City braced for fresh job cuts

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The Independent Online
AT LEAST 500 City jobs are to go following the Societe Generale and Paribas merger, the latest in a series of deals that are dramatically altering the landscape of London's financial district.

Hundreds more head office jobs will also go now that AXA, the French insurer, has claimed victory in the auction for British insurance group Guardian Royal Exchange with a pounds 3.5bn deal.

Further job cuts are planned by Barclays, the high street bank, which is to axe hundreds of staff in a pounds 300m restructuring of its retail businesses.

"It is going to be a very bloody affair," warned one City banker last night, referring to the French bank merger. "There is so much overlap." The biggest overlap is in the equities and fixed-interest divisions.

Announcing their merger to create the world's fourth largest banking group, the heads of Societe Generale and Paribas sought to play down the prospect of large-scale redundancies.

However, they admitted there would be some "streamlining" overseas, in an effort to yield a targeted 800m euro of savings by 2001.

The banks believe that as a result of the merger they can cut the amount they have to set aside to finance their investment banking activities to a third of their group equity capital, while maintaining or even boosting the amount of business they are able to do.

Although there is little direct overlap in France, where Paribas, as a mainly business and wholesale bank, has no retail branch network to get in the way of SocGen's, there is considerable duplication in investment banking.

One source estimated that in London, where the two banks together employ around 4,500, the cost in terms of jobs could be as much as 500.

Tough bargaining will also take place in New York where SocGen recently added Cowen, the US investment boutique, to its stable in a $600m deal.

"There is a 30-40 per cent overlap," said John Leonard, an analyst at Salomon Smith Barney.

In London the overlap is particularly acute in equities, where both Paribas and Societe Generale have invested heavily over recent years.

Paribas, which has a strong position in the Eurobond market, has a clear edge in fixed income and asset management.

But in the merger advisory business, especially in the UK, Societe Generale has a stronger position.

Barclays is reorganising retail, its most profitable division, with a new structure based around two distinct areas catering for mass market and so-called high net worth individuals, replacing the traditional emphasis on products.

News Analysis, page 14