Investment banks to launch fresh jobs cull as deal revenues slump

Philip Thornton,Katherine Griffiths
Friday 31 January 2014 03:09

The City of London is braced for another round of redundancies among leading investment banks that could see thousands of jobs axed across the globe.

Banks have been forced to react to a slump in revenue from mergers and acquisitions and on stock market flotations, which have dried up over the past 12 months.

Major Wall Street banks such as JP Morgan, Goldman Sachs and Salomon Smith Barney, which are major employers in the Square Mile, are planning to cull up to 10 per cent of their workforces, according to reports.

Rumours also swirl around some of the major European institutions, including UBS Warburg, Credit Suisse First Boston, West LB and ABN Amro.

The Centre for Economics and Business Research, which last year warned of a cull of 20,000 bankers in 2002, said the final total could be much higher.

Douglas McWilliams, its chief executive, said: "We think that may be on the low side. It looks as if the slowdown in the financial business lasted longer and the impact was much greater than we previously thought."

Blue-chip banks on both sides of the Atlantic have seen a marked slowdown in demand since the US recession began in March last year.

Global M&A activity is at a five-year low and the IPO market has been sluggish. Last week the pub owner Punch shelved its flotation as HMV endured a lacklustre debut.

The fall in business has left many looking overstaffed, according to analysts. They warn that unless an upturn materialises, more costs will be slashed in Europe.

Deutsche Bank, Lehman Brothers and Credit Suisse First Boston have already cut their European workforces.

Merrill Lynch, the largest US investment bank, has made the deepest cuts, cutting 15,000 jobs or 20 per cent of the total. Yesterday it denied reports of another 2,000 jobs. "There are no significant job cuts planned," a spokesman said.

Goldman Sachs cut 500 staff, or 2.5 per cent of its workforce, in the first quarter of this year. A spokesperson said: "We are very comfortable with our headcount."

UBS Warburg said it had no plans to make any more staff redundant. Last year it cut 240 staff.

CSFB applied one of the most severe job loss programmes, cutting 9 per cent of its staff, or 2,500 people, in the fourth quarter of last year and a further 300 investment bankers in the three months to March of this year.

The moves are seen as a delayed reaction to the US recession and 11 September, as banks were anxious to avoid the mistake of the 1997 Asia crisis when they cut jobs too quickly.

Their problems have been compounded by worries over corporate accountancy standards and the reliability of analysts' stock recommendations.

Wall Street firms have lost $19.5bn in market value since Eliot Spitzer, New York's Attorney General, announced a investigation into conflicts between banking and research.

The dire state of the market has prompted speculation some players might ditch their investment banking divisions, helping shrink surplus capacity by merging operations with rivals in the market.

Sources at one major bank said the larger institutions would withstand the pain and retain their staff in preparation for a likely upturn later this year.

"It is the smaller institutions that came under shareholder pressure to diversify," one said.

West LB, the state-owned German bank, said it had launched a review of costs at WestLB Panmure, its equities and investment banking unit in London and Dusseldorf. The bank declined to comment on reports that up to a quarter of the 750-strong workforce could lose their jobs.

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