Swiss banking and lending firm Credit Suisse (NYSE:CS) posted a sizable third-quarter earnings loss earlier this morning. No doubt, that news is disappointing many investors in CS stock. But that’s not even the full story. Apparently, Credit Suisse is undergoing a major restructuring in which it will reduce headcount and spin off its investment-banking segment. On top of that, traders aren’t particularly pleased that the company plans to raise a large amount of capital.
In other words, Credit Suisse is clearly having problems amid an overhaul. Credit Suisse Chairman Axel Lehmann described the move as a “blueprint for success.” But can the company really envision success as it plans a large workforce reduction?
Specifically, Credit Suisse intends to slash 2,700 jobs — about 5% of its workforce — by the end of 2022. By the end of 2025, it also plans to reduce its headcount by 9,000 staff members.
This is happening during a tough time for Credit Suisse. The company just reported a disappointing Q3 earnings loss of more than $4 billion.
What’s Happening With CS Stock?
“Bloodbath” might be a harsh word, but it’s appropriate. This morning, CS stock promptly plunged on extra-heavy trading volume. Currently, shares are down by more than 19%.
What are today’s traders reacting to, exactly? For one, they’re concerned about Credit Suisse’s sizable quarterly earnings loss. They’re also probably not too pleased with the company’s vast workforce reduction plans, which aren’t necessarily a good sign.
And that’s not even the whole story. Credit Suisse also plans to raise $4 billion by selling shares. This, evidently, is part of its “blueprint for success.” However, CS stock traders might not envision a good outcome for this capital-raise strategy.
Finally, there’s a major restructuring afoot. Reportedly, Credit Suisse will spin off its advisory and leveraged finance unit, rebranding the unit as CS First Boston. CEO Ulrich Koerner says that the company has already “lined up an outside investor willing to make a $500 million injection into the business.”
As you can see, there’s a lot to digest here. Is it a smart move for Credit Suisse to spin off this segment? And how will the massive capital-raising efforts impact shares?
These and other questions are weighing on the minds of traders today. Some are choosing to sidestep these issues entirely, it seems, as they unceremoniously dump CS stock.
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On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.