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Redundancy floodgates flung wide open

If you think you know what widespread layoffs look like, think again. Banks may have made tens of thousands of people redundant already, but events of the weekend will make cuts to date look like a gnat bite on the haunches of an elephant.

Lehman’s 25,000 employees worldwide and 4,000 employees in the City of London are evidently at the sharpest point of the sharp end. But overlaps make for an uncertain future at Merrill Lynch and Bank of America. And surviving investment banks are likely to seriously revisit their business models following the sudden death of one of their number and hurried takeover of another.

The Wall Street Journal points out that even if Morgan Stanley and Goldman survive intact, they will need to find a new funding model that’s not susceptible to a sudden loss of confidence. The outcome will be lower leverage, less risk, less trading capital, and fewer staff.

The implications could be felt far outside fixed income. For example, before Lehman’s bankruptcy, the Financial Times said last week that capital constraints were having a severe impact on ECM businesses. Banks are said to be increasingly unwilling to risk large amounts of capital underwriting IPOs: even if ECM bankers win deals, they are unable to execute them.

In this climate, job losses to date look tiny. Banking analyst Meredith Whitney recently pointed out that banks’ revenues fell 63% between the first half of 2007 and the first half of 2008, but that expenses fell a mere 10% over the same period. Expect banks to start making up for lost time.

Comments (23)

  1. But ….. the smaller banks outside the bulge bracket are well positioned as they weren’t blinded by the “spreadsheet geeks” and they will step up to service the market gap that the US dominated Banks have left wide open. This is a historical market share shift from big technology to old fashioned ethical banking, trust will be everything and speed/efficiency will count for little. The age of economic rationalism, where the world was dominated by accountants is drawing to a close. A new style of leadership will emerge that will be multi dimensional and considered. The Banks that capture this talent will lead the industry of the next 20 years. In 18 months there will be a fight for talent and the talent pool will be considerably smaller than it is today.

  2. True about the coming shortage of talent. ‘There’s a saying: Even a turkey can fly in a tornado’ or ‘A rising tide lifts all tides’. Put simply, when things were booming everyone seemed to be a master of the universe and were paid accordingly. Now the tide has fallen and the tornado has cleared, those who can actually ‘do stuff’ will be sought after. No more moeny for old rope.

    Those from overseas who arrived on Monday and got a job on Tuesday will have to accept that there’s no promised land.

  3. cool, Like the “Wizard of EC1” comment …

  4. Those that can actually ‘do stuff’? Like what?
    Desintermediation is knocking on the door. IB used to be connectors. The banks fell because of greed, trying to generate revenues to cover organisations that were too large with people that were overpaid compared to the value they created.
    So they risked on large bets and the party now is over.

    People that ‘can do staff’. Yeah right

  5. Money for old rope was good. That’s all I know how to sell.

  6. This is one of the happiest days of my banking career. Today 17 people in my Facebook social network have lost their jobs, more to come when the ML/BofA (and DKIB) losses filter through. My career carries on upwards and onwards whilst theirs has come to a grinding halt.

    Oh schadenfreude, schadenfreude, schaden all the way,
    Oh what fun it is to watch Lehman lose its way, hey..!

  7. Henry. You seems like a top lad. When you are old enough to have a drink we should get together. In the mean time best like popping those zits.

    PS I understand that your left forearm is particularly developed. Care to share how you achieved such definition?

  8. Henry, no one wins from the loss of an established counterparty like Lehmans, especially not the interbank market. If the firm that you claim to work for is exposed, your bonus will be negatively impacted. Do think before Mummy lets you use the computer again!

  9. Wizard, yes my bonus is going to be negatively impacted by this and all the negative events of this bear market. I don’t care less – one gains happiness through RELATIVE, not ABSOLUTE standing. I would much rather be on just 100k if my peers are earning 75k, than be on 250k if everyone else is getting 250-300k.

  10. Henry – what’s your family name? We can go on Facebook and try to verify all of the **** you have been talking about recently.

  11. Henry, you’re winding everyone up on purpose or you’re a sociopath

  12. Sarah, regarding Henry, can we limit the access to these forums to people over 12 years of mental age ?

    Henry ( if that is your real name)… whether you are joking or not (and it’s pretty scary if you’re not because that would mean you’re a young sociapath in training)… I hope all the garbage you have been spilling over these comment pages really comes back and kicks you in the a.. sooner rather than later…

  13. Interesting comment by Henry, showing once more that he will never make it with the real big boys by trying to achieve relative gains, rather than absolute…. a bit like most of the boring asset managers.

  14. Henry my friend- At least one cool guy over here. Yeah! You got it, man. All those Oxbridge wannabees are out. A few years ago, they were giving lessons. Now they’re in hell. They’ll have to pay for their mortgage (as well as their divorce). They just won’t be able to! Because the system – which used to reward them with illegitimate bonuses – has now decided to screw them all up.

    And that’s great given the fantastic opportunities looking forward: the US presidential election, under-priced properties, the war against Iran… So much money to make, for us, not for them. It’s just sooo good.

    Shalom Bro

    Alan Greenspan Reply
  15. These are 25000 good people who are losing their jobs. It could happen to any of us. They deserve to be treated with some respect.

  16. shalom ???? what background is Lehman from again you moron??? …. human stupidity really is limitless…

  17. Henry, don’t worry mate. what goes around comes around. u be hiding ur pathetic face in sand very soon, mark my words

  18. “These are 25000 good people who are losing their jobs. It could happen to any of us.”

    Err no, it won’t happen to -any- of us, it won’t happen to me. No sympathy, entirely their fault for choosing / having no choice but to work at such a joke of a bank with a more incompetent leadership team than the British government.

  19. Henry… how hopeless and lifeless can you be to be spending so much time writing on these pages ?

  20. Poor lehman..look at how the auditor comments on them…

    “value in terms of shareholder value or management value?

    We of course create loads of share holder value by stopping you greedy bankers building a personal bank from work… apparently we are also those ones who told the shareholder how big the management bonus is even though the firm as whole is bleeding to death.

    Unfortunately I’m not an audit manager (yet) and so I don’t have a share of bonus anyway (yea poor auditors what can you say)…. Lehman has always been a pain of a client for us for centuries (especially in the years they messed up) so I am personally very happy to see this thing finally go away.”…

  21. henry, you are either psychologically deranged, or have suble inferiority complex. these are the symptoms.

  22. Henry is a recruiter.

  23. Allright, since you are all so curious.

    I am a FX trader at Morgan Stanley. And an exceptionally good one at that.

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