Credit Suisse announced a fourth quarter net loss, job cuts, compensation reductions, and ongoing strategic shifts in its troubled investment banking business.

Based on preliminary information, Credit Suisse estimates that it had a net loss of approximately 3 billion Swiss francs (US$2.5 billion) in the fourth quarter as of the end of November.

Investment banking had a significant pre-tax loss, reflecting the challenging conditions in the financial markets in the quarter and costs associated with risk reduction, the bank said.

However, the firm had a modest net profit in November. The Private Banking division continues to perform well and attracted solid asset inflows in the fourth quarter, it said, adding that it has maintained its strong capital base and expects to have a tier 1 ratio of around 13% at year-end. The bank’s deposit base and funding remain very solid.

Credit Suisse said it will continue to judiciously invest in the growth of its Private Banking business globally and its Swiss businesses. In Investment Banking, Credit Suisse is accelerating the implementation of its strategy to reposition the business. The strategic measures reflect, among other factors, the impact of weaker macroeconomic conditions, continued market volatility and fundamental shifts in client demand away from more complex products towards the greater use of exchange-based and flow trading.

The Investment Banking division will also continue to reduce its origination capacity in complex credit and structured product businesses and cut risk capital usage, including exiting certain proprietary and principal trading operations. The new operating model will reduce earnings volatility, improve capital efficiency and better leverage the strengths of the integrated bank, it says.

Cost efficiency initiatives will be implemented across all divisions throughout the bank and will result in a headcount reduction of 5,300, an 11% reduction of the bank’s workforce. These reductions, the vast majority of which will have taken place by the end of the first half of 2009, will be primarily in Investment Banking and in related support areas.

Along with additional reductions in compensation and non-compensation costs, the bank expects to reduce costs by CHF 2 billion, representing 9% of the bank’s reported nine-month annualized 2008 cost base. Costs associated with the strategic measures will amount to approximately CHF 900 million and the majority will be taken in the fourth quarter. These costs are not reflected in the estimated quarter-to-date result as of end-November.

Also, the chairman, Group CEO and CEO of the Investment Bank have informed the Board of Directors that it would not be appropriate for them to receive variable compensation for 2008.

Commenting on the steps outlined today, Brady Dougan, CEO of Credit Suisse Group, said, “Our strategy remains clear and consistent: we will continue to judiciously invest in the growth of Private Banking globally and our Swiss businesses, reduce volatility and risk, and increase our focus on client and flow trading businesses in Investment Banking. The strategic steps we are outlining today will further reinforce the strong position of Credit Suisse from a risk, cost, capital and earnings perspective. These actions will better position us to weather the continuing challenging market conditions, capture opportunities that arise amid the continuing disruption, and prosper when markets improve. Our approach is firmly rooted in the integrated model, which we believe is the most effective means of delivering best-in-class service to our clients, while realizing enhanced operating efficiencies.”

IE