Credit Suisse is looking at moving nearly 2,000 jobs out of London because of its high costs, the bank’s new boss said on Wednesday, raising questions about the city’s status as Europe’s dominant financial centre.
Chief Executive Tidjane Thiam estimated the Swiss-based bank could save 230 million Swiss francs ($241 million) a year if some back-office positions were moved to lower cost centres such as in Poland and India. This could mean a saving of 128,000 francs for each of the estimated 1,800 jobs in question.
In all, some 5,000 jobs are likely to cut worldwide.
Thiam, who swapped London for Zurich after six years at the helm of insurer Prudential, was speaking after the bank set out plans for a major overhaul, including measures to “right-size” staff numbers in London, where most of its investment bankers are based.
“We have 6,600 jobs (in London), 2,400 front office, 4,200 back office. Out of the 4,200, about 2,400 are directly connected to the front office, so they need to be co-located with the front office,” Thiam told reporters on Wednesday.
“The other 1,800 frankly don’t need to be in London, and that’s the potential we’re looking at, plus a little bit of efficiency in the front office,” Thiam added.
London regained its crown as the world’s leading financial centre in 2015, after losing it to New York in 2014, according to research company Z/Yen, while jobs in London’s financial and related professional services industry reached an all-time high of 729,600 as of June, a survey by lobby group TheCityUK said.
Yet pressures on its position have intensified, with tough regulations imposed since the financial crisis and uncertainty about Britain’s membership of the European Union prompting a number of big banks, including HSBC, to look at the viability of remaining in the city.
The position of London’s financial sector is also central to the so-called “Brexit” debate ahead of a referendum on EU membership expected next year.
EU enthusiasts warn that leaving the bloc could help turn the city into an insignificant offshore centre as banks move elsewhere. But opponents of the bloc argue the city could benefit from leaving, being freed from tough EU rules that hinder doing business and how much bankers are paid.
Meanwhile, if the cost of doing business in London is deemed too high, members of either camps could vote with their feet, regardless of the referendum.
“Definitely London is too expensive,” said one Credit Suisse IT contractor based in Canary Wharf, the former docklands area to the east of the city which is home to Credit Suisse’s main London offices.
Property prices around Canary Wharf, whose parent Songbird Estates succumbed earlier this year to an offer from Qatar Investment Authority and Brookfield Property Partners, have risen 27 percent since early 2013, versus a 10 percent rise across prime central London, according to an index from property company Knight Frank.
Prime office space in Warsaw, one city where Thiam might look to relocate staff, costs around 270 euros ($306) per square metre, compared with around 670 euros in Canary Wharf, according to Savills, another property group.
Other major banks have already set up operations in locations that are cheaper and often more attractive for IT and back-office staff. Citigroup for instance has IT hubs in San Francisco and Israel; JPMorgan has sites in Delaware on the U.S. east coast and in Bournemouth, on Britain’s south coast.
Credit Suisse also aims to consolidate its London estate, which includes five locations across the city, by sub-letting some sites as well as offshoring staff.
It is in talks with the Irish central bank about opening a regulated office in Dublin to relocate some functions, including prime broking, which provides services to hedge funds, according to a source familiar with the matter.
Out of a total 1.3 bilion francs in restructuring costs by 2018, the bank estimates 500 million will come from its so-called “London initiative”, including 200 million from consolidating in London and 300 million in technology efficiencies.
“What we’re seeing is Credit Suisse accepting the logic that they have too much in London … he’s acknowledging that if he’s shrinking the investment bank he needs to shrink that hub,” Chris Wheeler, analyst at Atlantic Securities, said.
“London hasn’t done as much of the outsourcing as they have done on Wall Street already.”