Royal Bank of Scotland is set to announce the third tier of job cuts in relation to its takeover of the Dutch bank ABN Amro in the next two weeks. The third phase will affect rank and file bankers after most management positions were settled in previous announcements.
One of the areas of the combined bank that is set to come under pressure is the leveraged debt division. The market for leveraged loans, high-yield bonds and highly geared property transactions has all but ground to a halt since the onset of the credit crisis last year, forcing banks to collectively write down billions of pounds worth of deals. Both banks had active departments in the market before it dived last summer, leaving them with exposure to transactions it could not sell. As a result, management at RBS and ABN Amro, and other banks, have been more selective in the deals they are willing to underwrite.
It is understood that the combined bank plans to cut leveraged finance jobs and will eventually have fewer people than either bank employed separately. Spokespeople for both banks declined to say whether leveraged debt jobs would be cut.
Speculation at both houses has been rife for months that a number of bankers, mostly from ABN Amro, will lose their jobs. A spokesperson at ABN Amro declined to comment on the specific departments, adding that, "there has been no communication to staff about job loses but it would be common sense to expect departures as the integration continues."
In previous internal announcements covering more senior bankers in several divisions, RBS officials have taken the lion's share of the jobs.
Any leveraged debt redundancies would add to the cuts made by other banks in the market. According to sources, Citigroup last Thursday became the latest bank to cut back on its leveraged debt bankers in London. The US bank is understood to have removed 14 members of its 27-strong leveraged loans team, although only seven are expected to leave the bank, with the others redeployed to other jobs. All the redundancies are thought to affect junior employees. A spokesman for Citi-group declined to comment.
The fallout from the crisis in the US sub-prime mortgage market has already cost $188bn (£92bn) in asset writedowns. And several of the biggest global institutions are slashing headcount to try to trim their costs. Last month, Citigroup announced reductions of 20,000. Lehman Brothers cut 3,750 positions in the last half of last year. And UBS is most of the way through a programme to lose 1,500 roles across the world.
Recruitment consultants specialising in the industry report a marked increase in the number of leveraged debt bankers seeking advice, including those that still have jobs but are worried about losing them.
"We are seeing lots of people at the moment in these areas," said Sheldon Paul, managing director of employment group Cameron Kennedy. "Many of them do not realise the gravity of the situation and some are going to end up leaving the City."
Recruitment specialists say the US investment banks are shedding most jobs: JP Morgan, Citigroup and Morgan Stanley were particularly highlighted, as was the Canadian bank CIBC, which closed its entire leveraged finance operation in December last year.
The leveraged debt markets have toiled more than most since the start of the credit crunch. The market has stalled largely because investors have shied away from the more aggressively structured deals. As a result, the banks have been left with exposure to vast amounts of debt, more than £9bn in the case of the institutions, including RBS, on the deal backing the buyout of pharmaceutical Alliance Boots which owns Boots' retail outlets.Reuse content