Skip to main content

Layoffs Watch '11: How Much Will Firing You Save the Shareholders?

  • Author:
  • Updated:

Credit Suisse. Earnings. Not so great. Net income CHF 768 vs 1bn estimates, investment bank net revenues down 31% y-o-y and 43% q-o-q. Like its next-door neighbor gnomes, CS is most saddened and disappointed by the efforts of its investment bank. Wall Street analysts are pretty bummed too:

"The investment bank is a catastrophe," said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets who put the stock "under review" today. "After the financial crisis, Credit Suisse expanded the investment bank but then the hoped-for volumes didn’t materialize."

Which means that some Credit Suisse bankers will be dematerialized. To the tune of 2,000 layoffs firmwide.

Looks like Layoffs Season 2011 is well underway. So far CS, UBS and of all people GS have announced planned cost-cutting measures and put some numbers (both financial and body-count) around them. We looked at the stats**:

The CS and UBS numbers make sense - the savings per employee are right in the zip code of average annual comp (based on accruals so far / no particular reason to believe these reflect actual expected comp). The GS number seems like an outlier: the savings are 2.5x average employee comp. Three possible explanations:

1. GS's projected savings come from "comp and non-comp" expenses, so perhaps much of those savings are driven by cup rather than personnel downsizing

2. Maybe GS's savings are coming disproportionately from cutting the heavy hitters, and the junior mistmakers will be spared this round.

3. Or maybe 1,000 layoffs at GS is a little conservative?

** Based on public filings. All of GS is treated as investment bank. UBS "personnel expenses" include minor non-comp expenses.