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Monday, 3 September, 2001, 14:09 GMT 15:09 UK
City slashes jobs and pay
City worker near Bank of England
Many more are going home with an empty briefcase
By BBC News Online's Mary Hennock

Thousands of financial workers in the City of London are collecting redundancy notices in a round of quiet job losses sweeping the Square Mile - and the huge bonuses seen in recent years look set to be slashed by half.

Falling share prices have dried up work for the big earners of investment banking, their mergers and acquisitions (M&A) departments.

But the harsh results are being felt by staff in all departments, a City recruitment specialist told BBC News Online.

At some banks, notably Credit Suisse First Boston, the job losses will be "too big to keep it quiet", he said.

Stealth cuts

City institutions prefer to avoid public announcements of cutbacks, but there are "quiet job losses everywhere", according to the headhunter.

John Mack has already got his feet firmly under the table and has been quietly letting people go, including senior managing directors

City headhunter
CSFB has declined to comment on a report that it is poised to reveal another 2,000 job cuts this week, in addition to 3,000 it has already shed this year.

John Mack, CSFB's new chief executive, was appointed in July and has not hesitated to wield the knife.

"John Mack has already got his feet firmly under the table and has been quietly letting people go, including senior managing directors", the recruiter said.

Goodbye to big bonuses

"He's asked all employees who are on fixed or guaranteed (bonus) packages to give them up," with a redundancy note in the post for those who refuse.

CSFB's new chief executive John Mack
CSFB's new chief executive John Mack
For others at CSFB, bonus cuts of up to 60% are likely, the recruitment specialist said.

Early September is often redundancy time for American-based banks, as Wall Street returns from the Labor Day holiday. JP Morgan Chase is considering up to 4,000 job losses, according to The Times newspaper.

Cuts across the board

The trigger for the cuts is the slide in M&A, which was worth $753bn (518bn) globally in the first half of 2001 - down from $1,881bn in the same period of 2000.

M&A specialists earn some of the biggest salaries in the City, so they have been among the first to go. With pay packets - including bonuses - of up to 1m ($1.45m), they can cost the same as 20 to 30 support staff.

But so far this year, job losses have been across the board - front office sales staff and traders, middle office support workers and technology staff have all been shown the door.

Even human resources has been trimmed. Reduced headcounts elsewhere mean personnel department have less to do.

Debt specialists safe

One set of City workers who are relatively secure is employees in debt departments. There, business has held up well thanks to falling interest rates and the introduction of the euro.

American and German banks top the list of those preparing to cut back, one banking analyst said.

This is because UK banks are "comparatively light on equity market activities" and have completed their consolidation, he said.

He expects Deutsche Bank, Dresdner and Commerzbank to be among those with the biggest cutbacks.

French bank Societe Generale is "more equity-heavy but may have already carried some redundancies".

Wall Street woes

Among American banks, 3,000 to 4,000 job losses at JP Morgan Chase is "not an unreasonable figure", with most of them in the US and Europe.

The bank is still looking for synergies and savings in the wake of Chase's acquisition of JP Morgan, he said.

"If any of these redundancies come from the equity (departments) it is quite ironic considering Chase bought JP Morgan to bulk up and have a bigger role in the equity market", he added.

Cuts at Credit Suisse group, which is in the throes of a reorganisation, would most likely come from investment banking arm CSFB and would be mostly in the US, he said.

Despite the scale of the cutbacks, the headhunter expects most people laid off to find new jobs within a few months.

"Within our middle market recruitment business, we are as busy as we have been in the last five years," he said.

Not everyone is thought likely to join the firing line.

US bank Merrill Lynch was quick to cut in the 1998 crisis then found problems re-hiring expensive M&A staff, so it might be more cautious this time.

Bonus boom over

Most likely to cut jobs
JP Morgan
Deutsche Bank
UBS Warburg

The City's bonus culture is also in line for the chop.

Bonuses are often set at 50% to 100% of a City worker's basic salary, though at managing director level the bonus package can run to 10 times salary.

The impact of bonuses has been one factor driving up property prices in the Southeast of England.

Next year's bonus season - in January to March - seems likely to be less generous. Guaranteed bonuses, in particular, are a thing of the past.

Figures from April, showed the value of bonuses agreed by the middle of the 2001 bonus season was already 400m more than the previous year.

See also:

12 Apr 01 | Business
City fights redundancy fears
12 Jul 01 | Business
CSFB fires chief
30 Aug 00 | Business
Swiss bank clinches $11.5bn US deal
31 Aug 01 | Business
London faces economic crunch
08 Dec 99 | Business
Japanese pursue CSFB
21 May 99 | The Company File
Swiss bank suspends workers
12 Jul 01 | Business
Troubled times at CSFB
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