Credit Suisse's Decline Results in the Loss of 1,500 Jobs

The line at the unemployment office is about to get a bit longer.

Credit Suisse (NYSE: CS), one of the many multinational financial services companies, has apparently incurred a loss during the third quarter despite a 12% increase in net income.

Consequently, the company is responding by cutting “about 1,500 jobs” and “reorganize its securities unit after the division reported its first quarterly loss since 2008,” Bloomberg reports.

Bloomberg says that CEO Brady Dougan referred to the quarter as “challenging.” That “challenge” is apparently what led to the latest staff cuts, which are in addition to the 2,000 jobs that Credit Suisse eliminated during the summer.

Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, was quoted by Bloomberg as saying, “In the current environment and with new capital requirements I don't see Credit Suisse delivering adequate returns, so it makes sense to adjust capacity. Investment banking is affected most by the stricter regulation, while other businesses are suffering from clients' low risk appetite.”

Why is Credit Suisse bragging about its increase in net income while simultaneously cutting jobs? According to Bloomberg, the company reported a pretax loss of 190 million francs during the third quarter, “compared with a profit of 395 million francs in the year-earlier period.” Meanwhile, earnings dropped 78%.

Bloomberg also quoted Dougan as saying, “We believe subdued economic growth and the low interest rate environment and increased regulation that we are seeing may persist for an extended period. We may well continue to see continued low levels of client activity and a volatile trading environment.”

The job cuts are expected to be completed by the end of 2013. They will reduce the company's workforce by nearly 7%.

ACTION ITEMS:

Bullish:

If you think Credit Suisse can rise above its current shortcomings, consider the following trade:

• Closing yesterday at $28.97, Credit Suisse shares are considerably cheaper than their six-month high of $45.39. If you're interested in the stock, now might be a time to consider buying a few shares.

Bearish:

While bullish investors may see the reduced share price as a discount, the reality is that the shares have lost more than 30% of their value. If you don't see the glass as being half-full, then consider this alternative:

• Citigroup (NYSE: C), which reported a rise in Q3 profit, is doing fairly well these days. So well, in fact, that Credit Suisse recently upgraded the stock to Outperform and raised its price target from $45 to $48.

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