There was more bad news from the investment banking sector yesterday when Morgan Stanley Dean Witter reported a 36 per cent fall in second-quarter profits and Société Générale, France's third biggest bank, said it was considering cuts among its 3,000 equities staff around the world.
Société Générale is expected to cut about 3 per cent of its equities staff, amounting to about 90 people. The bank is repositioning to concentrate more on a pan-European, sector-based approach. The bank has not ruled out job cuts in London where it has 800 employees in equities.
The cuts follow similar retrenchments at Merrill Lynch, Credit Suisse First Boston and Morgan Stanley, which announced 1,500 job cuts in April. The so-called "bulge bracket" firms have all been struggling in the face of weak stock markets and declining fees from mergers and flotations.
Yesterday Morgan Stanley announced profits of $930m (£659m) for the three months to May, down from $1.5bn in the same period in the previous year. The fall was due to a slump in underwriting fees, merger advisory work and equity trading. Net revenue for the quarter fell 15 per cent to $6bn.
"During the second quarter, we continued to operate in a difficult environment, especially in the securities segment," said the chief executive, Philip Purcell and the president, Bob Scott in a joint statement.
Stephen Crawford, the bank's chief financial officer, added: "The fourth quarter will be stronger."
In the second quarter, revenue from advising on mergers dropped 55 per cent, while underwriting fees fell 29 per cent. Net income at the securities division fell 42 per cent to $635m (£448m). The results follow similar figures from Goldman Sachs this week, when the bank reported a 24 per cent drop in second-quarter profits. Lehman Brothers bucked the trend with a 14 per cent increase.
Like Goldman Sachs, Morgan Stanley has suffered as a result of its big push into technology sector.
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