Kidder Peabody axes 550

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KIDDER PEABODY, the troubled Wall Street firm, is to slash its workforce by 10 per cent, or about 550 employees, as part of a broad restructuring intended to reduce costs by more than dollars 100m annually.

The cuts, which take effect immediately, come as Kidder, owned by General Electric, struggles against heavy losses amid an embarrassing bond-trading scandal and rising interest rates that have hammered the firm's mortgage-backed securities business.

'A cost base built for the markets of the early 1990s doesn't work in today's difficult environment,' Denis Nayden, Kidder's president and chief operating officer, said.

Kidder will transfer its huge portfolio of mortgage-backed securities to an affiliate of GE Capital, a unit of GE. It has already pared the portfolio - hit by a lack of demand - from its March peak of dollars 15.8bn to about dollars 6.7bn.

Kidder said it had reduced total assets on its balance sheet to dollars 80bn from dollars 106bn. By year's end, Kidder expects to have assets of between dollars 50bn and dollars 60bn. Kidder also said that it has decided against relocating its offices to midtown Manhattan, and instead will upgrade its existing location in the Wall Street area and extend its lease there by 15 years.