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Credit Suisse to cut 10% of European investment bankers

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Credit Suisse is preparing to lay off more than 10 percent of European investment bankers this year, after already laying off hundreds of staff in London and Zurich last month, according to people with knowledge of the moves.

The crisis-plagued Swiss lender announced in October that it planned to cut up to 9,000 jobs globally over the next three years from its workforce of 52,000. But those plans have intensified in recent weeks as the bank prepares to announce its second consecutive annual loss next month.

Analysts expect a wave of big job cuts at investment banks around the world, following in the footsteps of Goldman Sachs, which kicked off a plan to lay off more than 3,000 employees this week.

Investment bank revenues took a hit last year and lenders are under pressure to cut costs, having ramped up hiring over the past two years.

Credit Suisse is under more acute stress than its peers as it suffered massive customer withdrawals in October following rumors on social media about its financial health and has racked up a string of quarterly losses over the past three years.

The initial wave of 2,700 global layoffs in December included 540 job cuts in Switzerland and up to 200 in London.

Credit Suisse employs over 5,000 people in London and 16,000 in Switzerland.

Consultations on the next round of layoffs began before Christmas, with more than 10% of investment banking jobs in Europe up for discussion, according to people with knowledge of the talks. A final decision is expected next month.

The lender employs around 17,000 investment bankers worldwide, with its main centers in New York and London.

At some of Credit Suisse’s smaller European outposts, up to a third of jobs are at risk as the bank restructures its operations in hopes of eliminating overlapping roles and front-office positions.

Many investment bankers surviving job cuts at Credit Suisse’s New York office, its main hub outside Europe, have the prospect of joining First Boston’s planned spin-off, which will be led by the former Credit Suisse chief , Michael Klein.

But there is less certainty about investment banking functions in Europe, as First Boston will be focused on the US market.

“It’s hard to know where we’re going to fit in, although it’s clear that European activities will scale back over time,” said a Europe-based banker. “We are in wait-and-see mode.”

Another leverage managers have when it comes to managing costs is cutting the bonus pool, which was reduced by a third in the last year.

Few of Credit Suisse’s investment bankers expect much in terms of bonuses this year, given the annual loss the bank has signaled it will report next month.

But senior managers are eager to offer incentives to wealth managers who have strong personal connections with clients to prevent them from defecting to rivals, as well as to staff working on critical projects.

“I expect bonuses on my team to be close to zero,” said a Credit Suisse trader.

“But for top private bank executives, they will get a lot of attention and try to retain as much as possible.”

In just three weeks in October last year, wealth management clients withdrew CHF 63.5 billion ($68 billion) from Credit Suisse, equivalent to 10% of assets.

By comparison, UBS suffered 10% of outflows for an entire year during the global financial crisis.

Credit Suisse chairman Axel Lehmann told the Financial Times last month that withdrawals had slowed and customers were returning to the bank.

Credit Suisse declined to comment on the prospect of further job cuts or its bonus policy.