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, dealing a blow to 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 ($240.99 million) a year if some back-office positions were moved to lower cost centres such as in Poland and India. This would potentially mean a saving of 128,000 Swiss francs for each of the estimated 1,800 jobs in question.
Thiam, who swapped London for Zurich after six years at the helm of London-based insurer Prudential, was speaking after the bank set out plans for a major overhaul, including measures to "right-size" its 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 said at a press conference 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."
The City of London regained its crown as the world's leading financial centre in 2015, after losing it to New York in 2014, following a decisive national election victory by the Conservative party, according to research company Z/Yen.
Jobs in London's financial and related professional services industry reached an all-time high of 729,600 as at June 2015, the latest survey by lobby group TheCityUK said this month.
But tough regulation imposed since the financial crisis and uncertainty about Britain's membership of the European Union have prompted a number of big banks, including HSBC to look at the economic viability of remaining in the City.
"Definitely London is too expensive," one Credit Suisse IT contractor based in Canary Wharf told Reuters.
In Canary Wharf, for example, where Credit Suisse's has its London offices, property prices have risen by 27 percent since early 2013, outstripping the 10 percent growth seen across prime central London over the same time, according to an index from property company Knight Frank.
Prime office space in Warsaw costs around 270 euros ($306.40) per square metre compared with around 670 euros per square metre 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 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. Deutsche Bank has moved people to Birmingham, in central England, HSBC's technology centres include Curitiba in Brazil and Barclays has opened a new technology hub in Dallas, Texas.
Credit Suisse is currently in discussions 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, to the Irish capital, according to a source familiar with the matter.
"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." ($1 = 0.9544 Swiss francs) ($1 = 0.8812 euros)