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As investment banks unveil results from a difficult third quarter, there are signs fallout from troubled credit markets will restrain business growth in months to come.

That augurs ongoing job insecurity among mortgage-backed and structured products specialists, in certain other pockets of fixed income, and even in broader areas of investment banking within the hardest-hit institutions.

Of course, the approach of year-end doesn't help. In the concluding months of any calendar year, even companies that aren't troubled may cut spending temporarily to spruce up full-year profit.

That's happening with a vengeance at Bank of America. According to an internal memo that found its way to the New York Times' DealBook, the bank is clamping down on items that usually escape such corporate belt-tightening campaigns. For the remainder of 2007, B of A won't pay for new BlackBerrys, information services, newspapers, internal team lunches or dinners, holiday parties, educational seminars or conferences, unless pre-approved by one of 14 senior executives.

Businesses, Jobs on the Chopping Block

B of A is expected to cut headcount as well. In a conference call last week, chief executive Ken Lewis reportedly told analysts, "The probability of changes and eliminations of some businesses and infrastructure...is very high." The brunt of the cuts is likely to hit investment banking, an activity where B of A expanded aggressively in the past two years. Trading losses of $1.4 billion, mostly from fixed-income, reduced the investment banking contribution to company-wide profit by 93 percent in the third quarter compared with a year earlier. Lewis said he's concluding an internal review of the investment bank and will announce the unit's future either later this year or in three months when reporting full-year results.

An early casualty is Chris Hentemann, former head of B of A's structured products group. He left the company last Friday and was succeeded by George Ellison, who was head of global structured finance. The structured products group - which includes mortgage-backed securities, collateralized debt obligations and structured credit trading - lost $527 million in the third quarter.

Meanwhile, other investment banks continue to scale back fixed-income departments. Morgan Stanley last week announced 300 layoffs in credit trading, structured products and leveraged lending, ranging from associates to managing directors. The company said it is reallocating resources to regions outside U.S. where it sees "the best potential for growth." Revenue from its credit markets business plunged 80 percent in the third quarter, including a $1 billion write-down of leveraged buyout loans.

JPMorgan Chase expects further job cuts in its investment bank beyond the 100 credit market positions already slated for elimination, chief executive Jamie Dimon said last week.

More Write-Downs Three Months Hence?

Attention is now shifting toward Merrill Lynch, ahead of its Oct. 24 earnings release. Tuesday's New York Post cites market talk that the bank might unveil new problems beyond the $5.5 billion write-down already announced. The collateralized debt obligation and sub-prime mortgage markets, which accounted for the bulk of Merrill's third-quarter write-down, have continued to tank in the initial weeks of the fourth quarter. Further declines could force banks to take additional write-downs, which will "lead to a lot of job losses," a mortgage-trading executive at another bank told the Post.

A recent report from Credit Suisse concludes that further charges are indeed in the cards for Wall Street. While equity and credit markets have improved, investment bank balance sheets are still clogged with nearly $200 billion of leveraged buyout loans, the report says.

Banks committed to make those loans earlier in the year, while hedge funds and other investors were busily snapping up risky debt. When demand dried up in the third quarter, the banks were suddenly unable to resell the assets profitably, or even at break-even. "It is possible to construct a number of scenarios in which further write-downs of this book of business could be made in the fourth quarter," Credit Suisse says. "There are more than 15 large LBO financings waiting to be carried out and there appears to be considerable pressure to get them away by year-end."

The banks' problems are compounded by the opaque nature of many structured products that pumped up revenues and profits from fixed-income trading and banking in recent years. Even while traditional corporate debt markets are stabilizing, investors by and large remain averse to multi-layered CDOs and other exotic instruments, out of fear that the collateral might include sub-prime mortgages.