More IBank layoffs coming

You idiot, you moron! How can you say this?? Just kidding, Bremlig. I was just trying to get into the NYC streeteasy spirit. You are on to something, but I think it may be a little overstated.

Gee whiz, one of my best friends is an IB head and he said they're going to strive to not lay anyone off overall. But some units may take big hits, like Merrill's shutting down it's subprime lending unit. We may see more of this. So in certain units/sectors, there may be some layoffs or maybe even shut downs, but no across the board of their entire workforces.

To put things into perspective: DB IB generated 70% or so of its 2006 revenue from private equity related activity (equity, lev fin, M&A), call it $3B. That 70% has declined to nearly 0% for the last nine months and nothing has replaced it, and it's not expected to come back for at least 12-18 months. These layoffs are going to be primarily bankers, analyst to MD.

Interesting bremlig, I'll do some checking. We layed off IBs around xmas. The rest got bonuses that were down 50%. This place is small though and IB isn't the powerhouse it is elsewhere. Those that are still here are definitely feeling uncertain, but I haven't heard yet of more layoffs. So far in #s of layoffs, it's no where near as bad as 2000/1.

There have been been layoffs but all in businesses that you expect would see layoffs. Lots of fixed income guys in Ops and MO got laid off. But Commodities and FX are making hand over fist in revenues, so why would you be cutting people from there? Besides, analysts and VPs are dime a dozen. Companies spend money to keep top talent MDs.

So 20% cut across the board? Not likely.

interestingly we didn't layoff any support people (okay, maybe 3 people), all our cuts were front office. But they are crazy lean here on the support side. What took a hit was all as expected, structurers, CDO traders, IB in debt, and anyone dealing with RE. FX is doing well as it's a volume business, commodities of course as well.

Lehman to Cut 5% of Global Workforce as Economy Slows (Update3)

By Yalman Onaran

March 10 (Bloomberg) -- Lehman Brothers Holdings Inc., the largest underwriter of mortgage-backed bonds, is eliminating 5 percent of its workforce as credit markets remain frozen and the U.S. economy slows, a person briefed on the plan said.

The cuts will affect all divisions and regions, according to the person, who declined to be identified because the New York-based firm hasn't announced the reductions. Based on Lehman's employee count at the end of November, about 1,400 jobs will be lost.

Chief Executive Officer Richard Fuld already eliminated almost 3,900 positions, mostly in units that made home loans, following the collapse of the U.S. subprime mortgage market last year. The bank, which shut down its subprime lending unit and reported record earnings for 2007, awarded Fuld $40 million in annual pay. He now faces a credit-market contraction that may have pushed the U.S. economy into a recession, prompting the Federal Reserve to add as much as $200 billion to the banking system over the next month.

``Job cuts are expected everywhere,'' said Roger Lister, the New York-based chief credit officer for financial institutions at DBRS. ``I wouldn't interpret it as a sign of weakness for Lehman or any other firm.''

Hannah Burns, a Lehman spokeswoman, declined to comment on the latest round of firings. The company fell $2.45, or 5.3 percent, to $43.91 at 1:42 p.m. in New York Stock Exchange composite trading. The shares have dropped about 33 percent this year.

30,000 Jobs

Credit-default swaps on Lehman rose 60 basis points to 395, according to Phoenix Partners Group. The swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A decline indicates improvement in the perception of credit quality; an increase, the opposite.

Wall Street firms have eliminated more than 30,000 employees in the last seven months as the U.S. housing market contracted and the price of mortgage-related assets declined.

Banks and brokers have written down more than $188 billion of subprime-related assets since the beginning of 2007, according to data compiled by Bloomberg. Lehman has reported $1.5 billion of charges while larger rival Morgan Stanley has taken $9.4 billion of writedowns. Merrill Lynch & Co., the world's biggest brokerage, has posted $24.5 billion of writedowns.

`To the Bone'

William Tanona, an analyst at Goldman Sachs Group Inc. in New York, predicts Lehman's first-quarter writedowns will reach $3.5 billion.

``The banks are starting the process of trimming to the bone,'' said Zaheer Ebrahim, executive director of London-based recruiting firm Kennedy Associates. ``This may go on for a while.''

**** A lot of these cuts are in IB, supposedly it's 15% or so of IB.****

O well, looks like its back to more honest, straightforward forms of panhandling for some people.

Article in the WSJ today (paid subscription required) basically says that IB firms will cut about 20% of their workforce by the end of the year.

"Grim Reaper of Jobs Stalks the Street" by Dennis K Berman
http://online.wsj.com/article/SB120519564156525807.html
(paid subscription required)

He goes on to say that one headhunter is receiving 100 resumes a day and only about 3 of them will find jobs. Most likely to get the ax are the technical people who actually structure or execute the deals. Most likely to stay are the schmoozers who have the client relationships. I guess it proves that kissing up to clients is more valuable than being technically smart.

Ouch. Here come the Little Black Arrows, y'all.

The question is. How many of these job are located in or around NYC? The fact that they layoff 1000 in another part of the country does little to hurt the NYC real estate.

From the WSJ article:

"Top Wall Street executives foresee layoffs of as high as 20% for Wall Street, which employs about 210,000 in New York state alone. If layoffs are that severe, job rolls would plunge to mid-'90s levels. "I've never seen so many résumés come to me at any time in my life," adds Options CEO Michael Karp."

Even if people don't technically get fired, many will have their bonuses cut dramatically. As per the article:

"There are a host of other tricks: Furloughing associates for a year; cutting bonuses and daring bankers to find jobs in a down market; "elevating" senior bankers at lower pay levels and higher titles."

Needless to say, the mood all around the street is grim. No one in their right mind would make a large financial commitment (such as a $2MM+ apartment purchase) with so much uncertainty in the air. This will have an overall "chilling" effect on NY-Metro housing prices for a while.

Way to answer the question, iMom. Of course, this isn't just an indicator for 2008, but 2009 as well, given the effect on the next bonus season.

yep, and more importantly, it will take a very long time (years, versus quarters) for wall street and the overall economy to have a positive trend.