Merrill Lynch to Cut 4,000 Jobs
The US investment bank at the center of the sub-prime mortgage crisis is to cut one in 10 of its workforce
Merrill Lynch, the US investment bank at the center of the sub-prime mortgage crisis, is to axe 4,000 jobs - one in 10 of its workforce, as it continues to count the cost of its involvement in the products at the heart of the credit crunch.
The firm, known as the "thundering herd", reported a first quarter loss, after taking an additional $6bn in write-downs for sub-prime mortgages, loans and other risky assets, of $1.96bn (£980m). This contrasts with $2bn of profits in the first quarter of last year. Shares in the bank fell 1.7% to $44.12 in early trading on Wall Street this afternoon.
Today's fresh write-downs from the world's largest brokerage reflect its exposure to investments in products related to the sub-prime mortgage crisis, which have already cost it $24bn.
John Thain, parachuted in as chairman and chief executive after Stan 0'Neal was ousted, insisted that Merrill's underlying business had produced solid results in a "difficult market environment" which had continued to get more difficult as the quarter progressed.
The firm indicated that employees are to receive smaller bonuses this year as its "compensation and benefits" costs fell 14% year on year. It intends to cut 4,000 jobs, primarily in its global markets and investment banking arm, and its support areas, to save $800m on an annualized basis. In so doing, it will incur a restructuring charge of $350m in the second quarter of 2008. More than 1,000 people left in the first quarter.
The firm is yet to specify how many jobs will be axed in the City of London.
Merrill Lynch is reporting at a time when international regulators and politicans are calling on financial firms to come clean about their exposure to the sub-prime mortgage crisis. The uncertainty over the scale of the losses is preventing firms from dealing with each other. The prime minister, Gordon Brown, was the latest to make such a plea during a meeting with Wall Street firms yesterday.
JP Morgan Chase, which is taking over Bear Stearns in a rescue deal orchestrated by the US Federal Reserve, reported yesterday that its profits had halved. The world's biggest bank, Citigroup, which is also hurting in the credit crunch, is due to report tomorrow.
The firm, known as the "thundering herd", reported a first quarter loss, after taking an additional $6bn in write-downs for sub-prime mortgages, loans and other risky assets, of $1.96bn (£980m). This contrasts with $2bn of profits in the first quarter of last year. Shares in the bank fell 1.7% to $44.12 in early trading on Wall Street this afternoon.
Today's fresh write-downs from the world's largest brokerage reflect its exposure to investments in products related to the sub-prime mortgage crisis, which have already cost it $24bn.
John Thain, parachuted in as chairman and chief executive after Stan 0'Neal was ousted, insisted that Merrill's underlying business had produced solid results in a "difficult market environment" which had continued to get more difficult as the quarter progressed.
The firm indicated that employees are to receive smaller bonuses this year as its "compensation and benefits" costs fell 14% year on year. It intends to cut 4,000 jobs, primarily in its global markets and investment banking arm, and its support areas, to save $800m on an annualized basis. In so doing, it will incur a restructuring charge of $350m in the second quarter of 2008. More than 1,000 people left in the first quarter.
The firm is yet to specify how many jobs will be axed in the City of London.
Merrill Lynch is reporting at a time when international regulators and politicans are calling on financial firms to come clean about their exposure to the sub-prime mortgage crisis. The uncertainty over the scale of the losses is preventing firms from dealing with each other. The prime minister, Gordon Brown, was the latest to make such a plea during a meeting with Wall Street firms yesterday.
JP Morgan Chase, which is taking over Bear Stearns in a rescue deal orchestrated by the US Federal Reserve, reported yesterday that its profits had halved. The world's biggest bank, Citigroup, which is also hurting in the credit crunch, is due to report tomorrow.
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