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
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Operations Manager

£30000 - £38000 per annum: Recruitment Genius: They are a financial services c...

Guru Careers: Stockbroker

£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence