Shearson Lehman to Split Operations : Securities: The financially troubled company may be reorganized into separate banking and business organizations as early as next week.

Shearson Lehman Hutton Inc., the nation’s second-largest securities firm, will reorganize by splitting its investment banking business and large retail brokerage operation, company sources confirmed today.

The troubled unit of American Express Co., which lost nearly $1 billion last quarter, also is likely to change its name to either Shearson Lehman Holdings Inc. or SLH Holdings Inc., with the two separate divisions under it, said Shearson employees briefed on the proposed realignment.

Shearson is the largest securities company in the country behind Merrill Lynch. It grew by leaps and bounds in the freewheeling boom years of the 1980s but has faced increasing financial and management problems in the aftermath of the 1987 stock market crash that sent Wall Street into a recession.

Shearson has four operating divisions: investment banking, capital markets, retail brokerage and asset management.

Under the reorganization, the retail brokerage and asset management businesses would be combined into one division, which would include nearly 10,000 stockbrokers catering to individual investment needs, said Shearson employees, who spoke on condition of anonymity. It will probably retain the Shearson name, they said.

The other division would include the operations in investment banking and capital markets and could operate under the resurrected name of Lehman Brothers, the sources said.

The reorganization is expected to be announced before the end of the month, the sources said. “It could be as soon as next week, but I don’t see it as a definite,” one said.

Steven Faigen, a spokesman for Shearson, said he couldn’t confirm or deny the reorganization plans.

“At this time the firm is examining a number of options that would result in a more customer-driven organizational structure,” he said. “But we haven’t made any decision on exactly how we’ll move ahead on that score.”

Shearson, formerly known as Shearson-American Express, acquired the venerable Lehman Brothers, Kuhn Loeb Inc. in 1984. The merged Shearson Lehman purchased E. F. Hutton & Co. in 1988.

The latest reorganization plan reportedly has been in the works since Howard L. Clark Jr., a former American Express official, became Shearson chairman earlier this year, replacing Peter A. Cohen, who resigned.

Clark was unavailable for comment today, Shearson officials said.

During the first three months of 1990, Shearson lost $915 million--the largest sum in securities industry history--in large part to pay for a restructuring that included 2,000 layoffs and business cuts initiated by American Express.

American Express, which owns 61% of Shearson, recently signed an agreement to buy the rest of its outstanding common shares. American Express was forced to inject more than $1 billion into Shearson to raise its capital levels.