Job cuts at major banks intensify: IFR

After more than two years of hiring and robust activity, some are now predicting the biggest investment banking lay-offs since the credit crisis, as managers pare back their headcounts in preparation for what many see as a possible prolonged slump in activity.

Credit Suisse, Goldman Sachs, Lloyds and RBS have been the first to move, slashing hundreds of banker positions in recent days. But the consensus seems to be growing within the industry that more banks will soon follow as falling revenues make cost-cutting more urgent.

"Nobody is really prepared for what might come," said one senior capital markets banker at a US firm in New York. "You can't even fill gaps in the business any more because investors expect you to be more disciplined; they are expecting a real focus on the short-term costs."

So far, however, cuts have been small. Within its investment bank, Credit Suisse has launched a cross-business consultation. The bank could shed up to 600 jobs, according to some estimates, with insiders at the bank saying that no part of the business would be immune.

With the worst cost-to-income ratio among its peers (see chart), Credit Suisse has been feeling the pressure for some time to slash jobs. It also needs to maximize profit in order to boost its core Tier 1 capital from a current 13 percent to the 19 percent required under new Swiss rules. As revenues fall, maximizing profit will depend on how deeply the firm can cut costs.