First Deutsche and now CSFB


In yesterday’s International Herald Tribune it was reported the CSFB is expected to announce a major reorganization this coming Tuesday.  At issue is the sagging market share of the financial giant.  Cuts are expected in the US Investment bank, with an expected merging of the fixed income and equity businesses. The high yield area (the Old DLJ Junk bond desk) may maintain its independence, owing to its dominance in junk bonds and its continued profitability.

One area that is being highlighted for cuts is the equity research area.  Both CSFB and DLJ have separate equity research departments so some rationalization is expected there.  Given the high cost of equity research (nearly $200,000 per stock per year for the sell-side) this seems to make eminent sense.

First Deutsche Bank and now Credit Suisse.  Does this constitute an avalanche of IBs slashing equity research budgets?  Hardly, but it does indicate that the once unassailable research department, is now in the sights of many major sell-side firms. We at Integrity Research expect the European banks with significant US presence are the most likely to rationalize research, for three reasons:

  1. The expense of sell-side research in the US is exorbitant
  2. European banks tend to have duplication of research, at least on some level
  3. The falling US dollar is putting additional pressure on costs as the European’s translate US dollar earnings into Swissie or Euro equivalents

Of course, one should look for a gradual erosion of research departments over the next several years. But the team at Integrity Research believes that the expected rationalization at CSFB has as much to do with the change over from John Mack to Brady Dougan as it has to do with exorbitant research costs.


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Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email:

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