Citi continues to sharpen the knives. Wall Street continues to attract capital from sovereign wealth funds. Bank of America came to Countrywide's rescue, while the two top credit rating firms and law firm Cadwalader all cut staff. It wasn't a good week.
Citigroup Chief Executive Vikram Pandit is still pondering how many heads must go, after the biggest U.S. bank reported a fourth-quarter net loss of $9.83 billion, including a $18.1 billion write-down of sub-prime and other fixed-income assets. Citi's financial release and conference call on Jan. 15 provided no layoff figure, but didn't contradict rampant media speculation the bank would ultimately slash tens of thousands of jobs. "I have not yet finished analysis of the work I said I would to position our businesses for the future," Pandit told investors on the call. Citi's fourth-quarter loss includes a $539 million charge for headcount reductions, but Pandit said that's only a "down payment on the productivity efforts we're working on," according to The Wall Street Journal's Marketbeat blog. Even after eliminating 4,200 jobs during the fourth quarter, Citi said it ended 2007 with 15 percent more employees than it had a year ago. Most of them work for companies acquired by Citi during the past year.
To shore up capital ratios, Citi cut its stock dividend 41 percent and announced $14.5 billion of preferred stock sales to the Government of Singapore Investment Corp. ($6.88 billion), the public (a $2 billion offering of new convertible preferred shares), Saudi Prince Alwaleed bin Talal and former Chairman Sandy Weill.
Look for hundreds of jobs to bite the dust in mortgage-backed securities structuring, trading and risk management if Bank of America absorbs Countrywide Financial. Industry experts tell eFinancialCareers that at least half of the 800-plus people who remain in Countrywide's capital markets business will be let go if B of A acquires the troubled California-based lender. The proposed purchase, for Bank of America shares initially valued at $4 billion, was announced Jan. 11. Wall Street compensation consultant Alan Johnson anticipates Charlotte, N.C.-based B of A will opt to retain about half of Countrywide's capital markets work force, which numbered 855 people out of a company-wide total of 50,600. For its part, B of A is still reassessing strategy for its corporate and investment bank, from which it slashed 3,000 jobs last October in the wake of fixed-income trading losses sparked by the sub-prime mortgage collapse.
One of the nation's most profitable and prestigious law firms, Cadwalader, Wickersham & Taft, is laying off 35 lawyers as the capital-market downturn weighs on its business. The layoff involves about 5 percent of the New York-based firm's 720 attorneys. Cadwalader has a large presence in structured finance and corporate mergers, according to the New York Times' DealBook. A statement from Cadwalader, quoted in several publications Jan. 10, said that "unexpected and persistent volatility... is affecting the capital markets, many of our clients, and certain practices" within the firm. The firm also said it's diversifying its practice and undertaking "strategic redeployment of certain persons," presumably into practice areas that haven't suffered lately. Other prominent law firms laid off associates and cut down on recruitment late in 2007 amid slowing business from Wall Street.
The two biggest credit rating firms, Moody's and Standard & Poor's, said they are cutting about 450 jobs in total. A third rating firm, Canada's Dominion Bond Rating Service, is closing offices in London, Paris and Frankfurt, eliminating 70 jobs. The moves come in response to dwindling issuance of structured mortgage bonds and credit derivatives, whose previous growth had fueled demand for rating services. S&P will eliminate 172 jobs while Moody's is dropping 275. The third member of the big three rating agencies, Fitch Ratings, is also considering cuts, according to the Financial Times. Separately, Fitch said it's consolidating "all non-rating products and services, product development, credit training, and the firm's product sales force" into a new business unit called Fitch Solutions. It's also folding its global structured credit ratings subsidiary back into Fitch Ratings.
To ease the pain caused by capping the cash portion of bonuses, UBS is shortening the lockup on selling a portion of share-based bonus awards to one year instead of the usual three, reports the Financial Times reports. "(UBS) bankers are expected to receive a further slug of shares that they can sell after a year," the paper says. It relays a Morgan Stanley estimate that the shares issued under this plan could total 5 billion Swiss francs ($4.57 billion at the Jan. 15 exchange rate).