JP Morgan job losses fuel Wall Street gloom

The bank's net income fell by 51 per cent in the fourth quarter `What can you see happening that is going to create a better environment?'

Wall Street's foundations were shaken again yesterday with news that JP Morgan is set to become the latest of a string of New York-based banks to begin shedding staff in an effort to cope with a year-long securities slump.

Already this week, Paine Webber had revealed that it was preparing to shed 5 per cent of its workforce, while Lehman Brothers was hit on Tuesday by a downgrading of its credit rating by the investor services firm Moody's. There was speculation that Moody's might act similarly against Salomon Brothers.

Rumours began to surface some weeks ago that JP Morgan had run into trouble in Mexico, following the devaluation of the peso, and in its derivatives trading division. Yesterday, the bank said it would be taking a $55m charge in the first quarter, largely to cover the costs of staff lay-offs.

While the bank has not confirmed the extent of the job losses, company sources were quoted yesterday as suggesting that 5 per cent of the worldwide workforce of 17,000 could be affected. That would mean 850 positions lost, including traders and investment bankers.

JP Morgan's first-quarter results are not due out until mid-April, but analysts are expecting poor figures reflecting the firm's difficulties. The bank's net income fell by 51 per cent in the fourth quarter of last year.

A spokeswoman for Salomon Brothers, itself hit by a $399m loss in 1994, declined to comment on the suggestion that Moody's was considering downgrading its current high rating. Moody's put Salomon's rating on review last month. It has similarly put Paine Webber's debt rating on review.

A downgrade in their credit rating is painful for investment banks because it increases the costs of short-term borrowings and reduces the confidence of clients, which is vital to a bank's survival.

It is estimated that the downgrading of Lehman's debt will cost it $100m in increased borrowing charges and an additional $100m in lost revenues.

Perrin Long, a brokerage analyst for Brown Brothers Harriman, was among those suggesting that Salomon may be next on Moody's list for downgrading.

"I think there is a good possibility", he said. "I think there is a question whether Salomon have a good risk management system in place and whether they are going to adhere to it."

Mr Long said there was a danger for all the banks that as profits dwindled they would be tempted to take greater risks to try to revive revenue flows.

Nor does he expect prospects for Wall Street to improve in the near term. "What can you see happening in the next six to 12 months that is going to create a better environment for the industry? It is hard to see much."

Meanwhile, Manhattan is awash with tales of strife at Smith Barney, which itself has faced disappointment in its efforts to become a world investment- banking leader.

The firm is reportedly riven by jealousies over the high compensation being awarded to executives drafted into the firm two years ago from Morgan Stanley - with Robert Greenhill at their head - compared with the lower figures being awarded to original Smith Barney staff members.

While members of the two camps are said to be avoiding even talking to each other, a company spokesman insisted that the disputes had been resolved. "The events that are at the root of so much speculation have been settled and solved and are behind us," he said.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral