Bear Stearns loses 50% of European bankers

The huge change in front-office staffing, which is understood to be the most severe of any of the main banks in Europe, shows the depth of the downturn in capital markets activity.

It also highlights the difficulty of building a European investment banking business almost from scratch in just a few years, and raises questions over how several of its peers who have expanded rapidly in recent years have avoided deep cuts.

It is understood that the size of the investment banking team - which includes corporate finance, equity capital markets and M&A advisory but not debt origination - has dropped from around 110 bankers at its peak in August 2001, to between 55 and 60 today.

Bear Stearns declined to comment on its current staffing levels or on staff cuts in European investment banking, but said it employs 852 people in Europe. It also said that several people who had left had not been laid off.

The first big cull came in October 2001, at the instigation of Bear Stearns in New York, which reduced the team by 40 staff. As many as 13 bankers left the firm in a second round of cuts in April this year, and a handful of others left in between.

The scale of the cutbacks is underlined by the fact that just six of the 12 MBA students hired at associate level to start in the investment banking division in 2001 are still with the firm. Three of those six have been relocated within the firm. One left in October, another in April and four more were made redundant.

The cuts have also hit Bear Stearns' research business, headed by Roger Hirst, which is understood to have fallen from 40 to 27 staff. Four analysts have left the telecoms team, while the media team has lost two, and the financial institutions team four.

Coverage of several sectors, including alternative carriers, cable and ISPs, has stopped.

In corporate finance, the technology team has been closed, chemicals and logistics have been folded into a single industrials team, and the telecoms team has been particularly hard hit.

Kevin Watson and John Paul Wyatt, both directors, are no longer with the firm.

Three vice-presidents in telecoms have also left, as has Olivier Garrigue, a French director in the media team. Nick Rogerson and Paul Cowan, directors in the pharmaceuticals team, have left.

Philip Mastriforte, one of two co-heads of M&A, left in October, and Andy Bugas, head of investment banking who had been brought over from the US to help build the business, left in January.

Former staff stressed that the decision to cut staff when the business in Europe had scarcely got going came from the US, not from Jeremy Sillem, chairman of Bear Stearns in Europe.

Several highlighted how Sillem dealt with the cuts fairly and reluctantly.

One former employee said: "Jeremy did not have any choice. New York wanted to cut staff, so he went about it in as honourable a way as one would expect from him." Sillem was on holiday and could not be reached for comment.

Another said: "When Dave Glaser and Jeff Urwin [co-heads of investment banking] came to town from New York, you knew there was trouble."

Bear Stearns has recently been one of the best performing investment banks. In the three months to the end of May, its net profits were up 90% compared with the previous three months, and 102% on same period in 2001.