Security Pacific to Trim London Unit : Trading in Some Foreign Issues Unprofitable; 140 to Lose Jobs
Security Pacific Hoare Govett Holdings Ltd. said Wednesday it is joining the growing list of major financial companies reducing operations in London’s securities markets.
The broker, a unit of Los Angles-based banking giant Security Pacific Corp., said it is withdrawing from the dealing of gilts, Eurobonds and Japanese equities. The withdrawal from those businesses will eliminate 140 of the broker’s 1,200 jobs.
“The economics of these businesses have become unattractive and are likely to remain so for the next three to five years,” Hoare Govett’s chief executive Peter Voss said in a statement.
The cutback also reflects efforts at the parent company in Los Angeles to curtail costs. Industry analyst Dan B. Williams, with the San Francisco brokerage Sutro & Co., said: “The management at Security Pacific is taking a hard look at all its operations. If it doesn’t look like it’s going to make money, they are going to get out of it.”
The decision on Hoare Govett follows withdrawals last year by several other major gilts market makers including Citicorp and Morgan Grenfell Group.
Security Pacific said its other equities and banking operations would be unaffected.
Further pullouts from the highly competitive gilts and Eurobond markets have been widely forecast since Morgan Grenfell announced its withdrawal from all U.K. market making last month, eliminating 450 jobs.
Hoare Govett is the seventh primary dealer to cease trading in gilts since the London markets were deregulated in the 1986 Big Bang. Many brokers overstaffed in anticipation of faster growth in the London market, whose trading volume is down sharply since the October 1987 crash. There are now 22 gilts market makers in a market which some analysts say can support only half that number.
About half Security Pacific’s 140 job losses are in the debt trading area. They include 20 gilts traders, 18 Eurobond traders and 16 futures dealers, Voss said. He added that the bank would continue to raise money for its clients in the capital markets through medium-term notes, private placements and syndicated loans, Voss said.