforce were going.
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