Bloomberg News
ZURICH Credit Suisse Group, trying to reassure investors and employees, said most bankers from Donaldson, Lufkin & Jenrette Inc. are staying on after its $13.4 billion acquisition of the Wall Street firm.
Credit Suisse, in an unexpected press release, said more than 90% of DLJ employees offered a job had accepted. The issue for Credit Suisse will be to retain these people in the longer term, analysts said.
The company, which since the deal closed is the biggest underwriter of high-yield securities, also said its exposure to risky securities would not hurt earnings, which rose 66% in the third quarter. This year junk bonds are among the worst-performing investments, and Credit Suisse shares have fallen 13% since the No. 2 Swiss bank agreed to buy DLJ on Aug. 30.
The acquisition has prompted some top DLJ executives to leave, however. Hal Ritch, co-head of the mergers and acquisitions unit, and Louis Friedman, who oversaw the media and communications mergers group, have both quit. Garrett Moran, another top DLJ banker, plans to take a six-month leave of absence.
The real issue for Credit Suisse is whether it can keep its people, said Dirk Bartsch, an analyst at Deutscher Investment Trust, a German money manager and company shareholder. These concerns dont go away because of good results in the third quarter.
The Zurich-based banking company is entering the period where were seeing headlines about people leaving, said John Leonard, an analyst at Schroder Salomon Smith Barney in London. Theyre probably losing some people they prefer not to lose.
The departures of DLJ bankers were partly tied to changes in the companys compensation plan.
At DLJ, they could invest part of their compensation in private equity funds managed by the firm. DLJ also would lend employees money, at interest, to fund additional investments.
An employee who quit did not have a right to the entire investment. Now that Credit Suisse owns DLJ, employees have that right. They become fully vested, but they arent able to liquidate their positions until the funds mature, said Credit Suisse First Boston spokesman Robert Baker.
Credit Suisse said it has limited holdings of high-yield bonds and telecommunications securities and hasnt experienced any notable difficulties. The company said it is making this statement in response to current market concerns.
Junk bonds have handed investors average losses of almost 4% this year, according to an index compiled by Merrill Lynch & Co. That compares to the 10% return on the 10-year Treasury note.
Credit Suisse said it is on target to reach a goal of cutting costs by $750 million next year and by $1 billion as of 2002.
It also is preparing to list shares on the New York Stock Exchange, Credit Suisse spokesman Andreas Hildenbrand said. He added that the banking company has no immediate plan to pursue a listing.
