eFC Briefing: The Ax Swings Deep and Wide

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Citigroup and Morgan Stanley joined this quarter's layoff parade with super-size numbers, confirming predictions the jobs lost earlier in 2008 were just a down payment. Two previously unscathed segments, Canadian banks and the institutional buy side, now are cutting heads too.

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Citigroup plans to cut more than 50,000 jobs beyond those previously announced. About half of the cuts reportedly stem from sales of business units, while about 25,000 will involve layoffs. Chief Executive Vikram Pandit did not disclose which business segments would suffer the most. Citigroup employed 352,000 people at the end of September.

Separately, in London, the Telegraph reported JPMorgan is reviewing operations around the world and will eliminate thousands of jobs at some point. Analysts estimate the bank could cut 3,000 jobs, or 10 percent of its global workforce.

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In an about-face from ambitious hiring plans outlined three months ago, Morgan Stanley said it's cutting as many as 4,600 workers from its institutional securities and investment management businesses, while expanding its nascent retail banking operation. The bank will cut institutional securities staff by 10 percent and the asset management group by 9 percent. Areas targeted for reductions include prime brokerage, proprietary trading, principal investments and commercial real estate origination.

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Goldman Sachs's top seven executives won't take bonuses for 2008. The top 12 at UBS won't receive any for this year, and beginning next year the bank is dropping the annual bonus system for its chairman and installing a new model of variable pay for other top executives and unspecified "risk-takers." However, the year-end bonus calculus for the rank and file of bankers, traders and support staff remains very much in flux at Goldman, UBS and throughout the industry.

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The mood is turning sour on Bay Street, the heart of Toronto's financial district. Canadian bank CEOs now openly worry the U.S. recession is drifting northward, and are beginning to trim staffs. One Toronto-based talent broker reported seeing "probably been the most aggressive laying off ... in the past 15 years." However, TD Financial Group and the Canadian Imperial Bank of Commerce have either said their hiring plans haven't changed or they plan to add staff in securities.

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Traditional asset management is fast losing its status as a career haven. BlackRock, a top manager of fixed-income funds, notified staff of its first mass layoff since its founding 20 years ago. Meanwhile, Boston-based Putnam Investments announced a broad restructuring that includes 47 staff departures and a new bonus system that emphasizes each portfolio manager's returns relative to a peer group. Putnam also said it's tilting toward fundamental equity research and downplaying quantitative analysis. But even while pushing out dozens of analysts and portfolio managers, Putnam says it's hiring others in a move to improve lagging fund performance. Those developments follow news of mass layoffs at mutual fund firms Fidelity Investments and Janus Capital.

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The Labor Department's October employment report showed U.S. securities industry payrolls shrank dramatically for the third time in four months. A net 20,000 securities industry jobs were lost from July through October - the third-worst drop over any four-month interval in the past decade (surpassed only by the period soon after the Sept. 11, 2001 terror attacks). Within New York City, the industry has shed 17,100 jobs, or nearly 9 percent since peaking in August 2007.

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