CSFB lets space to rival BoA

INVESTMENT bank Credit Suisse First Boston has agreed a secret deal to sublet space to rival Bank of America that it had earmarked for its own expansion at Canary Wharf.

BoA is to take over 250,000 sq ft, half the space that will be available in CSFB's new building, 5 Canada Square, which is due for completion in 2002. With about 1.2m sq ft owned or leased, CSFB is Canary Wharf's biggest occupant and the deal with Bank of America would be the first major sublet in the Docklands office centre.

The space had not been formally put on the market and a deal can only go through on the say-so of owner Canary Wharf Group, the terms of whose leases oblige tenants to seek approval and to charge a rent that protects the value of the estate. The only Canary Wharf tenant officially offering space is financial services firm Citigroup, which has asked property consultants CB Hillier to find a taker for 200,000 sq ft. The CSFB disposal is being brokered by BoA's advisers Jones Lang LaSalle, according to the trade journal Property Week. Both BoA and Jones Lang LaSalle refused to comment.

John Mack, the new head of CSFB, arrived from Morgan Stanley in the summer determined to cut $1bn (£690m) in costs within two years by shaking up business units, renegotiating pay deals and getting rid of about 2500 employees. The bank is smarting from a series of trading scandals, one resulting in a life ban from the City for former trader James Archer, son of Lord Archer.

Only this month, the Securities and Futures Authority fined CSFB £540,000 for overstating profits and misleading clients into buying loss-making products. BoA also has a new boss in Kenneth Lewis, who is cutting 600 investment banking jobs, and trimming corporate lending to restrict exposure to risk.

The bank has not gone directly to Canary Wharf Group for space, as it will be 2004 or 2005 before the developer can offer sufficient room. It will use 5 Canada Square to rehouse its European headquarters, which has operated from the City at 1 Alie Street for a decade. CSFB put its building at 111 Old Broad Street on the market in October and is thought to be in talks with a potential tenant, Belgium's KBC Bank.