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Old 28.07.2011, 15:25
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Re: Credit Suisse cuts jobs on poor results

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...., it doesn't cover the cost of capital demanded by the owners.

To be honest I didn't even look at the results presentation, mainly because you don't need a crystal ball to see this coming. I have however read the AGM minutes and I just can't find where the "owners" have demanded a certain ROE. Is it just me or is this "shareholders demand" just an excuse so that the big-wigs can feel better about laying off people and sleep well at night in their multi million chuff homes and spend their big bonuses? Must be just me then.
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Old 28.07.2011, 15:32
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Re: Credit Suisse cuts jobs on poor results

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Fixed that for you.

As one of those evil people working in these banks it always astonishes me how the banks can post a profit of nearly a billion for only 3 months and they have to lay off staff. I guess I will be even more upset when the currency turns again and all of a sudden these bankers are so clever because they made such huge amounts of money (read get HUGE bonuses) doing really trick clever stuff when in actual fact it's mostly to do with the currency fluctuations.

Would be interesting to revalue the profits on what the $/CHF exchange was at the begining of the year to see if the bank did actually miss their frofit expectations or if it is mostly to do with a strong chuff.
I am not a financial expert so how does these banks generate profits I cannot say, but bashing them generally seems plain wrong to me. People voluntarily put money there, pay for their services etc. If I take a job, I can expect it to end if owners of my employer decide to change ways they do business. Being contractor that is part of the deal, but I don't see much difference in perm poisitons, it just takes longer. I do not work there, so I am not trying to protect them, but world today is anything but stable place. It is double-valid for financial sector. Anybody who does not see that must have had their eyes and ears closed for last couple of years...
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Old 28.07.2011, 16:06
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Re: Credit Suisse cuts jobs on poor results

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I am not a financial expert so how does these banks generate profits I cannot say, but bashing them generally seems plain wrong to me. People voluntarily put money there, pay for their services etc. If I take a job, I can expect it to end if owners of my employer decide to change ways they do business. Being contractor that is part of the deal, but I don't see much difference in perm poisitons, it just takes longer. I do not work there, so I am not trying to protect them, but world today is anything but stable place. It is double-valid for financial sector. Anybody who does not see that must have had their eyes and ears closed for last couple of years...
Don't get me wrong. I am by no means bashing the banks. I am however bashing the guys that run the banks. These are the guys earning HUGE salaries to run the banks. Now unfortunately they are often also the owners, via share options and outright share purchases. Would you be able to sleep at night knowing you took away jobs from 2000 people just so you can get an extra 3 or 4 rappen for each of your shares you own? What would happen if all the shareholders tried to sell their shares in CS at the same time? Would other people who are happier to get the 3 or 4 rappen less per share dividend buy them? Probably. But what happens if NOBODY wants to buy them and the business is still profitable? I'll tell you. Nothing. Business as usual and 2000 jobs saved. I blame the vested interests that the top guys have. It's in their interests to make sure there is a large dividend for the shares they own and that the share price stays well above the options strike rate. That's how these guys line their pockets at the expense of the guys being "let go."

Here's an oxymoron for you. Business ethics.
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Old 28.07.2011, 16:14
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Re: Credit Suisse cuts jobs on poor results

Sorry if I am coming accross as grumpy, which those of you who actually know me in person can vouch, is not my normal state of being. I'm just having one of my "humanitarian" days. I remember what it was like to be let go and it's not nice not just for the soon to be lack of pay checks (not a huge issue here in Switzerland) but I have seen too many people's self confidence get really badly knocked and some never fully recover.
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Old 28.07.2011, 16:24
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Re: Credit Suisse cuts jobs on poor results

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Sorry if I am coming accross as grumpy, which those of you who actually know me in person can vouch, is not my normal state of being. I'm just having one of my "humanitarian" days. I remember what it was like to be let go and it's not nice not just for the soon to be lack of pay checks (not a huge issue here in Switzerland) but I have seen too many people's self confidence get really badly knocked and some never fully recover.
No problem, although I do not know You personally, I can relate to what You say about being laid-off. It is not nice, and can be really devastating. I learned to cope with that long time ago, when I understood (as a permie back then) that I am a simple tool to my employer, disposable if needed. One month after I left my perm position I had for 3.5 years company started firing employees like stones from sling, simply because numbers were not so nice as before. Same management guys that tried hard to appear as "friends" to many of company events.
One of my boss's primary responsibilities was to keep this "company spirit" in all his subordinates. It is a good feeling, but it's all just a game. Call me skeptic, but I don't look anymore for something that is truly not there. For me, it's just a job. Real life, goals, dreams, targets, purposes etc. lies elsewhere. Maybe I will not be employee #1 at the company, but I get the job done. And there is no way any employer can disappoint me.
So who is grumpy now?
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Old 28.07.2011, 16:45
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Re: Credit Suisse cuts jobs on poor results

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They are laying off staff because they are not making enough money. The return on equity was 10% this quarter, so even though they made 800m this quarter and that is a huge number to comprehend for us mere mortals, it doesn't cover the cost of capital demanded by the owners.
Come off it...who is expecting 10% ROE in one quarter / 40%+ / year on investments, especially in this climate.

Nobody.

If the bank are using this as an excuse let people go, it is nonsense.
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Old 28.07.2011, 16:59
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Re: Credit Suisse cuts jobs on poor results

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Come off it...who is expecting 10% ROE in one quarter / 40%+ / year on investments, especially in this climate.

Nobody.

