JP Morgan jobs face the axe

JP Morgan is preparing to axe 150 front-line investment bankers in Europe by the end of the year as part of a combined business and annual talent review.

Sources close to JP Morgan said the cost savings associated with the job cuts would enable the bank to invest in its prime brokerage and exotic options businesses.

JP Morgan is the latest big bank after Deutsche Bank and Commerzbank to make redundancies designed to improve profitability and return on equity.

Other banking sources claiming familiarity with JP Morgan's plans told Financial News that more jobs would go in the coming months, with several saying that as much as 10% of its 6,000 investment bank staff would be culled in Europe. Sources close to JP Morgan denied this figure. A spokesman for the bank declined to comment.

The 150 job cuts will be made across all divisions. Of the further 450 losses predicted by the sources, it is thought many could be at JP Morgan's London-based fixed-income unit.

The bank suffered a weak performance credit trading in the three months to the end of September, when investment banking profits fell by almost 40% compared with last year. Other areas of the bank in Europe, including derivatives, are also expected to be hit by the cuts.

Bankers said Bill Winters and Steve Black, co-chief executives of securities and investment banking, were under mounting pressure from Jamie Dimon and Bill Harrison, who run the parent group JP Morgan Chase, to cut costs and deliver improved results.

In its first set of results since taking over Bank One for $60bn (€46bn) this year, JP Morgan reported last month that revenues from fixed-income trading in the three months to the end of September were $657m, a 49% decline on the second quarter.

William Harrison, chairman and chief executive, said at the time: 'I am pleased with the progress to date on merger integration, but current operating results were below expectations, primarily due to weak trading results in the investment bank.'

Operating profits from investment banking were $627m in the third quarter. This was 10% below the $693m the bank made before the Bank One takeover and 39% below the combined profits from investment banking made by the two separate companies in the same period last year.

At group level, JP Morgan Chase reported net profits of $1.1bn for the first nine months. It is believed that as a result of its poor trading performance in Europe, the fixed-income bonus pool at JP Morgan is down 20% on last year.

Banking sources described the forthcoming cuts as 'trimming rather than butchering'. One banking source said: 'They are trying to make themselves leaner and meaner in investment banking. I would say 10%, possibly 12%, of the investment bank in Europe will go.'

The planned cuts come only a month after JP Morgan announced details of a joint venture with Cazenove, the UK stockbroker. The bank is contributing 150 of its London-based staff to the joint venture and has insisted the jobs of all staff within the joint venture will be safeguarded.

Staff have already left JP Morgan in the US. Two weeks ago, Jeremy Barnum, head of credit default swap trading, left after a reorganisation of fixed income under Patrik Edsparr and Carlos Hernandez, new heads of North American trading and markets respectively.

Managers have also gone in privately placed debt, asset-backed securities, mortgages and loans.