Axe is poised over Wall Street jobs
Saturday 10 October 1998
As securities firms in New York contemplate the dual carnage of steep trading losses and the evaporation of bread-and-butter deals, fears are mounting of a tide of lay-offs and the decimation of the bonuses that pay for so much high living.
All eyes are on Merrill Lynch, due to unveil its latest quarterly results on Tuesday. Rumours are swirling that the firm will announce plans to eliminate at least 1,000 jobs from its worldwide payroll, or even as many as 3,000. Cuts are also expected at Bankers Trust.
Adding to the gloom is the prospect of as many as 8,000 jobs going at Citigroup, partly as a result of the merger finalised this week between Travelers Group, which included Salomon Smith Barney, and Citicorp. More layoffs may be announced at ING Barings, which has already pledged to cut 1,200 positions worldwide, including 200 in New York.
"There is a momentum with firings right now," said James Ellman, a portfolio manager at AIM Global Financial Services Fund. "It will take at least six months for this wave of firings to stop and for these firms to have a recovery in earnings."
The change in mood has taken hold with extraordinary speed. In the first half of this year, when the bull still ruled, securities firms were hiring at a gallop and the securities business employed 166,000 people in New York, the highest number on record. It has been four years since the industry saw the last flurry of "pink slips".
But with most financial firms now expected to show a 70 per cent slump in profits from the year-ago quarter, some extensive pruning appears inevitable. Most brokerages are expected to register their worst quarter since the last quarter of 1994. The damage has been wrought both by trading losses because of turmoil in emerging markets and the drying up of deals in the underwriting of stocks and orchestrating mergers and acquisitions.
Brokerage houses have seen their own stock values plunge by up to 70 per cent since the broader market began its slide from its mid-July peak.
Even those who escape the axe face disappointment: Wall Street expects annual bonuses to be down by at least 40 per cent.
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