If the bank are using this as an excuse let people go, it is nonsense.
It's an annualised ROE not a quarterly one, as is convention. This will be one of the reasons for the cuts. We're almost a third of the way through the next quarter and I don't see any evidence of things picking up.
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Old 28.07.2011, 17:16
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Re: Credit Suisse cuts jobs on poor results

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It's an annualised ROE not a quarterly one, as is convention. This will be one of the reasons for the cuts. We're almost a third of the way through the next quarter and I don't see any evidence of things picking up.
Surely even 10% for the year is an excellent return.
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Old 28.07.2011, 17:22
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Re: Credit Suisse cuts jobs on poor results

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I have however read the AGM minutes and I just can't find where the "owners" have demanded a certain ROE. Is it just me or is this "shareholders demand" just an excuse so that the big-wigs can feel better about laying off people and sleep well at night in their multi million chuff homes and spend their big bonuses? Must be just me then.
I expect you're not alone, however banks, like other commercial organisations, compete for capital and if CS doesn't provide a good return on investment investors will sell, and they have been. The share price has halved in value in the last 4 years. It's gone down 21% in the last 6 months. That's a fairly clear signal from the shareholders.
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Old 28.07.2011, 18:15
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Re: Credit Suisse cuts jobs on poor results

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T
-----
In answer to Wollishofen's point about a strong CHF not being an asset for a Swiss bank there are two reasons for this. The majority of the investment bank's revenues and expenses are in USD. Secondly the majority of client assets are not held in CHF - banks typically take a performance fee from clients based on their assets under management. A strong CHF decreases the value of those non-CHF denominated assets and hence decreases revenues.
Thanks for this explanation. Interesting is that the bank-managers could not do anything against all this. I mean, companies with Euro-accounts for example in Frankfurt do not take their Euros in to Switzerland and lose money by changing them into CHF, but keep the money out there and use it to pay invoices from Eurozone suppliers. The same with £ accounts in London. Sure, there are big differences, but nevertheless, it shows that also the big "gnomes" are not almighty.
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Old 28.07.2011, 18:35
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Re: Credit Suisse cuts jobs on poor results

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I expect you're not alone, however banks, like other commercial organisations, compete for capital and if CS doesn't provide a good return on investment investors will sell, and they have been. The share price has halved in value in the last 4 years. It's gone down 21% in the last 6 months. That's a fairly clear signal from the shareholders.
Umm. If I sell my CS shares and you buy them, what portion of this goes to CS as capital. None. Zero. Nada. Nothing. So what does a share price have to do with a companies capital? Sure for an IPO but an already traded share? A companies income statement & balance sheet is NOT impacted by it's share price. Unless the company has bought it's own shares. It amazes me how so many people don't understand this. A share, more specifically a share price is based on a companies ability to produce a profit, the dividend, and it's asset or capital value, the actual base price. The only thing a share price does for a company is give it "credibility" when trying to raise capital through further share issues or borrowing from other institutions. That is all.
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Old 28.07.2011, 19:51
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Re: Credit Suisse cuts jobs on poor results

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The only thing a share price does for a company is give it "credibility" when trying to raise capital through further share issues or borrowing from other institutions. That is all.
Think you've answered your own point there.

A high share price stops it being taken over also.
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Old 28.07.2011, 21:29
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Re: Credit Suisse cuts jobs on poor results

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Surely even 10% for the year is an excellent return.
Cost of Capital is around 14% for CS, so anything less than that is destroying shareholder value.
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Old 28.07.2011, 22:43
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Re: Credit Suisse cuts jobs on poor results

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A high share price stops it being taken over also.
Not really, it just means you would be buying a 'better' buiseness
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Old 28.07.2011, 23:56
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Re: Credit Suisse cuts jobs on poor results

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Think you've answered your own point there.

A high share price stops it being taken over also.
Luckily a bank can always borrow from the central bank.

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Cost of Capital is around 14% for CS, so anything less than that is destroying shareholder value.
Cost of capital for a bank in Switzerland is 0.25%. Even I can borrow at from CS at 6%. Cummon eyebeebe you know better than that.
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Old 29.07.2011, 10:20
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Re: Credit Suisse cuts jobs on poor results

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Luckily a bank can always borrow from the central bank.


Cost of capital for a bank in Switzerland is 0.25%. Even I can borrow at from CS at 6%. Cummon eyebeebe you know better than that.
Overnight funding is not the same as cost of capital! It provides liquidity (or soaks up excess liquidity). For cost of capital you need to use the Weighted Average Cost of Capital, which (simplified) is the average of the interest payments on long term debt and the rate of return required by shareholders, which itself is a function of risk free investing (if such a thing exists right now cf USA), the premium for investing in a risky asset and how correlated the individual share is to other shares.
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Old 31.07.2011, 16:14
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Re: Credit Suisse cuts jobs on poor results

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Cost of Capital is around 14% for CS, so anything less than that is destroying shareholder value.
Are you suggesting that CS make a loss on any fund that they don't earn more than 14%pa on?

Pull the other one.
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Old 31.07.2011, 16:20
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Re: Credit Suisse cuts jobs on poor results

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Cost of Capital is around 14% for CS, so anything less than that is destroying shareholder value.
are you sure you don't mean IRR? i find it hard to believe that CS would have such a high cost of capital...

http://pages.stern.nyu.edu/~adamodar...afile/wacc.htm
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Old 31.07.2011, 17:21
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Re: Credit Suisse cuts jobs on poor results

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Are you suggesting that CS make a loss on any fund that they don't earn more than 14%pa on?

Pull the other one.
Funds are something different as the fund belongs to the investors & not the bank. The charges on the fund will be under 2% in any case, depending on the fund.
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Old 31.07.2011, 18:28
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Re: Credit Suisse cuts jobs on poor results

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Funds are something different as the fund belongs to the investors & not the bank. The charges on the fund will be under 2% in any case, depending on the fund.
Sorry, by fund, I meant any money/assets that they are managing for clients.
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