UK
Rumours are starting to fly about the depth of cuts at Merrill and Citigroup. Are things about to get nasty?
Yes, if you believe the Observer and CNBC. The weekend paper favoured by UK liberals predicts Thain is preparing for a “sweeping reform” of Merrill’s fixed income division, entailing a “swathe of job cuts”.
Separately, CNBC reported yesterday that Citigroup is planning 45,000 job cuts in addition to the 17,000 it announced earlier this year. This news broke before the more recent revelations that Citi has received $7.5bn (€5.1bn) cash injection from the Abu Dhabi Investment Authority at the seeming penal rate of 11%.
How realistic are the Observer‘s observations? The paper quotes a Merrill risk professional, who may not be best placed to judge the strategic intentions of the new US-based CEO.
Ominously, however, banking analysts and senior headhunters are also starting to mutter about a lynching at Merrill once Thain gets to grips with the situation. “You need to make room for the write-downs, and staff cuts are simply the quickest way to do that,” says Dave Hendler at Creditsights.
“It will be quick and it will be brutal and it will be done before bonuses are announced,” says a fixed income-focused headhunter.
“Divisional heads have been asked to report to Thain by the 29th and the expectation is that he will then present a plan to the board in early December,” he adds. “As many as 2,000 jobs could go in London.”
The good news is that some banking analysts are prepared to disparage claims that Merrill will chop up to 30% of investment banking staff. “There is no doubt that there will be job cuts,” says Dick Bove of Punk Ziegel & Co. “But Merrill won’t repeat what it did in 2003. 10% of staff will go across the board, with a higher percentage leaving in areas like credit derivatives, prime brokerage and mortgages.”
Meanwhile, Reuters reports that Merrill president Greg Fleming told employees yesterday that he has “tremendous confidence” in the company’s long-term prospects and Merrill’s strategy is fundamentally sound.
I suppose it makes all sense, and isn’t without a touch of irony.
These “professionals” pumped up a market driving irrational exuberance, the fallout of which, unfortunately, is also being borne by those that did not profit in quite the same way these last few years. It only seems fair that after banking 6/7 figure bonuses when the markets were up, these professionals bear their share of the downside pain!
I think there will be more than 2000 cut in London.If you follow http://www.randombanker.blogspot.com,which I do, there is worse to come in my opinion.
if only..
Citigroup is in need of a good clear out. it tends to employ a lot of dead wood on long term tenures.
ABS, CDO and credit derivatives professionals have subsidised for years loss-making colleagues in other divisions, i-bankers who were working on projects without producing real money. Now it’s the time to pay those guys back with the same currency
i agree with all the above…anyone for shooting??
Why is this news? Good people will reappear and morph into something else altogether. Markets will yo-yo, but natural selection will determine the survivors. We are already plannning the next cycle of products.
The hunger of unrealistic profits has led to over leveraging and increasing complexity and clouding transparency to make these extra normal profits. The problem is that after this blow-out…creative minds will find another way to do it…history will repeat itself again
You call more than 50bn coming from the ABS, CDO and credit derivatives subsidising?? If this is what you call producing real money.. then “no wonder there is a crisis”.
citigroup is synonymous with politics, cronyism and incompetence at almost all levels in the organization. I have worked there twice in two different continents and have several friends who work there. Its a big mess.