Banks, Brokers Feeling Pinch, Cutting Costs
U.S. banks and brokers are scaling back spending and cutting jobs as the U.S. economy slows and profits evaporate in businesses such as trading and advising on stock offerings.
Wall Street firm Bear Stearns Cos. said Tuesday that it cut 400 jobs, or more than 3% of its work force, as it tries to lower costs and become more efficient in slower economic times. It also predicted quarterly results would fall short of expectations because of the stock market slump.
“It’s not really an organized trend yet, but everyone with extensive capital markets operations is beginning to cut back,” said Nancy Bush, an analyst at Ryan, Beck & Co.
Citigroup Inc., the biggest U.S. financial services firm, could pare up to $2 billion in costs and investments, depending on how much the economy stalls this year, the Wall Street Journal reported Tuesday.
A Citigroup spokeswoman declined to comment. But analysts called the projected cuts plausible.
“There’s no official plan in place so you shouldn’t expect any kind of an announcement,” said Catherine Murray, an analyst at J.P. Morgan Chase. “There was no specific event that triggered the [Wall Street Journal] article. . . . But the numbers look reasonable.”
Citigroup’s stock finished up 38 cents at $48.63 on the New York Stock Exchange, between its 52-week high of $59.13 and a year low of $35.81. Earlier Tuesday, the shares shares rose as high as $49.75.
“The $1 billion to $2 billion figure has been out there among analysts,” a market source said.
Bear Stearns shares fell nearly 6% in after-hours trading after closing up $1.54 at $54.59 on the Big Board before its announcement.
Leading U.S. investment bank Goldman Sachs Group Inc. cut its executive bonuses last year as growth slowed. The firm’s cuts probably will be more aggressive this year, a market source said.
“You also have [Credit Suisse] First Boston announcing some job cuts, you have Bear Stearns announcing some job cuts,” said Andy Collins, an analyst at ING Barings. “A lot of the brokers have already taken a look at their expenses.”
Among banks, First Union Corp., the No. 6 U.S. bank holding company, has a plan to cut about $300 million to $400 million annually by trimming costs in areas such as travel. Higher interest rates, problem loans and losses on investments have knocked down profits at First Union and other banks.
The newly merged J.P. Morgan Chase & Co., the second-biggest U.S. bank holding company, also is expected to reduce costs and fire staff this year because of investment losses and sluggish capital markets revenues, some analysts said. A J.P. Morgan representative was not available for comment.
