Year-End Trimming or Something Worse?

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Year-end cutbacks are a rite of passage on Wall Street, but the latest round of layoffs have left some wondering if the roof is about to collapse.

Bank of America is reportedly set to layoff several hundred people in its investment banking unit. The bank is still bloated - boasting one of the largest staffs among investment banks - following its acquisition of Merrill Lynch.

Richard Lipstein of Boyden Executive Search says that the move is part of the post-Merrill consolidation. Other areas affecting cuts include hedge fund closures and the uncertain future of prop traders, which could result in layoffs of analysts and traders in the fourth quarter.

"We're really seeing year-end layoffs that are occurring in an accelerated fashion," says Lipstein. He isn't getting the sense that mass layoffs are about to hit the Street. In fact, he says, firms have improved their management of staff levels over the past few years.

Recruiters say that while banks are expanding in areas such as equities and front office jobs, its the back office that may be the hardest hit as 2010 comes to close. They say the recent cuts aren't much more than the normal churn of letting go non-producers. The fact that investment bank revenue fell by 15 percent last quarter doesn't help.

Michael Karp, of the Options Group, says that firms are evaluating their bottom lines and determining where they can cut headcount. He declined to speculate on which firms could be next, simply stating that "reviews are going on as we speak as firms engage in planning for next year."

Yet some are painting a picture that is far more bleak. Analyst Meredith Whitney believes that a slew of junior types - traders, analysts and salespeople - may soon be castoffs. She says that headcount in the securities industry may be reduced by up to 10 percent.

She may have a point. That's because firms thought to be expanding are also laying off. Despite increasing it's overall headcount, Barclays Capital has announced the layoffs of hundreds in back-office operations.

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